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 (LLPA 2000 ss.2-3) has three requirements: (a) two or more persons "associated for carrying on a lawful business with a view to profit" subscribe their names to an incorporation document; (b) the document is delivered to the registrar (form LL IN01); and (c) a statement is delivered, by a solicitor engaged in the formation or by a subscriber, that requirement (a) is met. The incorporation document must state the LLP's name; whether the registered office is in England and Wales (or Wales), Scotland or Northern Ireland; the registered office address and registered email address; the required information about each first member; for each individual member, that their identity is verified (from 18 November 2025); either which members are designated members or that every member is a designated member; and a statement of initial significant control. The registrar's certificate of incorporation is conclusive evidence that s.2 has been complied with and that the LLP is incorporated by the name in the document (s.3(4)).
• 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

• Every member is an agent of the LLP (LLPA 2000 s.6(1)), not of the other members. The LLP is not bound by a member's act if the member in fact had no authority to do it and the person dealing with the member either knew of the lack of authority or did not know or believe the person to be a member (s.6(2)). A former member is treated as still a member, as regards a person dealing with the LLP, unless that person has notice of the cessation or notice of it has been delivered to the registrar (s.6(3)). Contrast an ordinary partnership, where every partner is an agent of the firm and of the other partners for the purpose of the partnership business (Partnership Act 1890 s.5).
• The LLP (not the members) is liable to outsiders; members enjoy limited liability. Limited liability does not protect a member from liability for torts they personally commit; for example, a member who personally commits deceit is liable for it (Standard Chartered Bank v Pakistan National Shipping Corp (No 2) [2002] UKHL 43). For negligent advice or statements causing economic loss, a member is personally liable only if they personally assumed responsibility to the claimant (Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830).
• Where a member is liable to any person other than another member for a wrongful act or omission of theirs in the course of the LLP's business or with its authority, the LLP is liable to the same extent as the member (s.6(4)). The LLP's liability is in addition to the member's own liability, not a substitute for it.
• Limited liability has statutory limits. In a winding up, the court may, on the liquidator's application, order a member or former member to contribute up to the total of their withdrawals (profit shares, salary, loan repayments or interest, or other property) in the two years before the winding up began. The order requires that the member knew or had reasonable grounds for believing, at the time of the withdrawal, that the LLP was unable to pay its debts or would become unable to pay them as a result, and knew or ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation (Insolvency Act 1986 s.214A, as applied by the LLP Regulations 2001, Sch.3). Fraudulent and wrongful trading (IA 1986 ss.213-214) also apply to members. If an LLP carries on business with only one member for more than six months, that member, if aware of it, is jointly and severally liable with the LLP for debts contracted after the six months (LLPA 2000 s.4A).

Internal governance

• Governed by a members' agreement (private) (LLPA 2000 s.5). Subject to the general law and that agreement, LLP Regulations 2001 reg.7 supplies default rules: members share equally in capital and profits; the LLP must indemnify a member for payments and personal liabilities incurred in the ordinary and proper conduct of its business or in preserving its business or property; every member may take part in management; no member is entitled to remuneration for acting in the business or management; no one may be admitted as a member, and no member may voluntarily assign their interest, without the consent of all existing members; ordinary matters may be decided by a majority of the members, but the nature of the business may not be changed without the consent of all members; and a member must account to the LLP for profits from a competing business, and for benefits from LLP transactions, property, name or business connection, obtained without the LLP's consent. No majority may expel a member unless an express agreement confers that power (reg.8). Without agreement on leaving, a member may cease to be a member by giving reasonable notice to the other members (LLPA 2000 s.4(3)).

Tax — the key attraction

• An LLP is tax transparent provided it carries on a trade, profession or business with a view to profit (ITTOIA 2005 s.863 for income tax; TCGA 1992 s.59A for capital gains; CTA 2009 s.1273, "trade or business", for corporation tax). Individual members pay income tax on their profit shares as partners and CGT on their shares of the LLP's gains; a corporate member pays corporation tax on its share. The LLP itself is not charged. An individual member who meets all three salaried-member conditions is taxed as an employee instead (ITTOIA 2005 ss.863A-863G; see BLP.18). Transparency is not limited to trading LLPs: an LLP carrying on an investment business with a view to profit is still transparent. Transparency continues through a temporary cessation, and through a winding up that is not tax-motivated or unreasonably prolonged. It ends when a liquidator is appointed or a winding-up order is made, or if the LLP permanently stops carrying on any business with a view to profit outside such a winding up; the LLP is then taxed as a company (ITTOIA 2005 s.863(3)-(4); TCGA 1992 s.59A(3)-(5); CTA 2009 s.1273(3)-(4)). 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, an LLP carrying on a trade, profession or business with a view to profit is taxed transparently; don't confuse it with a company.

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