A Limited Liability Partnership (LLP) is a business entity in which professionals work as a general partnership with limited business liability. Although an LLP setup resembles a traditional partnership, it offers reduced financial liability for business debts. Subsequently, this guide comprises all the steps on how to set up an LLP in the UK.
Hence, the LLP itself, rather than the individual partners, will be liable for any debts incurred unless individual members personally pledge a loan to the company. More importantly, LLPs are ideal for profit-making businesses. Therefore, non-profit organisations are not recommended to choose an LLP structure.
LLPs are ordinarily more complicated to set up and govern compared to traditional partnerships.
How to set up an LLP in the UK: A step-by-step guide
The following is comprehensive step-wise information on how to set up an LLP, including registration, membership criteria, rights and obligations of the partners involved, and partnership agreement.
Registering an LLP:
To begin with, registration is the first step if you’re wondering how to set up an LLP in the UK. Registering your LLP company with Companies House is mandatory in order to incorporate it. Next, Companies House will issue you a company registration number and certificate.
In addition, registering an LLP includes filling out a Companies House LL IN01 form and sending it by post.
Alternatively, you can register online by pursuing the services of a skilled accountant on registering an LLP with Companies House, like from Accountingfirms.
To go further, the necessary details you need to supply when filling out the form include:
- An LLP name.
- The registered office address.
- Information about at least two members.
- An agreement that outlines how it will run.
Notably, this information will remain on the public record.
Finally, registering an LLP online usually takes around 3-4 hours. Likewise, The processing time can vary based on the number of applications received by Companies House and the time of day. In general, the earlier you apply in the day, the sooner it is likely to be processed.
Choosing the name:
There are several rules you must stay mindful of when choosing an LLP name. To be more specific, the following is not permissible while naming your LLP:
- Ensure that the name is not the same as or identical to that of an existing company. Nevertheless, if the existing company or LLP belongs to the same group as your LLP, you must seek their approval before using the proposed name.
- Note that the name has to feature ‘LLP’ at the end.
- It must not contain offensive words.
- A name that suggests it is related to the UK Government.
Membership qualifications:
Another crucial step in how to set up an LLP in the UK is to know the LLP membership requisites. While there is no upper limit, an LLP needs at least two or more people. Likewise, LLP members can be:
- Individuals over the age of 16.
- Companies (called ‘corporate members’).
- Of any nationality or country of residence.
Further, two of the members/partners must be designated to incorporate an LLP.
For greater clarity, a designated member has additional duties and legal responsibilities than any other member. Their prime responsibility is to make sure that the company and its members comply with the LLP Act 2000, the LLP Regulations 2001, and any other pertinent regulations.
For ease of understanding, the LLP Act 2000 refers to the Limited Liability Partnerships Act 2000. It is a UK law that established the legal framework for incorporating a Limited Liability Partnership (LLP).
Similarly, LLP Regulations 2001 are the accompanying regulations that further expound on the rules and procedures governing how LLPs operate under the Act.
Lastly, all members in an LLP must be registered with Companies House. They must fulfil their legal responsibilities laid out in the partnership agreement irrespective of where they are based in the world.
Designated members’ responsibilities:
As stated above, designated members have more responsibilities than other members in an LLP.
They must:
- Register for HMRC Self Assessment, both personally and for their business.
- Incorporate/register the company for VAT if the overall revenue is estimated to surpass £90,000 a year.
- Appoint an auditor.
- Maintain accounting records.
- Prepare, sign, and submit annual accounts alongside a confirmation statement to Companies House.
Changes in membership:
It is important to highlight that the designated members are required to inform the Companies House of any changes or updates to details (like their name and status within the company). You can do this through Companies House’s online service.
Alternatively, you can download and fill out a member’s ( corporate member’s )change of details form and have it delivered by post.
Plus, if any designated members are dissolved, it is vital to replace them promptly and inform Companies House to maintain compliance with legal requirements.
Draughting an partnership agreement:
It’s common to formulate an agreement of partnership when setting up an LLP in the UK. This agreement is also called a partnership agreement or an LLP agreement. Its prime purpose is to ensure fairness and transparency and protect partners’ interests and investments.
You can draft an LLP agreement yourself or hire a professional accountant to help you.
More crucially, the partnership agreement is a legally binding contract between members. It spells out the rights, duties, and liabilities of all the members.
Beyond that, it includes:
- How the members can enter into or exit the LLP.
- How the partnership will be governed and run.
- How business debts are to be handled.
- How profits are shared.
Conclusion:
In the long run, a limited liability partnership structure proves to be immensely advantageous for independent professionals, like doctors, architects, or solicitors, seeking to split labour and share managerial costs by partnering.
It is advisable to seek professional help on how to set up an LLP in the UK, whether an accountant or solicitor like the ones listed at Accountingfirms. The adept accountants on our platform can offer dedicated application services to submit your documents and help you formulate an agreement, taking the whole process off your plate.
Thus, consider the accountants at Accountingfirms if you’re intending to set up an LLP or any other type of business structure and its tax obligations.
Disclaimer: The information provided on AccountingFirms.co.uk is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.