Create a limited liability partnership in Alba and reduce your risks: a limited liability partnership is an alternative way to structure a business that combines limited liability for certain partners, but also allows its members to organise the internal structure of the business as a traditional partnership. In Scotland, LLP creation is becoming increasingly popular, as the limited liability partnership itself is liable for any debts it runs up, but the liability of its members remains limited unless they have personally guaranteed any borrowing.
The Limited Liability Partnership Act was passed in 2000 and came into force on April 6 2001. The main purpose was to protect members of worldwide partnerships, for instance legal practices, where the members in another country simply could not have full knowledge of the actions of their partners in another country. It has become increasingly popular for large collectives that are wholly contained in these shores, too, and Scottish LLP creation on the ascent.
The LLP is liable for the actions of each and every member. Unlike other partnership agreements, the members of the LLP cannot be held jointly or individually liable for the actions of another member. It can, therefore, protect each partner from huge claims arising from a colleague committing negligent, fraudulent or even criminal acts.
For example, if a group of professional service providers enters into an LLP and one is found guilty of malpractice, the remaining members are protected from the subsequent legal claim. This means that, through the adoption of an LLP, organisations can take on high-risk members and simultaneously limit their exposure to potential costs. In the modern business world, this is a big advantage.
It takes just two people to form an LLP from a physical registered address, similar to company formation. There is no legal requirement for a 'Deed of Partnership', but we still recommend one to avoid any misunderstandings and disputes later on. If members do not have a deed, they will be governed by the Limited Liability Partnerships Act 2000 (LLP Act 2000) terms.
LLPs are governed by a hybrid system of company and partnership law. If the LLP is forced to wind up then the liability of the members is limited to their capital investment. This makes it an attractive proposition for complex business structures, or even for simpler ones where the investors wish to retain their own unique identity within the company structure.
A limited liability partnership is also an excellent way to structure a company where one partner is not actively involved on a day-to-day basis. With no real input into the business apart from capital, it makes sense for these partners to limit their liability. Due to the set-up costs, though, this structure will only be suitable for larger business ventures. For a small company, a limited company formation performs many of the same functions for a lower cost.
LLP creation in Scotland, therefore, can help to protect your personal assets, while giving many of the tax advantages of a sole trader partnership.
Registration is relatively simple; in fact, it is very similar to registering a company with Companies House. LLP establishment has proved especially popular with property investment funds, private equity management companies, building firms, investment and accountants firs, and solicitors – although it is suitable for a wide range of businesses.
A limited liability partnership creation has a number of other advantages. It is effectively a legal personality in its own right, separate from its members, which means it can own property and enter into contracts in its own right. The main difference between a limited liability partnership and a limited company is the more informal organisational flexibility of a partnership and tax advantages including full transparency. In other respects, it is very similar to a company. It can obtain a credit rating, borrow against its assets and enjoy many other advantages. An LLP can only cease to exist if it is formally wound up, but individual members are free to leave and the LLP continues regardless.
The members of the LLP aren't legally required to provide a written contract regulating the relations between the members and the LLP, as long as there are at least two designated members who take responsibility for the filing of accounts with Companies House and other duties. The burden of liability lies with the designated members, too, which means there is added protection for other members of the LLP.