A Limited Liability Partnership (LLP) in the United Kingdom is a legal business structure that combines some of the features of a traditional partnership with limited liability protection, similar to that of a limited company. It's a popular choice for professional services firms, such as law firms, accounting firms, and consultancy practices. Here are some key characteristics and details about UK LLPs:
Legal Structure: An LLP is a separate legal entity from its members (partners), which means that it can own property, enter into contracts, and sue or be sued in its own name. The liability of the partners is limited to the amount they have invested in the LLP, similar to shareholders in a limited company.
Formation: To form an LLP in the UK, you need to:
- Register with Companies House, providing details about the LLP's registered office, partners, and members.
- Appoint at least two designated members who have additional responsibilities, such as ensuring that accounts and annual returns are filed.
- Create an LLP agreement, which outlines how the business will be run, how profits and losses will be distributed, and other important matters. The agreement is not publicly disclosed but is a crucial internal document.
Limited Liability: One of the primary benefits of an LLP is that the personal assets of the partners are protected from the business's debts and liabilities. Each partner's liability is limited to the amount of capital they have contributed to the LLP.
Taxation: LLPs are treated as tax-transparent entities for income tax purposes, meaning that profits and losses flow through to the partners, who report them on their individual tax returns. There is no corporate tax on LLP profits.
Ownership and Management: LLPs are owned and managed by their members (partners). The members typically share in the profits and have a say in the decision-making process according to the terms of the LLP agreement.