Limited Liability Partnerships Introduction

The creation of LLPs introduced the benefit of protected liability for the partners, not previously offered to partnerships.

Back in 2001 an alternative legal structure was introduced by the Limited Liability Partnership Act 2000. This structure is known as a Limited Liability Partnership (LLP) and is widely used by professions such as architects, accountants and solicitors, who had previously operated as a traditional partnership.

There is not a huge difference in the characteristics of an LLP to a traditional partnership. They are often referred to as a hybrid of a Partnership and a Limited Company as they have similarities with both. One of the main differences to a partnership is the reduced financial liability for each partner. Any debts or liabilities of the business belong to the LLP as a legal entity and not the partners.

A Limited Liability Partnership can be registered at Companies House by downloading and completing form LLIN 01 and making the correct payment. This form is rather long and postal applications can take several weeks to complete. It is very common for errors to be made which can delay the registration further. Most LLPs are now registered online through a company formation agent. Unlike Companies House, an agent offers a simplified online LLP registration service. Very few registrations are now completed by post directly.

Member Requirements

An LLP must have at least two members, and two of which need to be classed as ‘designated’ members. If there are less than two designated members recorded at Companies House, then every member of the LLP is deemed a designated member.  A designated member must carry out additional duties/responsibilities as detailed below:

  • Registration of the LLP at Companies House
  • Prepare and sign accounts on behalf of members
  • If necessary – appoint an auditor
  • Notify Companies House of any changes to the LLP
  • Delivery of accounts to Companies House
  • Prepare, sign and deliver the annual return to Companies House
  • If the LLP is dissolved/wound up, they must act on behalf of the LLP

If they fail to perform these duties correctly, a designated member is legally accountable.

Differences between LLP and private Limited Company’s


Cannot be set up as a charity or non-profit enterprise, it must be set up as a profit making business. It must always have at least 2 members, at least two of which must be designated members. An LLP cannot have shares, shareholders or directors and its registered office address must be in the country in which it was incorporated. Each LLP member is classed as self- employed and is taxed via self- assessment and Companies House must receive annual accounts and returns each year.

A Partnership Agreement is normally drawn up to detail the way in which the LLP should be managed and as such the limit of each members liability should be agreed and stated in the agreement. As LLP’s do not have shares to sell, they cannot receive capital investment for a portion of ownership.

Private Limited Company:

If it is a profit making company it will be limited by shares. If it is a non-profit organisation, it will be limited by guarantee. In comparison to an LLP, it is required that a private Limited Company has at least one shareholder and one director, but one person is able to assume both roles. The company must pay corporation tax on profits. As well as filing annual accounts and the confirmation statement, it must also file company tax returns with HMRC.

The company must have a registered office address in the same part of the UK in which it was incorporated. The rights of the shareholders will vary depending the type of shares they own. Capital investment can be bought by way of selling shares.

For more information please read our guide to LLPs v LTDs.