What is a Limited Liability Partnership?
A Limited Liability Partnership (LLP) is an alternative corporate business structure (and the newest corporate vehicle) that has the benefit of limited liability for its members (like a limited company), is a separate legal entity in its own right (meaning it can contract and own assets etc. on its own behalf) but allows its members the flexibility of organising their internal structure to resemble a traditional partnership. It therefore has both corporate and partnership characteristics. However despite its name an LLP is not a partnership and partnership law does not generally apply to LLPs. LLPs are broadly governed by the Limited Liability Partnership Act 2000 as amended by various regulations, the Companies Act 2006 and the Insolvency Act 1986.
A LLP must be incorporated with the Registrar of Companies but has no articles of association (it will often however enter into a members’ agreement rather like a partnership agreement), has members rather than shareholders, has no share capital, must prepare and publish accounts and is tax transparent, i.e. the individual members are treated as self-employed for tax purposes similar to partners in a partnership. Note however that the position of LLP members does not equate to that of the directors of a company, as there is no legal distinction between the owners of an LLP and its management. It is a business vehicle particularly favoured by professional services firms, however is adaptable enough for any small business.