General Information on Limited Liability Partnerships (LLPs), UK
|The LLP company format is not particularly well known among the general public. The huge benefits of the LLP lie in the fact that under certain circumstances there is no corporate taxation, as, following the principles of flow-through taxation, the members of the LLP are liable for the taxes payable on the company’s income in the place where they are resident for tax purposes. As a result of the high level of prestige, the LLP is an excellent vehicle particularly for the performance of transactions between the UK and non-EU partners.
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|What is a Limited Liability Partnership (LLP)?
|An LLP is a partnership which is in itself a legal entity, and whose partners enjoy limited liability. The partnership has existed as a corporate form in UK corporate legislation for more than a century, but a new limited liability act, which was passed in 2000, has totally modernised the partnership, making its operation much more simple and convenient.
|Source of corporate legislation:
||Limited Liability Partnership Act 2000, Limited Liability Partnership Regulations 2001.
|Method of registration:
||A special form is signed by the partners and registered with Companies House. A Certificate of Registration is issued by Companies House following registration.
|Time required for registration:
|Possible suffixes to company name:
||LLP or Limited Liability Partnership
|Restrictions on company name:
||The name of an LLP should not be the same as or similar to a name already registered. The name must not include the following names or their derivatives: British, English, European, Great Britain, United Kingdom, International, National, Institute, Authority, Board, Council, Chamber, Charter, Chemistry, Holding, Registered, Sheffield, Trade Union, Foundation, Trust, Stock Exchange, University, Credit Union, Bank, Insurance and some others. Registration of names, including those containing the words mentioned above is possible only if approved by the relevant authorities.
||No minimum requirements
|Type of shares:
||No shares are issued.
||An LLP is formed by partners (at least two) for the purpose of carrying on a lawful business with a view to profit. The liability of the partners is limited to the assets of the LLP. The LLP does not have directors as it is usually managed by the partners, although it is also possible to appoint a manager.
|Number of Directors:
||LLPs have no directors.
|Number of owners (partners):
||A minimum of 2 partners are required to form an LLP. The minimum number of designated partners (see below) is 2. If the company has only two partners, both will be designated partners.
|Who can be a partner of an LLP?
||Any person or legal entity can be a partner in an LLP. There are no restrictions on the nationality or residency of the partners, i.e. partners may be either residents or non-residents of the U.K.
|What is the difference between a limited liability partnership and a limited company?
||The structure of an LLP is different from that of an Ltd (see above). In addition, there are significant differences from the point of view of taxation. Limited companies are taxed as corporations, while LLPs are taxed as partnerships (see the detailed information below).
|Information available to the public.
||LLP name, registered office address, names and addresses of partners, names and addresses of designated partners.
|Disclosure of owners (partners):
||Names and addresses of partners are available to the public.
||Each LLP must deliver to Companies House an annual return and annual accounts, reporting on the financial performance and position of the LLP during the year.
|Registered office address:
||Each LLP must have a registered office, which must be a physical location, not just a post office box. The registered address can be anywhere in England and Wales. All official documents, letters and reminders of Companies House, as well as notices and court papers have to be sent to the registered office address. If an LLP changes its registered office address after incorporation, then Companies House must be notified of the new address within 14 days of the change. All company documents (or copies of them) must be kept at the registered office address.
||An LLP is not required by law to have a registered secretary. However, it is advisable to appoint a local qualified secretary, who will be responsible for the preparation of the annual return of the company and for the keeping of professional records to avoid the risk of penalties.
|What is meant by the term "designated member"?
||Designated members have the same rights and duties towards the LLP as any other member. These mutual rights and duties are governed by the limited liability partnership agreement and the general law. However, the law also places extra responsibilities on designated members. Designated members are responsible for:
- Appointing an auditor,
- Signing the accounts on behalf of the members,
- Delivering the accounts to the Registrar,
- Notifying the Registrar of any membership changes or changes in the registered office address or name of the LLP,
- Preparing, signing and delivering to the Registrar an annual return, and
- Acting on behalf of the LLP if it is wound up or dissolved.
