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LLP or limited liability partnership is a general form of partnership, but with one key difference.
Unlike a traditional partnership where individual partners must bear the partnership’s debts and other financial obligations – an LLP provides every partner protection against personal liability for specific partnership-related liabilities.
Now, why do business owners incorporate an LLP? Well, the key advantage here in contrast with a traditional partnership is that every member of the LLP can limit their personal liability should things ever go wrong – the same way shareholders in a limited company do.
Incorporating an LLP – Basic Steps
Anyone can incorporate an LLP as long as the goal is to generate profit. A minimum of two individuals are required to incorporate a limited liability partnership.
To start the registration or incorporation process, you must first complete Companies House Form LL01.
To fill out this form properly, you’ll need to have the following information on hand:
- The business name;
- A registered postal address (this will be public so it needs to be 100% accurate);
- Details on the members – which may also be public to a certain degree.
In addition, designated members of an LLP must:
- Register the LLP with Companies House
- Appoint an auditor if required
- Prepare all accounts on behalf of the LLP’s members
- Deliver these accounts to Companies House
- Prepare and submit the annual return to Companies House
Registering your LLP and choosing a name
Once application form LL IN01 has been completed, it must be delivered to Companies House along with the submission fee.
At this point, it is always a good idea to consult with a professional accountant or solicitor who can offer advice and help you draw up the Deed of Partnership – a critical document which must be completed accurately and submitted on time.
Bear in mind that you cannot use an LLP name which is already being used – you also cannot use a name that is already present in the registrar’s company names index.
Deed of Partnership
A partnership agreement or more commonly Deed of Partnership is a legal agreement between partners who set out to incorporate an LLP.
It details how the partnership will operate along with the respective rights and responsibilities of each member. This is typically drawn up by a professional solicitor who will consult you and your partners so that it includes all the necessary information.
LLP Tax Matters
Once your LLP has been registered with Companies House, HMRC will be notified as they will set up the correct tax records for you. Each partner within the LLP must register individually with HMRC in order to have their tax records set up.
When it comes to tax matters, LLPs are for the most part treated the same way as traditional partnerships. However, unlike limited companies, LLPs do not typically have to pay Corporation Tax.
While it may not be difficult incorporating an LLP yourself, there are many aspects to carefully consider when drawing up a partnership contract. Our consultants will be happy to offer you their expert guidance and make the process hassle-free. Contact us today.