A desire to restructure to a more contemporary outfit, as well as the limitation of liability for members, is often an attractive prospect for partners in a general partnership subject to potentially unlimited joint and several liabilities.
Converting can also be an attractive prospect from a tax perspective, depending on how you run your business. If converting from a partnership to a corporate entity such as an LLP or a limited company is something you are considering, there are a number of important hoops you need to jump through.
LLP vs limited company
You will have to make the decision firstly as to whether you want to convert to either an LLP or a limited company. Each has its own advantages and disadvantages and the most suitable vehicle for you will depend upon the nature and structure of your business.This will involve careful review and consideration of both options. After that, one of the initial steps is to set up the LLP or company, which involves incorporating at Companies House.
If you are subject to a regulator, such as the Solicitors Regulation Authority, they will need to be notified and an application made for registration made subject to how you have restructured. Other parties requiring consultation in the conversion process will include your bank, your insurer, your suppliers and, importantly, your customers or clients.
Contracts in place at the time of conversion will have to be dealt with in an appropriate manner and novated or assigned to the new corporate entity as necessary.
A number of important documents will have to be agreed in the conversion process, including a transfer agreement, LLP Agreement or shareholder agreement and supplementary documents. This can be a time consuming process. If there is property to be transferred, this will have to be dealt with in the appropriate manner.
If you have employees, they will need to be consulted about the transfer using the correct procedure under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (or TUPE as it is more commonly known). You will need specialist employment advice to ensure you do not breach TUPE, as this could have expensive implications for you if you do breach.
Consulting a partnership law solicitor
Throughout the process, you will need specialist legal advice from your solicitors and accountants and possibly others, depending on the nature of your business. Note, this is simply a snapshot of the process involved.
If you are considering converting, it is vital you speak to your legal adviser about the best option for you, to ensure you are properly guided through the process.