What Is A Partnership?
A partnership is where two or more people come together to carry on a business, trade or other activity. There are two forms of partnership in the UK, traditional unincorporated partnerships and limited liability partnerships (LLP).
The legal status of a traditional partnership is similar to that of a sole trader but instead of having one owner, there are two or more proprietors involved in running the business, each having a stake in the ownership of the that entity.
Limited Liability Partnerships vs. a Traditional Partnership
A Limited liability partnership is different from a traditional one. LLPs are incorporated at Companies House, have a registered office and as their name suggests, enjoy the protections of limited liability.
The document will focus on traditional partnerships.
As is the case with a sole trader, a partnership is an unincorporated business. It is not (neither is it required to be) registered at Companies House and has no obligations to maintain statutory records, prepare and file statutory accounts or to submit an annual return to the Registrar of Companies.
This kind of partnership structure is usually found within firms of solicitors, surveyors and accountants; although in recent years some practices within these professions have changed their status to an LLP.
Limited Liability Partnership
- What is a Limited Liability Partnership?
A Limited Liability Partnership is a business incorporated at Companies House consisting of two or more persons who share the profits of that entity.
- What are the benefits and advantages of this type of business?
The main benefit of this type of business over a traditional partnership is that LLPs provide the owners with limited liability in the same way that a company does to its shareholders.
An LLP is a separate and distinct from the partners who own it and therefore can protect their personal wealth from the business’ creditors and others to whom it might owe money.
- Does a Limited Liability Partnership have shares?
Shares only exist in limited companies. LLPs have partners and it is up to them how the profits of the business are divided among them. It is often the case that a partnership agreement is drawn up to lay down the profit sharing entitlement of each partner.
- What are the statutory obligations for LLPs?
LLPs are required to submit an annual return in the same way that UK companies are. They also have obligations to submit their annual accounts to Companies House within 9 months of the end of their financial year.
- Can an LLP have the same name as a UK company?
For the purposes of registering an LLP, the company name guidelines apply and thus the name of a Limited Liability Partnership must not be held on the Companies House register by an existing company or partnership.
- Can an LLP change its name?
LLPs can opt to change their name in the same manner in which a company would do so.
- What is a Designated Member of an LLP?
A Designated Member is a person or corporate body who accepts the duty to conduct the partnership’s statutory obligations. These would typically include: filing annual accounts, completion of the annual return and approving the business’ financial statements.
The successful incorporation of a Limited Liability Partnership mandates that at least two persons (or companies) hold themselves out to be designated members. Companies House will assume that all initial partners at the time the LLP is set-up are agreeing to act in this capacity unless information is given to the contrary.
- Is a partnership agreement necessary for an LLP?
LLPs are not required to have a partnership agreement or other form of constitution by law; however it is common practice for the partners to draw one up.
The scope and detail of any such agreement may depend on the nature of the business and the participants. Common areas covered usually include: profit sharing arrangements, capital to be put in to the business, events which might trigger a dissolution of the partnership and so on.
A solicitor experienced in partnership matters would be able to provide guidance on both the content and structure of the document.