An LLP is essentially a hybrid between a partnership and a limited company which operates under a combination of the Limited Liability Partnership Act 2000 and the Companies Act 2006. It allows business partnerships to enjoy the benefits of Limited Liability, avoiding the problems of joint and several liabilities that apply to ordinary partnerships.
LLP formations have relatively few compliancy requirements and possess many added benefits when compared to conventional companies. Some of the requirements and benefits are listed below.
The main requirements of a LLP are as follows:
- Minimum of two members required.
- Of the members there must be a minimum of two designated members.
- A registered UK office.
- Accounting records must be maintained.
- Annual accounts and returns must be submitted to the Registrar.
- Although not subject to taxation itself, a LLP must file an annual informational tax return.
- A LLP must be a commercial venture operating for profit.
There are a number of advantages of a LLP, some of which are listed below:
- All the members enjoy limited liability.
- The liability of the members is limited to the investment in the partnership.
- Unlike other companies which must only trade within the objects stated in the M&AA a LLP has unlimited capacity.
- An LLP provides a for a more flexible management structure.
- An LLP is transparent for tax purposes with members being taxed individually on their share of the limited liability partnerships income or gains.