A limited liability partnership is a kind of partnership in which the responsibility of members is restricted to their investments. In other words, in limited liability partnerships, partners can not lose more than what they have capitalized in it. Although in the case of bankruptcy, personal assets or properties cannot be accumulated to pay debits, but it can happen if there are signed personal guarantees. According to the UK’s business regulations, a limited liability partnership is entitled as a corporate body.
One of the key benefits of limited liability partnership is the limited liability of partners, but the organizational flexibility of limited liability status and partnership is the basic idea behind it. It works similarly to corporate bodies with the management structure of a usual partnership.
This partnership does not need any CEO or executive to make top-level decisions, but it majorly depends on the members to determine either to appoint any CEO or CTO.
In this kind of business structure, partners are mutually responsible to the stakeholders to the agreed extent, while none of the partners is liable for other’s actions like in a simple partnership status.
Like simple partnerships, in LLPs too, are not liable to pay any capital gains tax or corporate one. This partnership structure is a bit different from other structures due to flexibility in management and profit distribution. All the partners are required to pay their income tax and class 4 national insurance contributions on their partnership profit share.
In this regard, the UK government has set some new rules that state that a partner is counted as an employee in case of meeting certain conditions. The key highlights of new rules areas:
- Disguised wage rule counting the term like partners provide their services in exchange for a salary with at least 80% fixed or any amount that is variable but is unaffected by the whole loss or gain of LLP.
- A member who has no significant influence over the partnership affairs
- Support for the partnership from a member is lower than 25% of the disguised wage.
The members will be entitled to employees on meeting these terms and conditions and will be subject to PAYE and taxes on other benefits.
Legal Requirements for LLP
There is no restriction for businesses to be registered as limited liability partnerships except non-profit or charitable organizations. A limited liability partnership consists of 2 or more partners, and a partner or member can be either an individual or company.
Every partnership requires to have
- Name of the LLP
- No less than 2 selected members
- Listed address in the same nation in which LLP is registered.
- An LLP treaty
Key Components of an LLP Agreement
An LLP agreement sets how it will run, and it depends on the members to decide components as
- The percentage in which profits will be shared
- Who consents to take high precedence
- Duties of members
- Terms and conditions for entering or exit the partnership.
ProAccountax has all the expertise and skills to provide you sufficient counseling for drafting these agreements in order to help you resolve conflicts that can take place.
Key Responsibilities of Designated Partners
A limited liability partnership should have at least two members who will be responsible for the company accounts and records management and keeping them up to date. The other key responsibilities of designated members are:
- Registration of partner for self-assessment tax with HM’s Revenues and Customs
- VAT registration in case of meeting set threshold of £85,000
- Appointment of auditors
- Accounting records management for the business
- Preparation and submission of annual accounts and confirmation statements to Companies House
- Informing the HMRC and Companies house in case of any changes within the business
- Making sure that all the members are complying with the statutory requirements
ProAccountax is serving a variety of businesses over the years and is offering a vivid range of accounting and bookkeeping services for LLPs too. You can take advantage of our following services for your business
- Business-oriented Solid Year-end Report Packages
- Planning and submission of annual accounts and confirmation statements
- Accounts management in the preferred intervals
- Monthly and quarterly bookkeeping and Xero support facilities
- Preparation and submission of all tax returns
- Effective payroll management
- Cash flow budgeting
Along with high standard accounting and bookkeeping services for our clients, we also offer very affordable packages that you can acquire in accordance with your business needs. Our services for LLPs start from £50 and can vary according to your chosen packages. So, what are you waiting for? Select ProAccountax as your accounting manager and be fearless to deal with legal complexities with our highly qualified accountants and taxation solicitors.