Who should consider a Limited Liability Partnership?

LLPs can be attractive vehicles for professional firms and other businesses, including start-ups and joint ventures. They are particularly valuable for businesses that would find corporate tax and other consequences of forming and operating a limited company onerous, but want to enjoy corporate status and limited liability for members.

For existing partnerships that convert to LLP status there will be stamp duty relief on the instrument transferring property from the current partnership to the newly incorporated LLP if relevant conditions are met.

What are the characteristics of a LLP?

LLPs are created by registration at Companies House on a prescribed form LL IN01 together with a statutory fee. The Registrar issues a Certificate on registration that has the same effect as the Certificate of Incorporation of a company. This means it is easy to establish the existence and good standing of an LLP in a transaction where this is important, such as acquisition of overseas assets by the LLP.

If members of an LLP do not expressly agree the contents of a Members’ Agreement, the Act provides for a basic set of “default” terms.

LLPs must file an annual return and annual statutory accounts similar to those filed by limited companies. Small company exemptions apply, including audit exemption rules. Generally, though, Companies House compliance requirements are minimal.

There are no directors. However, “designated” members have particular responsibility for certain statutory requirements.

LLPs can create floating charges as security for borrowings. This can be a major advantage over an ordinary partnership when raising funds.

Members do not have to contribute a minimum amount of capital, even in the event of insolvency and parts of the Insolvency Act 1986 will apply.

For more information on our LLP incorporation service contact Alister Gillies on 0131 200 7124 or by e-mail alister_gillies@oswalds.co.uk

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