Designated members are accountable in law for failing to carry out these legal responsibilities.
Every LLP must have at least two, formally appointed, designated members at all times. If there are fewer than two designated members then every member is deemed to be a designated member.
|Requirements regarding the use of the name of the LLP and other registration information:
||The LLP must paint or affix its name on the outside of every office or place in which its business is carried on - even if that is the home of a member. The name must be kept painted or affixed there, and must be both conspicuous and legible.
The LLP must also state its name, in legible lettering, on the following:
- All the LLP's business letters,
- All its notices and other official publications,
- All bills of exchange, promissory notes, cheques and orders for money and goods purporting to be signed by, or on behalf of, the LLP,
- All its bills of parcels, invoices, receipts and letters of credit.
In addition, the LLP must show the following information on all its business letters and order forms:
- Its place of registration (for example: Registered in London) and its registered number,
- The fact that it is a limited liability partnership,
- The address of its registered office. If a business letter or order form mentions more than one address, it is recommended that it should be mentioned which one is the registered office address.
|What is an annual return and when should it be submitted?
||An annual return is a snapshot of the information on the LLP which must contain the following information:
- The name of the LLP,
- Its registered number,
- Its registered office address,
- The address where certain LLP registers are kept if not at the registered office,
- The name and address of each member,
- If not all the members are designated members, then details of which of them are designated members.
The annual report is separate from the LLP's annual accounts.
Every LLP must deliver an annual return to Companies House at least once every 12 months. The annual return should be delivered to Companies House within 28 days of the anniversary of incorporation of the LLP.
The designated members of an LLP are responsible for ensuring that the annual return:
- Is delivered to Companies House in time, and
- Gives a true picture of the membership of the LLP at the time of delivery.
Designated members can be prosecuted if the LLP fails to deliver the annual return in time.
Every LLP must prepare annual accounts that report on the financial performance and position of the LLP during the year. The period reported on in the accounts is called the financial year, or the accounting reference period. This starts on the day after the previous financial year ended or, in the case of a new LLP, on the day of incorporation.
For all new LLPs, the first accounting reference period is automatically set as the first anniversary of the last day in the month in which the LLP was incorporated. For example, if the LLP was incorporated on 10 June 2001 its accounting reference date would be set at 30 June. The next accounting reference period will start on July 1, 2002 and will end on 30 June 2003.
The accounts must normally be delivered to Companies House within 10 months of the accounting reference date.
|What does a set of accounts include?
||Generally, the accounts must include:
- A profit and loss account,
- A balance sheet signed by a designated member,
- An auditor's report signed by the auditor,
- Notes to the accounts, and
- Group accounts (if appropriate).
The accounts must be approved by the LLP's members and signed before they are sent to Companies House.
|Penalties for late filing of the accounts:
||There is an automatic civil penalty for late filing. The amount of the penalty depends on how late the accounts are filed. The fixed penalties are as follows:
|Length of delay
||Amount of penalty
|3 months or less
|3 months one day to 6 months
|6 months one day to 12 months
|More than 12 months
Failure to deliver accounts on time is also a criminal offence for which designated members may be prosecuted.
|Taxation of LLPs:
||LLPs are taxed as partnerships. This means that the company is not taxed at the corporate level, as in the case of limited companies. The profit of an LLP is divided between the partners in the proportion of their participation in the LLP, and the partners must pay taxes in the place in which they are resident for tax purposes. The income received from the LLP must be added to the income received from other sources and tax should be calculated according to the total income. If the partners of an LLP are non-residents of the UK, the LLP has conducted no activities on the territory of the UK and received no income from UK sources, then the partners will not become subject to taxation in the UK.
|Double Tax Treaties:
||Non-resident LLPs are not subject to DTTs concluded by the UK