What is a Limited Liability Partnership?
Sharing some similarities to a limited company, an LLP is a way for two or more people to come together to carry out business projects and activities.
By joining with a business partner, it means that you can put your individual skills and expertise together, as well as spread the level of risk that comes with running a company.
What is meant by an LLP member?
An LLP must have at least two ‘members’ – this can be in the form of a person or a company.
If there are numerous members, then there will always be two designated members who will have more responsibilities compared to the others.
For example, it will be solely up to them to carry out tasks such as:
- Registering the business with HMRC.
- Keeping accounting records.
- Registering the business for VAT (but only if sales are expected to exceed £85,000 a year).
- Preparing, signing and sending annual accounts to Companies House.
Liabilities will need to be set between all members through a partnership agreement – a solicitor will usually be involved with this process.
The LLP agreement of duties should clearly state the following:
- All members’ responsibilities.
- Who needs to agree on decisions.
- How the profits will be shared among the members.
- How the members can either join or leave the LLP.
All members will need to pay tax on their share of the profits, which means that they’ll need to register for self-assessment and complete an annual tax return.
How do I register a Limited Liability Partnership?
Before registering, you’ll need to choose a business name.
Whether a limited company or LLP, when it comes to naming a business, you’ll need to take a few things into consideration, such as ensuring it’s not offensive or the same as an existing company.
The name will need to end in either ‘Limited Liability Partnership’ or ‘LLP’.
You’ll also need an official address for your business; this has to be a physical address in the same country that your LLP is registered in. It is possible to use your home address, but it’s important to be aware that due to an LLP being registered as a legal body at Companies House, this information can be viewed by the public.
You can register your LLP either electronically via third-party software, by post (download and fill out an application form found on GOV.UK) or by using a formation agent.
What are the benefits of a Limited Liability Partnership?
There are a number of advantages that come with trading through an LLP, some of which include:
- Flexibility – it’s completely up to you and the other members how you operate and distribute the profits of the business. There’s also the option of the level of membership you wish to be.
- LLPs are a separate legal entity to a member, which means that personal assets are protected should the business incur any debts that it is unable to pay.
- Expenses – you’re able to claim back on certain expenses incurred through the running of the business. These include travel and subsistence and home office expenses.
We hope this page has answered some of your LLP questions. Our team of experts are available to answer any queries you may have, so drop us a line on 01442 795 100 or email Jaime at email@example.com.