A Limited Liability Partnership (LLP) is a hybrid of a Partnership and a Limited Company. Only introduced in 2001, it combines limited liability with the flexibility of partnerships. An LLP has a separate legal identity so it can be more preferential than a sole trader and has the tax status of an ordinary partnership. This means it can adopt whatever internal structure it likes without requiring a Memorandum or Articles of Association.
An LLP is made up of members (partners) but no Directors or shareholders. It must have at least two designated members who, similarly to Directors and Secretaries, are responsible for annual filing requirements and submitting to the Registrar of Companies. These include:
- Signing the annual accounts
- Signing and submitting to HM Revenue & Customs the Partnership Tax Return
- Notifying Companies House of any changes to the LLP’s membership
- Notifying any changes to their members’ names and/or addresses
- Notifying any change of Registered Office address
Members can become designated members by way of agreement from the other members and all rights and responsibilities should be outlined in the partnership deed.
The deed will set out:
- The business name, address and type of business
- Details of each member
- How profits and losses will be shared between each member
- Working arrangements between each member
- What happens in the event of changing circumstances e.g. if a member wishes to leave the partnership.
Every LLP must submit an Annual Return to Companies House every year. You have 28 days from the “made-up date” to do this.
Following your Accounting Reference Date (ARD), which is usually the last day of the month the partnership was incorporated, an LLP must submit accounts which include:
- A profit and loss account
- A balance sheet – signed by a designated member
- An auditor’s report (unless exempt)
- Notes to the accounts
If the LLP has an annual turnover of less than £5.6m and assets of less than £2.8m then it can claim exemption from audit.
Any profits from the LLP are shared amongst its members and they are liable for income tax due on these profits. Although an LLP is not liable for corporation tax, any member that is a Company will have to pay corporation tax on their profits.
The LLP is responsible for any debts, not its members and any debts must be met by its assets. The liability of each member is limited to the amount they have contributed to the assets.
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