Chartered Management Accountants | Milton Keynes
An LLP is a form of separate legal business entity that gives the benefits of limited liability but allows its members the flexibility of organising their internal structure as a traditional partnership. They are intended for businesses which carry on a trade or profession, and are particularly attractive to larger professional partnerships.
LLPs are in law regarded as ‘bodies corporate’ and are subject to aspects of company law, but for tax they will generally be treated as ‘partnerships’. The members provide working capital and share any profits.
Members who are individuals will be liable to pay income tax under self-assessment, and self-employed class 2 (due to be abolished at some point in the future), and class 4 NICs.
The members of an LLP have limited liability, but the LLP is liable for all its debts to the full extent of its assets. To the extent that the members have contributed to those assets, a member risks losing that amount should the creditors claim those assets.
An LLP has unlimited capacity which means that third parties need not be concerned about any restrictions or activities.
An LLP has complete flexibility as to the internal structure which it wishes to adopt; there are no requirements for board or general meetings or decision-making by resolution. Unlike a company, but similar to a partnership an LLP does not have a memorandum or articles of association.
LLP disclosure requirements are very similar to those of a company, including the filing of annual accounts (audited where necessary). There are also similar rules for the filing of annual returns, and notifying changes in members’ details or the location of the Registered Office. However, the LLP agreement remains confidential.
Every LLP must have at least two, formally appointed, Designated Members, who carry responsibilities similar to those of a Company Secretary. These designated members have statutory responsibility for certain tasks and are personally liable in the event of a default to any fine or penalty. Responsibilities include:
The name of an LLP is used in a similar way to that of a company, and is displayed in the format Millionaire Limited Liability Partnership, or Millionaire LLP, and there are similar restrictions on the use of similar or sensitive names
A comprehensive agreement governing the duties and responsibilities of the members is a necessity, therefore, and it will need to include provisions for:
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