About limited liability partnership – LLP
In 2001 a new format for the legal structure to a business was offered in the guise of a limited liability partnership, otherwise referred to as an LLP.
Originally take up was slow but in recent years the LLP has become more popular in particular amongst professional partnerships seeking to limit their liability.
A limited liability partnership is in effect the best of both worlds – it affords the protection of limited liability and provides a transparent tax structure that means that the partners pay tax as individuals instead of corporation tax, and is governed by a partnership agreement.
As far as the corporate aspect is concerned the LLP is registered at Companies House, although the partnership agreement remains confidential and it can grant charges but the LLP will still have to file accounts at Companies house.
If you decide that you wish to form a limited liability partnership, before you run out and make changes it is wise to plan the transition carefully with professional guidance.
A limited liability partnership will not automatically remove all risks, as banks may still require a personal guarantee from the partners and existing suppliers and creditors may not wish to transfer agreements into an LLP unless they also have guarantees.
In many aspects the transition to a limited liability partnership is similar to converting from a sole trader into a limited company with all the usual parties needing notification and agreements needing to be reviewed and amended accordingly with staff, customers, suppliers and regulatory bodies.
The transfer of assets and goodwill into an LLP may also have tax implications, both for better or for worse and each case needs to be visited and a decision taken on its own merits.
Whatever you decide it is essential that the basis for any change is a sound one with a clear goal or benefit in mind and that a partnership agreement is utilised in order to avoid the default regulations applying, which is rarely a good thing in the event of a breakdown in relationship between the partners.