Limited Liability Partnership Formation & LLP Incorporation in the UK?

Welcome to Coddan, online UK limited liability partnership (LLP) formation agent. We will guide you through the process of registering your partnership and establishing your registered identity. You need to complete and submit an LLP application form. Adequate completion and submission of this form, along with the provision of payment, will enable Coddan to incorporate your proposed UK LLP within five business days. We will express-mail your documents to the mailing address you specify in your incorporation order.

The Limited Liability Partnerships Act of 2000 created for the first time a British version of the American limited liability company (LLC). Like its America cousin it is governed by an Operating or Limited Liability Partnership Agreement and can be structured in a way to allow non-UK resident individuals, conducting all their business outside of the UK to enjoy the prestige of a genuine British entity without liability to UK taxes.
UK limited liability partnership (LLP) is a new form of legal business entity with limited liability. Limited liability partnerships are taxed as partnerships but in most other respects they are very similar to companies. They MUST have at least two, formally-appointed, designated Members at all times. Designated Members are similar to Executive Directors and the Company Secretary of a company. If there are fewer than two Designated Members, then every Member automatically becomes a Designated Member.

Provided that no business or trade is carried out with, or within, the UK and the Members are located outside the UK, then LLPs have no liability for UK taxation. Basically, this is because the limited liability partnership itself will not be liable for taxation on profits or gains; the profits or gains of the partnership will be assessed for tax separately on the individual partners, and, IF THEY ARE LOCATED OUTSIDE THE UK, THEN NO UK TAX IS PAYABLE.

Important Note:

It is important to note that tax consequences may be created in the jurisdiction of management and control and/or the fiscal residence of the beneficial owners depending on double taxation treaties and the specific drafting of the Partnership Agreements.

The Limited Liability Partnership itself will not be liable for taxation on profits arising within the partnership, but the profits will be assessed to tax separately on the individual partners. A limited liability partnership must be a commercial venture operating for profit. Changes in the tax rules are anticipated to confirm that operation through a limited liability partnership by a charity or in relation to investment in shares or property will not be allowed.

For more information about setting up LLP in UK please visit the UK limited liability partnership formation section on our main website.
Starting UP LLP in UK
All partners enjoy limited liability. Partners can pool their resources and talents. Management, distribution etc. are governed by the Partnership Agreement. All partners have apparent authority to bind the partnership to agreements entered into. Limited liability partnerships do not have as much continuity. Under certain circumstances, however, claims for economic loss could be made against individual Members who have been negligent. Any such claim would be a civil action outside the contract, as the party would have contracted with the LLP

Limited liability partnerships are similar to companies in the respect that they will be required to provide financial information equivalent to that of companies, including the filing of annual accounts. While an LLP must file an informational tax return, its income is passed through to its partners and taxed at the individual partner level, without any income tax assessment at the LLP entity level. Members of an LLP are afforded the protection of limited liability. There are two notable exceptions to this protection: insolvency and personal fault. In the event of the LLP becoming insolvent, Members can be required to repay profits (with interest) and other property which has been withdrawn from the LLP within the preceding two years.

Regarding personal fault, if an individual Member is purported to have been negligent, it may be possible to bring a civil negligence action against that individual. However, the courts have indicated that they would have regard to whether the allegedly negligent advice was given in a personal capacity or whether the LLP assumed responsibility for the advice.

If you are looking for more information about the forming up a limited liability partnership please follow this link.
The advantages of operating in this way are that no personal liability falls on a member of a limited liability partnership for the contracts or debts of the limited liability partnership and there is no joint or several liability for the negligence of any other member. The organisation of a limited liability partnership may well, therefore, be a popular vehicle for future use by the professions in the United Kingdom and for international business operated by non-resident partners outside of the United Kingdom. There may well be taxation advantages to be obtained from this route, where multi-national business is being undertaken by an international group of partners.

The key advantage of a LLP compared with a traditional partnership is that the members of the LLP (it is important that they should not be called partners but members) are able to limit their personal liability if something goes wrong with the business, in much the same way as shareholders in a limited company are able to.

Perhaps the greatest benefit of becoming an LLP is the rule that an LLP partner's personal assets will generally NOT be at risk in the event of a financial disaster resulting from business losses, or errors and omissions, or other tortious conduct of an employee or a co-LLP partner.

Thus, the LLP law eliminates personal exposure for vicarious tort liability as well as liability for partnership debts and obligations such as bank loans and lease obligations. The LLP law does not, however, change the fact that an LLP partner will still be personally liable for his or her own errors and omissions, whether arising from his or her own acts or failures to act, or negligent supervision of associates and staff.

If you require professional assistance with the registration of your new limited liability partnership in UK, please do not hesitate to contact Coddan or visit the limited liability partnership formation section of our main website.
UK LLP FAQs

What is the difference between a LLP and a limited company? The main difference is that a Limited Liability Partnership has the organisational flexibility of a partnership and is taxed as a partnership. In other respects it is very similar to a company. It will be seen from the above comparison that the Limited Liability Partnership will be of most interest to businesses where the members wish to have limited liability but where all the members wish to be able to participate in the membership of the firm and where the less formal partnership structure is preferred to the more formal company structure (with transferable shares). The Limited Liability Partnership structure is particularly appropriate for professional practices that wish to limit members' liability.

Who can form a limited liability partnership? The Act generally allows two or more persons associated for carrying on a lawful business with a view to profit to form a Limited Liability Partnership by subscribing to its incorporation document.

Partnership Agreement: There is no legal requirement for the members of an LLP to enter into a written agreement regulating the relations between the members themselves and between the members and the LLP. It is, however, desirable to have such an agreement to avoid dispute.

What is the minimum number of members an LLP requires? Every Limited Liability Partnership 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. (The Limited Liability Partnership may have decided that all members will be designated members or that only some members will be designated members).

What are the disclosure requirements? They are similar to those of a company. LLPs will be required to provide financial information equivalent to that of companies including the filing of Annual Accounts. Among other things, they will also be required to: file an Annual Return; notify any changes to the LLP's membership; notify any changes to their members names & residential addresses; notify any change to their registered office address.

How is a UK LLP taxed? An LLP is taxed as a partnership. The internal structure of the LLP is similar to that of a partnership. The members provide working capital and share any profits. Income derived by the members from the LLP will be closer to that of a partnership than to the dividends paid by companies. The Act also provides that any partnership converting to an LLP will receive relief from stamp duty on any property transferred in the first year, subject to conditions. Members will be liable to pay Class 2 and Class 4 National Insurance contributions.

If you have more questions about the UK LLP incorporation procedure, incorporation and annual filing requirements, please visit the LLP Main FAQs section of our main web site.