LIMITED LIABILITY PARTNERSHIP

A limited liability partnership is similar to an ordinary partnership in many ways but a partner’s liability is limited to the amount of money they have invested in the business (plus any personal guarantees they have given on loans). Limited liability partnerships are a relatively new form of business structure, only being available over the last few years. As a result, they are not yet as common as ordinary partnership arrangements in the licensed trade.

Pros

• A partner’s liability for business debts is limited.
• It has many benefits of an ordinary partnership.

Cons

• Its formation is more complicated and expensive than an ordinary partnership.
• You must register with Companies House.
• There are additional rules and requirements.
• Accounts must be filed with Companies House.
• Your financial information is publicly available.

Separate legal entity

A limited liability partnership is regarded as a separate legal entity from its partners. This means that the limited liability partnership itself is responsible for any debts that it runs up, not the individual partners. This is because when a limited liability partnership enters into a contract, it binds itself and not its members.

Tax and National Insurance

Despite being a separate legal entity, a limited liability partnership is treated as a partnership for tax purposes. The limited liability partnership will not itself be chargeable for tax on its profits, instead each member will be taxed on their share of the profits and also be required to make National Insurance contributions as in the case of a partnership. The limited liability partnership and the individual members must make annual self-assessment returns to HM Revenue and Customs.