Limited Liability Partnerships Act (LLPA)

The Limited Liability Partnerhsip Act (LLPA) received Royal Assent on 20 July 2000, offering a new vehicle for businesses to trade. A Limited Liability Partnership (LLP) is a new corporate entity, which allows members to limit their liability (as in a limited liability company) whilst organising themselves internally as a partnership. It is expected to be popular with the professional business community and start-up businesses.

A limited liability partnership (LLP) is similar to a normal partnership - but it also offers reduced personal responsibility for business debts. Unlike sole traders and partners of ordinary partnerships, the LLP itself - not the individual members - is responsible for any debts that it runs up, unless they have personally guaranteed a loan to the business.

LLPs are more complicated to set up and run than ordinary partnerships, as they have to meet many of the same requirements as limited companies. LLPs are designed to be used by profit-making businesses. Non-profit making organisations should not use this business structure.

LLP's will be governed in a similar way to limited companies by the provisions of the Companies Act 1985 and The Insolvency Act 1986 - appropriately modified. Similar financial disclosure will be required; members of an LLP can be sued for wrongful and fraudulent trading; and there will be provisions to protect creditors from the siphoning off of funds by members.

An LLP must have at least two members. It will be a separate legal entity and, while the LLP itself will be liable to the full extent of its assets, the liability of the members will be limited, with non-negligent members not being penalised - a potential problem with exiting partnerships.

LLP's are taxed along similar lines to partnerships, but detailed regulations and guidelines can be found on the website of the newly created HM Revenues and Custom Department (HMRC)

Unlike companies, the rights and duties of members to one another and to the LLP are governed by agreement between members, which remain confidential.

To find out more about our Partnerships and the Limited Liability Partnership in particular, please call us at +44 (0)1223 507080 or email at info@tax.uk.com