A UK Limited Liability Partnership is a legal entity which limits the liability of its owners and members.
An LLP is essentially a hybrid between a partnership and a limited company which operates under a combination of the Limited Liability Partnership Act 2000 and the Companies Act 2006. It allows business partnerships to enjoy the benefits of Limited Liability, avoiding the problems of joint and several liabilities that apply to ordinary partnerships.
LLP formations have relatively few compliancy requirements and possess many added benefits when compared to conventional companies. Some of the requirements and benefits are listed below.
The main requirements of a LLP are as follows:
- Minimum of two members required.
- Of the members there must be a minimum of two designated members.
- A registered UK office.
- Accounting records must be maintained.
- Annual accounts and returns must be submitted to the Registrar.
- Although not subject to taxation itself, a LLP must file an annual informational tax return.
- A LLP must be a commercial venture operating for profit.
There are a number of advantages of a LLP, some of which are listed below:
- All the members enjoy limited liability.
- The liability of the members is limited to the investment in the partnership.
- Unlike other companies which must only trade within the objects stated in the M&AA a LLP has unlimited capacity.
- An LLP provides a for a more flexible management structure.
- An LLP is transparent for tax purposes with members being taxed individually on their share of the limited liability partnerships income or gains.
Tax and accounting regulations
A LLP offers a flexible tax structure and governance arrangements. A LLP is not subject to corporation tax as the members are taxed individually on their share of the partnerships income. Also if members of the LLP are offshore companies then no tax is payable in the UK.
A Tax Residency Certificate can be obtained but only if the LLP has local (UK based) members. The process however can take up to 2 months. A VAT certificate can also be obtained although the company requires a UK bank account and is required to show trade within the UK.
A LLP is required to file an Annual Return and Annual Accounts with Companies House. Even if the members are not UK based and therefore no tax is payable Annual Returns are still required to be filed. It is important to comply in order to avoid any future problems. An annual audit is also required.
Procedure of company registration
A Limited Liability Partnership is a legal entity which limits the liability of its owners and members. A LLP is basically a hybrid between a partnership and a limited company which operates under a combination of the Limited Liability Partnership Act 2000 and the Companies Act 2006. It allows business partnerships to enjoy the benefits of Limited Liability, avoiding the problems of joint and several liabilities that apply to ordinary partnerships.
There are no shares in a LLP, instead of issuing shares the members of a LLP are its investors and are issued Interest Certificates which reflect the amount of investment in the partnership. A LLP does not require a Memorandum and Articles of Association instead a Partnership Deed is used to specify how profit is split and what happens in the event that the partnership is wound up.
The management of the LLP is conducted by the Designated Members (similar to Directors). There must be two or more Designated Members. Each Designated Member is responsible for fulfilling certain duties and obligations. Unless the Registrar is specifically advised which members are Designated Members all members will be deemed to be so.
The LLP is not subject to any corporate income tax in the UK, instead the profits are distributed to the members who pay personal income tax on their income from the partnership. The members are liable for Capital Gains Tax and are obligated to make National Insurance Contributions.
In order to register a LLP the following documentation is required:
- Certified proof of ID for the members and beneficial owner
- Certified proof of address for the members and beneficial owner
- Completed Application Form (supplied by Service Pro)
The formation of a LLP is very quick once the signed LLP2 form is delivered to Companies House. A next day formation service can be offered, subject to receipt of all correct documentation.
The following documents will be received upon incorporation:
- Certificate of Registration
- Partnership Agreement
- Partnership Combined Register
- Minutes of the First Members Meeting
- Membership Certificates & Membership Register