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The LLP Characteristics in Brief

The LLP characteristics in brief

Open a UK LLP

From 6th April 2001 it will be possible to register UK limited liability partnerships (LLPs) at Companies House. This new business entity, which will combine limited liability, corporate personality and the advantages of limited liability partnership taxation, may prove attractive not only to the professions but also to many other businesses. Limited liability partnership is a body corporate (with legal personality separate from that of its members) which is formed by being incorporated under the Limited Liability Partnerships Act 2000; and a limited liability partnerships has unlimited capacity.

The members of an LLP have such liability to contribute to its assets in the event of its being wound up as is provided for by virtue of the Limited Liability Partnerships Act.

For a limited liability partnerships to be incorporated: two or more persons associated for carrying on a lawful business with a view to profit must have subscribed their names to an incorporation document, there must have been delivered to the registrar either the incorporation document or a copy authenticated in a manner approved by him, and there must have been so delivered a statement in a form approved by the registrar, made by either a solicitor engaged in the starting-up of the limited liability partnership or anyone who subscribed his name to the incorporation document.

The LLP start-up document must be in a form approved by the registrar (or as near to such a form as circumstances allow), state the name of the limited liability partnerships, state whether the registered office of the limited liability partnerships is to be situated in England and Wales, in Wales or in Scotland, state the address of that registered office address, state the name and address of each of the LLP partners who are to be members of the limited liability partnerships on incorporation, and either specify which of those persons are to be designated members or state that every person who from time to time is a member of the limited liability partnerships is a designated member.

The profits of the business of an LLP will be taxed as if the business were carried on by partners in partnership, rather than by a body corporate. This ensures that the commercial choice between using an LLP or a partnership is a tax neutral one. The taxation clauses in the Act are expressed in broad terms so that the existing rules for partnerships and partners will, in general, simply apply to LLPs, and members of LLPs, which are carrying on businesses, as if these were partnerships and partners respectively.

The transfer of an existing business to an LLP will only be treated for tax purposes as giving rise to a cessation of the business of the partnership which is making the transfer if in otherwise identical circumstances a transfer between one partnership and another would do so.

The transfer of assets between a partnership and an LLP will only give rise to chargeable gain or capital allowance consequences if, in otherwise identical circumstances, a transfer of assets between one partnership and another would so do.

Similarly, Inland Revenue Statements of Practice and Extra Statutory Concessions will apply to LLPs and members as they apply to partnerships and to partners.