Although a relatively new form of business structure, the use of Limited Liability Partnerships has risen significantly among professional services companies in recent years.
Black and White Accounting provides Accounts & Tax, Book Keeping & Payroll, Business Planning and Software Training to Limited Liability Partnership specifically catered to their specific requirements across Surrey, Hampshire and surrounding areas.
To find out more about our range of services for LLPs, please get in touch with us today on 0800 140 4644 or email us on [email protected]. We are currently offering an hour’s free consultation to prospective new clients – we can come to yours or you’re more than welcome to come to our offices at a time to suit you.
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Limited liability partnership definition
Introduced under the Limited Liability Partnership Act (2000), LLPs are designed to offer firms which traditionally offer partnerships to members of staff the benefit of limited liability protection against their share of company liabilities (i.e., debts).
What is an LLP?
What does LLP stand for? LLP stands for limited liability partnership and it’s a type of business structure which offers a cross between a limited company and an unincorporated partnership.
Legally, an LLP is treated like a “legal person” or “body corporate” but HMRC tax it as if it were an unincorporated partnership.
Choosing the structure of an LLP means partners effectively pay tax at the rate of employees or the self-employed.
How is an LLP taxed?
As with an unincorporated partnership, an LLP is not responsible for the payment of any taxes based upon the profit it makes.
When an LLP’s profitability has been determined, that profit is then split between its members. Members are then responsible for paying the tax on these profits via a self assessment form. Tax is payable on the share of profits and not on how much a member has taken in ‘wages’ from the LLP. The rules surrounding the payment of wages and tax can be complicated, especially for salaried LLP members – please contact Black and White Accounting for more information about this.
As with other types of business structure, profitability is the amount which remains after all allowable expenses have been subtracted from the turnover of the LLP, subject to any further allowances or reliefs.
The key advantage of an LLP is that if there are changes in the partners on a business, there is no Capital Gain crystallised on the ‘sale’ of the share in the partnership, unlike a limited company, which can make them very attractive to business who undergo consistent changes in ownership.
File company accounts
As with limited companies, LLPS can set their own tax year. The tax year normally starts on the month of incorporation but it can be changed later if desired by the members. LLPs must submit an annual LLP partnership tax return.
Accounts must also be filed with Companies House annually as well as confirmation statements (previously known as annual returns).
Partnership accountant FAQs
Limited liability partnership examples
Limited liability partnerships are often used by professional services firms like surveyors, solicitors, and accountants, owing to the benefit of there being no Capital Gain crystallised when there is a change in the share split of a partnership between members.
Setting up a limited liability partnership
You can set up a limited liability yourself or you can use Black and White Accounting or a company formation agent to do it for you.
Companies House will issue you with a registration number (eight-digit alphanumeric code) and authorisation number (six-digit alphanumeric code). These will be required in any correspondence or filing with Companies House. HMRC will also issue a UTR (unique taxpayer reference) for your business. The UTR is the code used by HMRC for corporation tax purposes to uniquely identify the company and thus make payments to HMRC.
The next key step is to set up an LLP bank account in order to keep everything between yourself and the LLP separate, before you can have the fun of ordering stationery, domain names and whatever else you want to make your dream start to come to life.
LLP companies and other taxes
As mentioned earlier, LLPs pay no tax based upon the profitability of the LLP.
LLPs may however be subject to other tax including VAT, PAYE (including workplace pensions), non-domestic business rates, capital gains tax, and more. Please contact your Black and White Accountant, call us free on 0800 140 4644 or email us on [email protected] for more information.
LLP accounting software
Would you like to save time, save money and make your life easier? Well in one sentence that’s what accounting software can provide you and your LLP.
Not only are we Gold partners of Xero, we are also certified partners of QuickBooks and Sage and work with FreeAgent and Wave, to name but a few. We work exactly how you want to work, so whatever software solution you want, we can deliver through set up, training, implementation through to continued support. Please contact us to learn more about how we can help you.
What are the key advantages of a Limited Liability Partnership?
The key pros of an LLP include:
- Limitation of liability so members’ personal assets are protected, unless they do not fulfil their legal obligations;
- Constant changes in ownership can take place without creating a capital gain, unlike limited companies. It is therefore well suited;
- LLPs can be owned by companies as part of a group structure; a limited company requires at least one director who must be a ‘real’ person;
- Like (unincorporated) partnerships, there is flexibility in profit share amongst the partners, subject to the partnership agreement. There can also be different levels of membership with different levels of profit sharing and the designated member.
What are the key disadvantages of a Limited Liability Partnership?
The key cons of an LLP include:
- LLPs are fully transparent for tax purposes and taxed the same way as (unincorporated) partnerships, with profits taxed as income. There are also fewer opportunities for tax planning that limited companies;
- Partners must disclose incomes in full and cannot choose the levels to distribute to the owners, unlike limited companies;
- Like limited companies, you have more of your information in the public domain (although this can be restricted to a minimum) about Members and the LLP Accounts; and
- LLPs have a high administrative burden, like limited companies, and start to trade within a year of registration, or be struck-off.
Limited liability partnership accounting in Hampshire and Surrey
LLPs are not the simplest business structure, but if you are anticipating several partners and the ownership split may change annually or overtime, this could be a good option for your business.
Please contact us today for a free initial consultation so we can get to know you, your business and how we can best support you with our complete services of Accounts & Tax, Book Keeping & Payroll, Business Planning and Software Training. We want to be your business partners today and into the future. Our bespoke quote will be designed to provide exactly the level of service you need in order to achieve your business objectives and how we work and what we do can of course evolve as your business evolves.
Get in touch using the form below, simply call us free on 0800 140 4644 or email us on [email protected]. Thank you!