Convert a Partnership to an LLP: 2026/27 UK Checklist

Updated for 2026/27. An existing general partnership can move its business into a limited liability partnership (LLP), but there is no one-click legal conversion. The partners incorporate a new LLP and then transfer the business, assets, contracts, employees and registrations in a planned sequence.

Why convert a partnership to an LLP?

• Limited liability: members are generally not personally responsible for LLP debts solely because they are members, subject to guarantees, wrongful conduct and insolvency rules.
• Flexible profit sharing: the LLP agreement can govern profit allocations and management rights.
• Separate legal personality: the LLP can own assets, contract and sue or be sued in its own name.
• Tax transparency: an LLP carrying on business with a view to profit is normally taxed through its members rather than paying Corporation Tax itself.
• Continuity: membership can change without dissolving the legal entity.

The trade-off is public filing, annual accounts, confirmation statements, statutory registers and greater administrative formality.

Step 1: review the existing partnership

Check the partnership agreement, ownership of assets, leases, finance, licences, employee terms, client contracts, intellectual property, insurance and disputes. Identify personal guarantees and contracts that prohibit assignment. Agree how capital accounts, profit shares and liabilities will translate into the LLP.

Step 2: incorporate the LLP

At least two subscribers form the LLP through Companies House, choosing an available name, registered office, email address, members and designated members. The LLP receives a new registration number and is legally separate from the old partnership. Identity-verification and filing requirements applying at the incorporation date must be followed.

Step 3: prepare an LLP agreement

A written agreement is strongly recommended. It should cover capital, profit and loss allocation, drawings, decisions, authority, duties, admission and retirement, absence, death, disputes, restrictive covenants and winding up. Without suitable terms, statutory defaults may create unexpected equal-sharing and management outcomes.

Step 4: transfer the business

Use a business transfer agreement to specify the effective date and everything being transferred. Depending on the business, this may include:

• Stock, equipment, receivables and cash
• Goodwill, trading name, website and intellectual property
• Property interests and leases
• Customer and supplier contracts
• Employees and accrued employment rights
• Loans, creditors and other liabilities
• Books, records and data-protection responsibilities

Third-party consent or novation may be required. The LLP cannot simply use assets legally owned by the partners without documenting the arrangement.

Step 5: address tax

The transfer may create Income Tax or Capital Gains Tax consequences. Incorporation relief under section 162 Taxation of Chargeable Gains Act 1992 can sometimes defer gains where a business is transferred as a going concern with all its assets except cash in exchange for an interest in the new entity, but eligibility is fact-specific. An LLP interest and the nature of consideration require careful analysis.

Land and buildings can create Stamp Duty Land Tax or the corresponding devolved tax. Partnership rules are complex and relief is not automatic. Stock, debtors, work in progress, capital allowances and goodwill also need separate treatment.

VAT registration

A partnership and the new LLP are different legal persons for VAT. Where the business is transferred as a going concern, the VAT registration number may sometimes be transferred using the prescribed process, or the LLP may need a new registration. Review the transfer-of-a-going-concern conditions, option-to-tax position and VAT records before completion.

Employees and payroll

TUPE may transfer employees and their continuity of employment to the LLP. The partners should obtain employment advice, inform and consult as required, set up the correct PAYE arrangements and transfer pension and payroll data securely. Do not assume that forming the LLP automatically moves employment contracts.

Contracts, bank and insurance

Open an LLP bank account, arrange finance and obtain releases or replacements for guarantees. Notify clients, suppliers and insurers. Engagement letters, website terms, invoices and privacy notices should identify the LLP’s registered name, number and office. Regulated businesses need approval from their regulator before or during the change.

HMRC and ongoing filings

Register the LLP for the appropriate taxes and submit the final partnership return for the old business period. Members continue reporting their allocated profits. The LLP must prepare accounts, file confirmation statements and maintain Companies House information. The old partnership’s records must still be retained for the required period.

Suggested conversion timetable

1. Eight to twelve weeks before: tax, legal and commercial review.
2. Six to eight weeks before: incorporate the LLP and draft agreements.
3. Four weeks before: seek consents, arrange banking, VAT, payroll and insurance.
4. Completion date: sign transfers, move operations and notify stakeholders.
5. After completion: update registers, filings, invoices, websites and tax records; close the old partnership when appropriate.

Common mistakes

• Assuming assets and contracts transfer automatically
• Ignoring SDLT, VAT, capital allowances or goodwill tax
• Using an LLP without a tailored agreement
• Failing to obtain releases from personal guarantees
• Leaving clients and suppliers invoicing the old partnership
• Closing old bank or tax records before reconciliations are complete

See the official guidance on setting up an LLP and HMRC’s Partnership Manual. Our Companies House LLP registration guide covers the formation filing.

Frequently asked questions

Does the partnership registration number become the LLP number?

No. The LLP is a new legal entity and receives its own Companies House number.

Is tax always deferred?

No. Relief depends on the assets, consideration, ownership and statutory conditions. Property and goodwill require particular care.

Do clients need new contracts?

Often yes, or a valid assignment/novation and notification. Check each contract and applicable professional rules.

This guide is general information. A conversion should be coordinated by legal and tax advisers before assets are transferred.