Definition of a Limited Liability Partnership
It is a type of business structure. It is made up of professionals who would usually operate as a general partnership (such as doctors, architects or solicitors), but who require limited business liability.
An LLP is made up of ‘members’ or ‘partners’, rather than directors and shareholders. These organisations are taxed as partnerships and are not liable for Corporation Tax. They can be based anywhere in the world.
What You Need To Know To Register New LLP
To incorporate, you need to fill out a Companies House LL IN01 form and send it by post. Alternatively you can register online via a dedicated service, like Osome.
The details you need to supply include:
- A company name
- The address, such as an office, that you’ll register it to
- Information about at least two members
- An agreement that details how it will be run
Bear in mind that this information will be on the public record.
Membership in Limited Liability Partnership
You need two or more people to incorporate. Two of them must be ‘designated’.
A ‘designated’ member has more duties and legal responsibilities than an ordinary member. Their role is to ensure that the organisation and the people that are part of it comply with the Limited Liability Partnership Act 2000, the Limited Liability Partnership Regulations 2001 and any other relevant regulations.
How Many Members Should You Have?
At least two. There is no upper limit for LLP. They can be:
- Individuals over the age of 16
- Companies (called ‘corporate members’)
- Of any nationality and country of residence
Certain people are prohibited from becoming members, including anyone disqualified from acting as a company director and anyone with undischarged bankruptcy.
The Rights and Responsibilities
They can be based anywhere in the world. They are required to meet their legal responsibilities, as set out in the agreement. This sets out:
- How profits are shared
- Who needs to agree decisions
- Their responsibilities
- How they can join or leave
They must all be incorporated for HMRC Self Assessment.
The Responsibilities of Designated Members
Designated members have more responsibilities than ordinary members. They must:
- Register themselves and the business for HMRC Self Assessment
- Incorporate the company for VAT if sales are expected to exceed £85,000 a year
- Appoint an auditor
- Keep accounting records
- Prepare, sign and send annual accounts and a confirmation statement to Companies House
Changes to Details or Status
Designated members are required to inform Companies House about any changes to details, such as their name or status within the company. You can do this by using Companies House’s online service, or by downloading and filling out either a member’s or corporate member’s change of details form to send by post.
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Where To Register Your LLP and Get Help
To incorporate an LLP, you must register it with Companies House, which will provide you with a company registration number and certificate.
It can be helpful to seek professional advice on the process, whether from Osome or an accountant or solicitor, who can also help you draw up an agreement. Dedicated application services can help you submit your documents, taking the whole process off your plate.
Agreement of Partnership
It’s common to set out an agreement of partnership, also known as an LLP agreement, partnership agreement or members’ agreement.
It’s a legally binding contract made between members, outlining the rights, duties, responsibilities and liability. It also sets out how the partnership will be managed and run. Its purpose is to ensure fairness and protect people’s interests and investment.
Choosing the Name of Your LLP
When choosing a name, there are several rules to consider. Ensure it’s not the same as or too similar to that of any existing company. You can check whether a business name has already been registered on the Companies House website.
Remember that the name has to feature ‘limited liability partnership’ or ‘LLP’ at the end and ensure that it doesn’t contain offensive words or anything that would connect it to the government.
Tax Payments for an LLP
An LLP as an entity isn’t taxable, so you don’t have to file a Corporate Tax return on its behalf. However, its members are liable for tax. They pay Income Tax via Self Assessment on the value of the profits they’ve received.
Note that any corporate members are also liable for Corporation Tax rather than Income Tax.
Does an LLP differ from a Limited Company?
Yes, they differ in structure, the way they share profits and the way they are taxed. The structure can’t be used by non-profit organisations and you need two people to set one up, whereas a limited company only requires one and can be used by not-for-profits.
Who can register a new LLP?
Any two people can set up an LLP if they intend to make profit with it. Note that a person encompasses individuals, as well as companies and firms if they are incorporated. You can register yourself by post or online, or through an agent.
How do I register a new LLP?
Either you or an agent can apply through approved software or by post. To register by post, download and fill out the Companies House LL IN01 form. To register online, use third-party software or a formation agent.
Are there any rules on LLP names?
Yes. You can’t choose a name that suggests you’re connected with the UK Government. The name can’t be similar to that of any other organisation. It can’t contain offensive words. It must have ‘LLP’ or ‘limited liability partnership’ on the end.
How long does it normally take to register an LLP?
Online registration may only take 3-4 hours. It depends on how many applications Companies House is processing, so start early in the day. Postal registrations take around 2 weeks.
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