Status of an LLP
A limited liability partnership (LLP) is a relatively new form of body corporate which was introduced by the Limited Liability Partnership Act 2000. An LLP is a hybrid between a limited company and a general (ie traditional) partnership.
An LLP shares the tax treatment and organisational flexibility of a general partnership, but also benefits from limited liability and separate legal personality as if it were a limited company.
A key characteristic of an LLP is that, unlike a traditional partnership, its members benefit from limited liability. This means that the members' liability is generally limited to the amount they have invested or agreed to invest in the LLP. There are limited circumstances in which the members can be held personally liable in relation to an LLPs activities, for example if the members take on commitments or obligations in their own name (thereby assuming personal responsibility), if they have acted fraudulently, or if the 'clawback' provisions apply in the event that the LLP is liquidated.
Separate Legal Personality
Unlike general partnerships, LLPs have a separate legal personality, they can:
- own assets;
- employ people;
- contract with customers and suppliers; and
- create floating charges.
As a result of this separate legal personality changes in the LLP’s membership do not affect its continued existence.
LLPs are 'transparent' for tax purposes. They are taxed in the same way as a general partnership, with each member being assessed on their share of the LLPs income and gains.
Accounts and Filing
An LLP's accounting and filing obligations are similar to those imposed on limited companies.
Who can be a Member?
The members of an LLP can be individuals or corporate bodies (such as companies). The members are the initial subscribers (signatories) to the incorporation document and any subsequently admitted persons. A person cannot be a member if they are bankrupt or have been disqualified from acting as a member or a company director.
Do Limited Liability Partnerships have a minimum or maximum number of Members?
Limited liability partnerships can have an unlimited number of members.
They must have two formally appointed members on incorporation, but will not cease to exist if (for example) one member dies. However, please note that if an LLP carries on business with a single member for more than six months, that single member will become personally liable for the LLP's debts and liabilities.