A Limited Partnership (LP) is a form of General Partnership, where the partners have the flexibility of organizing the company’s internal structure, but still avail of the benefits of limited liability. In this business structure, one dominant partner runs the business and the multiple ‘limited partners’ make contributions to the partnership in the form of products, services or cash. If an LLP runs into financial bad weather, the general partner has no protection. However, each of the ‘limited’ partners is independent of the liability caused by the actions of other partners. Thus, the LLP structure limits the personal liability of each of the partners for any errors caused by omissions, negligence or incompetence of the employees or other agents involved in the business. For tax purposes, the government recognizes the LLP as an association of co-owners. Each partner or co-owner is taxed to the extent proportional to their share of profits. This is in contrast to the structure of a partnership, where all the partners are liable for any debt incurred by the company. It is to avoid this element of high risk that many people turn to LLP formation.
An LLP must have at least two members, and the rights and duties of all these members are given in the “Deed of Partnership”. Before LLP formation, the company would have to select a “Designated Member” who is responsible for all correspondence with Companies House. This member would also be responsible for supervising and preparing accounts and acting on behalf of the LLP, if it were dissolved in the future.
LLP formation is somewhat similar to other forms of business incorporation. There are two ways in which you can go about the formation of your LLP. You may enlist the services of one of many business start-up agencies who have qualified formation agents. They will guide you through the process of LLP formation, collect all required documentation and advise you regarding tax planning of the company. Currently, Companies House charges £20 for LLP formation. However, if you opt to go for the services of formation agents, they will naturally charge you extra.
It is easier to make use of the services of a formation agent because, LLP formation has a number of rules pertaining to choice of names, the use of sensitive words and expressions, the need for different approvals from recognized authorities and the disclosure of information. At the time of LLP formation, the members of the company should draw up a Deed of Partnership, which is a legally binding agreement that lais out in black-and-white all the responsibilities of each of the partners. This deed would also contain valuable information like the address of the members, their names, amount of capital invested by each of the members and their roles in the company.
One of the constraints of LLP formation is that it is not possible for interested parties to buy an off-the-shelf limited liability partnership, as you can with a limited company. This is because the old the set of documents that need to be submitted to the Companies House has to contain the names of the partners who are present at the time of incorporation. The registration form must contain the following details:
An LLP must have at least two members, and the rights and duties of all these members are given in the “Deed of Partnership”. Before LLP formation, the company would have to select a “Designated Member” who is responsible for all correspondence with Companies House. This member would also be responsible for supervising and preparing accounts and acting on behalf of the LLP, if it were dissolved in the future.
LLP formation is somewhat similar to other forms of business incorporation. There are two ways in which you can go about the formation of your LLP. You may enlist the services of one of many business start-up agencies who have qualified formation agents. They will guide you through the process of LLP formation, collect all required documentation and advise you regarding tax planning of the company. Currently, Companies House charges £20 for LLP formation. However, if you opt to go for the services of formation agents, they will naturally charge you extra.
It is easier to make use of the services of a formation agent because, LLP formation has a number of rules pertaining to choice of names, the use of sensitive words and expressions, the need for different approvals from recognized authorities and the disclosure of information. At the time of LLP formation, the members of the company should draw up a Deed of Partnership, which is a legally binding agreement that lais out in black-and-white all the responsibilities of each of the partners. This deed would also contain valuable information like the address of the members, their names, amount of capital invested by each of the members and their roles in the company.
One of the constraints of LLP formation is that it is not possible for interested parties to buy an off-the-shelf limited liability partnership, as you can with a limited company. This is because the old the set of documents that need to be submitted to the Companies House has to contain the names of the partners who are present at the time of incorporation. The registration form must contain the following details:
- the name of the LLP
- the location and address of the registered office
- the name and address of individual members of the company at the time of incorporation
- the name of designated members
1 comment:
very useful information on Limited Partnership formation and business incorporation
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