The accounting and audit requirements for limited liability partnerships will be similar to those applied to companies. They will include financial disclosure for third parties dealing with the LLP and disclosure of earnings of the highest paid member. Although all limited liability partnerships (LLPs) have to submit some form of accounts to Companies House, these accounts don't have to be audited for financial years starting before 6 April 2008 or prior to 1 October 2008 for LLPs if you:
For financial years starting on or after 6 April 2008, to qualify for total audit exemption, an LLP must:
Small and medium-sized LLPs can take advantage of the higher thresholds for accounting periods starting on or after 1 October 2008. In these cases you can submit audited accounts if you wish, but it is not compulsory. Bear in mind there can be drawbacks. Banks, credit managers and your customers and suppliers rely on information from Companies House to assess creditworthiness and will be reassured by an independent audit. If you decide to submit audited accounts, you must appoint an auditor.
Even if a small LLP meets the criteria, it must still have its accounts audited if any of the following ask for an audit:
Recent changes to the rules have allowed some small financial services businesses and some small businesses, such as home-finance providers, that comply with Sharia law to qualify for an audit exemption. However, businesses taking advantage of the audit exemption should be aware that shareholders who own 10 per cent or more of the company still have the right to ask for an audit.
Limited Liability Partnership Insolvency & Winding Up
The major corporate insolvency and winding up procedures contained in the Insolvency Act 1986 will apply to limited liability partnerships. This will include a provision granting the court discretion to order repayment of any withdrawals made by a member of an LLP within the 2 years prior to winding up. This will only in the event that the member knew or ought to have concluded that after such a withdrawal there was no reasonable prospect that the LLP would avoid going into insolvent liquidation. The limited liability partnership and its members may also be subject to statutory investigation and to penalties for wrongful and fraudulent trading.
United Kingdom Limited Liability Partnership Taxation
LLPs will be taxed as though they were partnerships. Provisions in the LLP Act ensure that the transfer of assets from an existing partnership to a limited liability partnership will be tax neutral. Limited liability partnerships that do not carry on business as a trade or profession such as an investment company will be subject to corporation tax.
Limited Liability Partnership Annual Return
Every limited liability partnership must deliver an annual return to Companies House within 28 days of its made-up date. A limited liability partnership's designated members are responsible for ensuring that the annual return: is delivered to Companies House within 28 days after the anniversary of incorporation or the anniversary of the made-up date of the last annual return; and gives a true picture of the membership of the limited liability partnership at the made-up date.
NB: It is a criminal offence not to deliver the limited liability partnership's annual return within 28 days of the made-up date, for which designated members may be prosecuted.
Limited Liability Partnership Accounts & Accounting Preference Dates
Every limited liability partnership must prepare annual accounts that report on the financial performance and position of the limited liability partnership during the year. The period reported on in the accounts is called the financial year. This starts on the day after the previous financial year ended or, in the case of a new limited liability partnership, on the day of incorporation. Another term for a "financial year" is an "accounting reference period" (ARD).
For all new limited liability partnerships, the first accounting reference period is automatically set as the first anniversary of the last day in the month in which the limited liability partnership was incorporated. For example, if the limited liability partnership was incorporated on 10 June 2001 its ARD would be set at 30 June, and the first accounts would cover a period from 10 June 2001 to 30 June 2002 - or up to seven days either side of that date.