FAQs – LIMITED LIABILITY PARTNERSHIPS
The FAQs may assist official receivers in dealing with limited liability partnerships. The answers should be read in conjunction with the detailed guidance provided in the Technical Manual chapter. Relevant links to the Technical Manual are provided within the FAQs.
What is a Limited Liability Partnership (LLP)?
An LLP is a body corporate with a legal identity separate to that of its members. There are no restrictions on a LLP’s operations. Many LLPs are solicitors or accountants.
What legislation governs an LLP?
The Limited Liability Partnerships Act 2000 is the main point of reference. Further detail is contained in the regulations created under the Act. The regulations operate by reference to the Companies Act 2006 and the Insolvency Act 1986 by applying or modifying relevant sections of those Acts to LLPs. The regulations need to be read with the relevant Act as together they effectively create an Act specifically for LLPs. The most important regulations are the Limited Liability Partnership Regulations 2001 and the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009.
What is the difference between an LLP and a traditional partnership?
A partnership is a number of individuals carrying on business with a view to a profit. A partnership has no separate legal identity and each partner, usually, has unlimited liability. An LLP has a separate legal identity and the members (or partners) generally have limited liability.
Who can form an LLP?
An LLP may be formed by two or more legal persons (for example individuals, limited companies, LLPs, corporations etc) for carrying on a lawful business with a view to profit.
How is an LLP created?
Potential members can incorporate an LLP by submitting the incorporation document form LL1N01 electronically or by post to Companies House together with the registration fee (see paragraphs 53A.15 to 53A.17)
What is the difference between a designated and an ordinary member?
The rights and duties of the members of an LLP and the relationship between the members and the LLP are set out in legislation or, where held, the LLP agreement. A member is expected to show a duty of care in the transactions he/she undertakes for the LPP (see paragraph 53A.37) Every LLP must have at least two designated members who may be corporate or individual members. A designated member has additional responsibilities which include the production of accounts, annual returns and providing information in a winding up (see paragraph 53A.40).
What is an LLP agreement?
An LLP agreement is not compulsory, however the legislation does provide for a default agreement (see paragraph 53A.47). If an LLP has a partnership agreement it may be verbal or written. A written agreement is not a public document and as such is unlikely to be filed with the registrar of companies. It is a formal agreement that governs members mutual rights and duties in relation to each other and the LLP (see paragraph 53A.45 for details of the likely matters covered in the agreement).
What happens if a member becomes insolvent or is disqualified?
Where a member of an LLP is wound-up or is made bankrupt they cannot participate in the management of an LLP. This prohibition also applies to the liquidator or trustee in bankruptcy of the member. Where a person is subject to a disqualification order/undertaking or bankruptcy order/undertaking he/she is barred from being a member or tasking part in the management of an LLP without the agreement of the court (see paragraphs 53A.49 to 53A.52).
Does an LLP have to keep accounting records and submit accounts and other returns?
An LLP must keep adequate accounting records and prepare and file annual accounts with the registrar of companies. Small (see paragraph 53A.60) and medium sized (see paragraph 53A.65) LLPs are entitled to submit abbreviated accounts (see paragraph 53A.61 and paragraph 53A.66 for further details). An LLP must file an annual return with the registrar of companies (see paragraph 53A.74).
How is an LLP taxed?
Generally tax legislation treats an LLP as a partnership carried on by the individual members. However a corporate member of the LLP would be subject to corporation tax on its share of the profits. Where an LLP is wholly or mainly carrying on an investment business it will be subject to corporation tax. Where appropriate an LLP must register for VAT in the same way as a company. Further details can be found in paragraph 53A.76.
Can an LLP own assets?
As a body corporate an LLP may own assets in the same way a company owns assets. The official receiver should use the accounting records, any accounts, any LLP partnership agreement and any other records to establish whether the assets (if any) belong to the LLP or the individual members.
How does an LLP create a charge on its assets?
An LLP can create a charge on its assets and issue debentures (see paragraph 53A.80). An LLP must keep a register of debenture holders and register most charges or mortgages with the registrar of companies (see paragraph 53A.81).
What is the role of the official receiver when a winding-up order is made against an LLP?
The official receiver generally has the same duties and responsibilities as he/she has with regard to a company in compulsory liquidation. Part 5 provides detailed guidance on dealing with an insolvent LLP.
Does the winding-up order have to be filed at Companies House?
The official receiver must file the winding-up order with the registrar of companies. The company registration number must start with the pre-fix “OC” (short for “other company”). Without this pre-fix the document will be rejected (see paragraph 53A.88).
How does the official receiver deal with non co-operative members?
Designated members and members of an LLP have a similar duty to co-operate with the official receiver as a company director. The official receiver should follow the guidance provided in paragraph 13.9 when dealing with non co-operative members (see paragraph 53A.90).