Setting up your business as a limited liability partnership (LLP). Things you should know.
A limited liability partnership (LLP) is similar to a normal partnership except that it also offers reduced personal responsibility for business debts.
Unlike sole traders and partners of ordinary partnerships, the LLP itself, not the individual members is responsible for any debts that it runs up, unless individual members have personally guaranteed a loan to the business.
LLPs are more complicated to set up and run than ordinary partnerships, as they have to meet many of the same requirements as limited companies. LLPs are designed to be used by profit-making businesses. Non-profit making organisations should not use this business structure.
Who is a member of your partnership business?
Any group of two or more people who want to set up a profit-making business together can form a limited liability partnership (LLP), unless one of them has previously been disqualified as a company director or LLP member. It is also possible for companies to be members of an LLP.
How many members should an LLP have?
An LLP must have at least two members, and at least two must be “designated” members.
The rights and responsibilities of LLP members.
The members of an LLP normally share in both the responsibilities of running the business and the profits that it makes. Exactly how their rights and responsibilities are defined and divided depends on the LLP’s partnership agreement or “deed of partnership”. Designated members have some extra responsibilities on top of those of ordinary members.
The responsibilities of designated members.
Designated members have to ensure that the LLP meets various legal obligations. These include making sure that the annual accounts and returns are properly signed and delivered to Companies House. They are also responsible for appointing auditors if necessary, and they act for the LLP if it is wound up or dissolved. Designated members are legally accountable if they fail to carry out their duties properly. If the LLP does not specify any designated members when it registers, then all of its members will be treated as such.