Setting up a Limited Liability Partnership (LLP) is a popular choice for businesses looking to combine the flexibility of a partnership with the protection of limited liability.
If you’re considering forming an LLP, this guide will walk you through the essential steps, from choosing a name to registering with Companies House and understanding your legal responsibilities.
What is a Limited Liability Partnership (LLP)?
A Limited Liability Partnership (LLP) is a legal business structure that combines the flexibility of a traditional partnership with the benefit of limited liability for its members.
This means the LLP itself is responsible for the business’s debts and obligations, protecting individual members’ personal assets, unless they have given personal guarantees.
Key Features of an LLP
- Separate legal entity: The LLP exists independently from its members.
- Limited liability: Members are only liable up to the amount they invest in the business.
- Flexible management: Members can decide how to run the business and share profits, usually set out in a partnership agreement.
- Minimum two members: At least two members are required to form an LLP, which can be individuals or companies.
- Designated members: Certain members have additional legal responsibilities for compliance and reporting.
How an LLP Differs from Other Business Structures
| Structure | Liability | Management Flexibility | Taxation |
| Sole Trader | Unlimited personal liability | Full control by owner | Taxed as personal income |
| Traditional Partnership | Unlimited personal liability | Shared control among partners | Taxed as personal income |
| Limited Liability Partnership (LLP) | Limited to investment amount | Flexible, agreed by members | Members taxed individually |
| Limited Company | Limited to share capital | Managed by directors | Subject to Corporation Tax |
Benefits of Setting Up an LLP
- Limited liability protection reduces personal financial risk.
- Operational flexibility allows members to tailor management and profit-sharing arrangements.
- Separate legal identity means the LLP can own assets, enter contracts, and sue or be sued in its own name.
- Suitable for professional services and joint ventures where members want limited liability but prefer partnership-style management.
- Simplified tax treatment: Profits are taxed as personal income of members, avoiding corporation tax.
Who Can Set Up an LLP?
Minimum Members Required
To form an LLP, you need at least two members. These members can be individuals or corporate entities. There is no upper limit on the number of members.
Types of Members
Individuals: Private persons can be members of an LLP, including UK residents and non-residents.
Companies: Other companies or LLPs can also be members, allowing for flexible ownership structures.
Designated Members and Their Responsibilities
An LLP must have at least two designated members at all times. These designated members have additional legal duties, including:
- Registering the LLP with Companies House.
- Filing annual accounts and confirmation statements.
- Maintaining statutory registers.
- Notifying Companies House of changes, such as member details or registered office address.
- Acting on behalf of the LLP in legal matters.
If the LLP has fewer than two designated members, all members are deemed designated and carry these responsibilities.
Designated members are legally accountable for ensuring the LLP complies with its statutory obligations.
Choosing a Name for Your LLP
Choosing the right name for your LLP is an important step in the registration process. Your LLP’s name must comply with specific rules and regulations to be accepted by Companies House.
Naming Rules and Restrictions
- The name must end with “Limited Liability Partnership” or the abbreviation “LLP”.
- It cannot be the same as or too similar to an existing company or LLP name on the register.
- Certain words are restricted or require permission, such as those implying a connection to government, professional bodies, or sensitive industries (e.g., “bank,” “solicitor,” “architect”).
- The name must not be offensive or misleading.
How to Check Name Availability
Before registering, check your proposed LLP name’s availability using the Companies House name availability checker. This helps avoid delays caused by rejected names.
Importance of the LLP Suffix
Including “Limited Liability Partnership” or “LLP” in your business name clearly indicates your legal structure to customers, suppliers, and creditors. It also ensures compliance with legal requirements and helps protect your business identity.
How to Register an LLP
Registering your LLP with Companies House is a straightforward process, but it’s important to follow the correct steps to ensure your LLP is legally recognised.
Step-by-Step Guide to Filling Out Form LL IN01
Form LL IN01 is the official application to register a Limited Liability Partnership. You’ll need to provide:
- The proposed LLP name.
- Details of at least two members (individuals or companies).
- Details of at least two designated members.
- The LLP’s registered office address in the UK.
- Information about the nature of your business (Standard Industrial Classification code).
- Statement of compliance confirming all legal requirements are met.
Online vs. Postal Registration
Online Registration: The quickest and most convenient method. You can register your LLP online via the Companies House Web Incorporation Service or through third-party software providers. Online applications usually cost £40 and are processed within 24 hours.
Postal Registration: You can complete form LL IN01 manually and post it to Companies House with a £100 fee. Postal applications typically take 8 to 10 days to process.
Registration Fees and Processing Times
- Online registration fee: £40 (usually processed within 24 hours).
- Postal registration fee: £100 (takes approximately 8-10 days).
- Same-day registration is available for postal applications for an additional fee.
Using Formation Agents or Solicitors
If you prefer, you can hire a company formation agent, solicitor, or accountant to handle the LLP registration process on your behalf.
Firms like Ryans Chartered Accountants offer expert guidance, prepare your deed of partnership, and ensure all documents are correctly submitted to Companies House.
Using a professional service can simplify the process, reduce errors, and save you time. Fees vary depending on the level of service you require.
Drafting a Deed of Partnership
What is a Deed of Partnership?
A deed of partnership, also known as a partnership agreement, is a legally binding document that sets out the rights, responsibilities, and obligations of the members of an LLP. It governs how the LLP operates and how decisions are made.
