A Limited Liability Partnership (LLP) is a special form of partnership allowed by the Limited Liability Partnerships Act 2000.
Although an LLP is a form of partnership, it is a separate legal entity to its partners (known as members). Unlike ordinary partners, members do not have unlimited liability for the obligations of the LLP.
Although there are many similarities between an LLP and a limited company, there are also significant differences. A partner doesn’t have to be an actual person. For example, a limited company counts as a ‘legal person’, and can also be a partner in a partnership. You must choose a name for your partnership and register it with HM Revenue and Customs (HMRC).
Advantages
LLPs have a legal identity of their own and members have limited liability, which means claims are made against the LLP only.
As a separate legal entity, an LLP can enter into contracts in its own name.
LLPs do not have to be dissolved on the resignation, death or bankruptcy of a member.
Depending on the LLP agreement, the structure can be flexible.
Management responsibilities of the LLP are shared.
Disadvantages
As audited accounts must be submitted to Companies House, the LLP’s financial circumstances and trading position cannot be kept private.
All members of an LLP can be held responsible for any one member’s negligence.
Formation of an LLP is usually more costly and complex than for an ordinary partnership.
Administration costs in an LLP are higher than those for an ordinary partnership due to additional accounting and reporting requirements.
