Limited liability partnerships

BLP.09 — Limited Liability Partnerships (LLPs)

An LLP is a body corporate with separate legal personality, incorporated under the Limited Liability Partnerships Act 2000 (LLPA 2000). It combines corporate features (limited liability, perpetual succession, can sue/be sued and own property in its own name) with partnership-style internal flexibility and tax transparency.

Formation

• Incorporation by registration at Companies House: two or more persons "associated for carrying on a lawful business with a view to profit" subscribe to an incorporation document (form LL IN01) (LLPA 2000 s.2). Registrar issues a certificate of incorporation (conclusive evidence).
• Name must end in "LLP" or "Limited Liability Partnership".
• There should be at least two designated members (responsible for filing accounts/returns, signing). Under LLPA 2000 s.8, if at any time there are not at least two designated members, every member is deemed a designated member.

Members and liability

• Members are agents of the LLP (LLPA 2000 s.6), not of each other — a key contrast with ordinary partnerships (where partners are agents of one another, Partnership Act 1890 s.5).
• The LLP (not the members) is liable to outsiders; members enjoy limited liability. A member may still be personally liable in tort for their own negligence where they assume a personal duty of care.
• An LLP can be liable for a member's wrongful act/omission in the course of business (s.6(4)).

Internal governance

• Governed by a members' agreement (private). In default of agreement, the LLP Regulations 2001 supply default rules, e.g. equal share of capital/profits, no entitlement to remuneration for management, all members take part in management, and unanimity to change the business nature. No expulsion power unless expressly agreed.

Tax — the key attraction

• An LLP is tax transparent provided it carries on a trade, profession or business with a view to profit (CTA 2009 s.1273): members are taxed as self-employed partners (income tax on profit shares; CGT on chargeable gains), not corporation tax. The LLP itself pays no corporation tax while trading. (An investment/non-trading LLP can lose transparency and be taxed as a body corporate.) BADR may apply on disposal of a member's interest (£1m lifetime limit; 18% rate from 6 April 2026).

Common traps

• LLP ≠ ordinary partnership: it is a body corporate; members are not agents of one another.
• LLP files accounts and a confirmation statement at Companies House (public), unlike an ordinary partnership.
• Designation matters: aim for two designated members; if there are fewer, s.8 deems all members designated.
• Despite corporate status, a trading LLP is taxed transparently — don't confuse with a company.

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