An LLP is similar in some ways to a standard Partnership, except that the individual members have less of a liability to any debts which may arise from running the business.
There are more administrative duties involved compared to the Partnership business structure. In fact, an LLP is more similar to operating a Limited Company. The main difference is that a limited liability partnership has the flexibility of a partnership and it is the individual partners who are taxed not the LLP itself. Anyone can be a partner in an LLP provided that that person is not an already disqualified director.
The characteristics of an LLP:
- It is an entity on its own distinct from the partners, which means that the latter have limited liability but the LLP is liable for all its debts to the full extent of its assets.
- An LLP does not have to abide by the law governing the maintenance of Capital because it does not have shares and shareholders.
- An LLP does not have directors but instead has to have members and a minimum of 2 designated members who have the responsibility similar to the director of a limited company. These members are also governed by the similar law that is in place for directors who are involved in wrongful or fraudulent trading
- For those dealing with an LLP, they are reassured that the law requires Annual returns and Accounts to be filed just like limited companies.
- It is in the interest of the members of an LLP to have an LLP Agreement in place to specify the contribution (if any) of each member in the eventuality of a liquidation.
- The registered office of the LLP should be in the UK.
- The law requires at least 2 designated member in an LLP.