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February 14, 2018
An LLP is a form of legal business entity that gives the benefits of limited liability but allows its members the flexibility of organising their internal structure as a traditional partnership. They are intended for businesses which carry on a trade or profession, and are particularly attractive to larger professional partnerships.
LLPs are in law regarded as ‘bodies corporate’ and are subject to aspects of company law, but for tax they will generally be treated as ‘partnerships’. The members provide working capital and share any profits. Members who are individuals will be liable to pay income tax under the Schedule D rules, and self-employed Class 2 and Class 4 National Insurance contributions. Members who are companies will be liable to pay corporation tax on their share of profits.
In general, LLPs afford protection for members against personal liability for negligence claims. LLP members’ agreements typically provide that any payments made and liabilities incurred by the individual member will be met by the LLP and hence shared by all the members collectively. However, individual members may be personally liable to the LLP for their own mistakes if they are deemed to be not in the ordinary and proper conduct of the LLP’s business. The negligent member may also be liable to a client if he has (inadvertently) assumed personal responsibility.
LLP disclosure requirements are very similar to those of a company, including the filing of annual accounts (audited where necessary). There are also similar rules for the filing of annual returns, and notifying changes in members’ details or the location of the Registered Office. However, the LLP agreement remains confidential
Every LLP must have at least two, formally appointed, Designated Members, who carry responsibilities similar to those of a Company Secretary.
The name of an LLP is used in a comparable way to that of a company, and is displayed in the format Millionaire Limited Liability Partnership, or Millionaire LLP, and there are corresponding restrictions on the use of similar or sensitive names.