Limited Liability Partnerships or LLPs were introduced by the Limited Liability Partnership Act 2000. An LLP is a half way house between a general partnership under the Partnership Act 1890 and a Limited Company.
Incorporation
An LLP is incorporated, that is it has a separate legal personality and is able, like people and companies but unlike partnerships, to contract on its own behalf. An LLP can own property, enter into contracts and employ staff.
Limited Liability
The key issue is that the LLP has limited liability. The members of the LLP have their liability limited to the value of their share of the capital of the LLP, in the same way that shareholders in a limited company have their liability limited by their share capital. Partners in general partnerships have unlimited joint and several liability.
Taxation
However from a tax viewpoint, the members of an LLP are treated as self employed (Schedule D) rather than employed (Schedule E) which can be advantageous.
Members (Not Partners)
LLPs have members rather than partners and there is a theoretical risk that members of an LLP who call themselves partners may be creating a separate partnership outside the LLP for which they are jointly and severally liable.
LLPs also have Designated Members who are like the directors of limited companies and responsible for ensuring that all the relevant regulatory paperwork is correctly filed at Companies House.
It is possible for LLPs to have salaried members and fixed share members.
Members will need an LLP agreement between them to regulate their interaction and especially to agree exit provisions and shares of profits.
If you are in need of LLP advice contact one of Ralli Partnership Law's expert solicitors now or complete the contact form.