Why It’s Important
While it’s not legally required to have a deed of partnership, having one is highly recommended. Without it, your LLP will be governed by the default rules in the Limited Liability Partnerships Act 2000, which may not suit your specific business needs. A well-drafted deed helps prevent misunderstandings and disputes between members by clearly defining expectations and procedures.
Key Elements to Include
- Capital Contributions: Details of what each member will contribute to the LLP, whether cash, assets, or services.
- Profit Sharing: How profits and losses will be divided among members.
- Decision-Making: Procedures for making business decisions, including voting rights and authority levels.
- Changes in Membership: Rules for adding new members, handling the departure or death of members, and transferring membership interests.
- Roles and Responsibilities: Duties of ordinary and designated members, including any special roles or limitations.
- Dispute Resolution: Methods for resolving disagreements among members.
Tax and Accounting Obligations for LLPs
Registering for Self-Assessment
Once your LLP is registered with Companies House, HM Revenue & Customs (HMRC) will be notified automatically.
However, each member of the LLP must register individually for Self Assessment to declare their share of the profits or losses on their personal tax returns.
Tax Treatment of LLPs
An LLP is treated as a transparent entity for tax purposes, meaning the LLP itself does not pay Corporation Tax.
Instead, profits or losses are allocated to the members, who are taxed individually on their share of the income. This is similar to how traditional partnerships are taxed.
Annual Filing Requirements
- Annual Accounts: LLPs must prepare and file annual accounts with Companies House, showing the financial position of the partnership.
- Confirmation Statement: LLPs must submit a confirmation statement (previously called an annual return) to Companies House at least once every 12 months, confirming key details about the LLP.
- Partnership Tax Return: The LLP must file a partnership tax return with HMRC each year, detailing the partnership’s income and expenses.
Meeting these obligations on time is essential to stay compliant and avoid penalties.
Ongoing Compliance and Legal Responsibilities
Annual Filing Deadlines
LLPs must meet strict annual deadlines to maintain good standing:
Annual Accounts: Must be filed with Companies House within 9 months of the financial year-end.
Confirmation Statement: Must be submitted at least once every 12 months, confirming the LLP’s key details.
Record Keeping
LLPs are required to keep accurate and up-to-date records, including:
- Financial records and accounting documents.
- Details of members and designated members.
- Minutes of meetings and resolutions.
- Copies of filed documents with Companies House.
These records must be kept for at least 6 years.
Responsibilities of Designated Members
Designated members have additional legal duties, including:
- Ensuring annual accounts and confirmation statements are filed on time.
- Maintaining statutory registers and notifying Companies House of changes (e.g., membership, registered office).
- Acting on behalf of the LLP in legal matters.
- Ensuring compliance with relevant laws and regulations.
Failure to meet these responsibilities can lead to fines and legal consequences.
Consequences of Non-Compliance
Non-compliance with filing deadlines or statutory duties can result in:
- Financial penalties and late filing fines.
- Possible removal of the LLP from the Companies House register.
- Personal liability for designated members if duties are neglected.
- Increased scrutiny from HMRC and potential investigations.
Staying compliant is essential to protect your LLP and its members.
Why Choose Ryans for Your LLP Setup and Support?
Setting up an LLP can be complex, but with Ryans Chartered Accountants, you gain a trusted partner to guide you through every step.
As part of our expert business setup services, we help you decide on the most suitable structure for your business. Whether that’s a sole trader, partnership, limited company, or LLP, we ensure your choice aligns with your goals and circumstances.
Our comprehensive LLP formation and support services include:
Expert Guidance on LLP Formation: We simplify the process, advising on the best structure and helping you understand your legal and financial responsibilities.
Assistance with Registration and Compliance: From preparing and submitting your LLP registration to Companies House to ensuring ongoing compliance with statutory requirements, we handle the paperwork so you don’t have to.
Ongoing Support for Tax, Accounting, and Legal Matters: Beyond formation, we provide continuous support with tax planning, accounting systems, company secretarial duties, and HMRC liaison to keep your LLP running smoothly.
Additionally, we help you prepare business plans, cashflow projections, and budgets, assess your finance needs, and establish strong banking relationships, laying a solid foundation for your LLP’s success.
At Ryans, it’s our job to break down complex processes into simple steps and offer the best advice to help your new business thrive. Looking to start an LLP? Let’s talk.
FAQ's
How long does LLP registration take?
If you register your LLP online, the process usually takes around 24 hours once your application is accepted. Postal applications take longer, typically 8 to 10 working days.
Same-day registration is available for postal applications for an additional fee.
Contact UsCan I convert an existing partnership to an LLP?
Yes, you can convert a traditional partnership to an LLP. This involves registering the LLP with Companies House, transferring the business assets and liabilities to the LLP, and creating a new deed of partnership.
It’s advisable to seek professional advice to ensure a smooth transition and compliance with legal requirements.
Contact UsWhat are the costs involved in setting up an LLP?
The standard registration fee is £40 for online applications and £100 for postal applications. If you use a formation agent, solicitor, or accountant, additional fees will apply depending on the level of service.
There may also be costs associated with drafting a deed of partnership and ongoing compliance.
Contact UsHow do I change members or the LLP name later?
Changing Members: You must notify Companies House of any changes to LLP members within 14 days. This includes adding new members or members leaving.
Changing the LLP Name: To change your LLP’s name, you must pass a resolution and file a form NM01 with Companies House. The new name must comply with naming rules, including the LLP suffix.
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