Setting up a limited liability partnership

A few days ago we were discussing limited partnerships and the important of having a deed of partnership in place. Well, what if you want to set up a Limited Liability Partnership? An LLP is a relatively new concept (we are talking years!) and restricts the liability of the partners even more so than a regular limited partnership. It acts more like a company in that it is the LLP itself – not the individual members – is responsible for any debts (unless individual members have personally guaranteed a loan to the business).

LLPs are trickier to set up than regular partnerships as they have to meet many of the same requirements as limited companies. LLPs are designed to be used by profit-making businesses only.

The members of an LLP normally share in both the responsibilities of running the business and the profits. Exactly how their rights and responsibilities are defined and divided depends on the LLP’s partnership agreement or ‘deed of partnership’. Designated members have some extra responsibilities on in addition to those of ordinary members.

When you set up you must contact your local HMRC office to let them know the business exists. HMRC will send a Partnership Tax Return, which must be filled in to show the partnership’s income and expenses for the tax year.

The partnership should appoint one of its members – the ‘nominated member’ – to fill in the Partnership Tax Return and return it to HMRC. The nominated member should also make sure that other members of the partnership are given copies of the Partnership Statement, to help them complete their own personal tax returns.

Although the nominated member has responsibility for the Partnership Tax Return, all the members will be jointly liable for any penalties that result from it being submitted late or incorrectly.

Have a burning legal question? Ask away…

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