LIMITED LIABILITY PARTNERSHIPS ( LLPs) - A Description

United Kingdom Limited Liability Partnerships (LLPs) were established under the Limited Liability Partnerships Act 2000 and created a new legal structure that embodied the limited liability nature of a traditional private limited liability company (a 'limited' company) with the fiscal transparency of a partnership. The original impetuous for the legislation was to afford a degree of protection for professionals in the legal and accountancy professions which was denied them due to the restriction placed upon the use of a private limited company by their professional and regulatory bodies namely: the Law Society, the Institute of Chartered Accountants and the Institute of Certified Accountants. Notwithstanding the original purpose behind their creation, LLPs soon found favour amongst a much wider audience due to the greater flexibility of the governing instrument known as the LLP Agreement (The structure and flexibility of a limited liability company is far more constrained by statute as represented by their Memorandum & Articles of Association and governing administrative 'Tables' A-F as listed in the Companies Act, 1985), the continued benefits of being a separate legal entity at law, the ability to represent itself independently of its 'partners' and probably most importantly; the ability for the 'partners' to be taxed directly and independently of the LLP which is deemed by the Inland Revenue to be a fiscally transparent entity. In addition to the above, the Limited Liability Partnerships Act 2000 also had the unintended benefit of re-creating the possibility of a non-resident UK separate legal liability entity since fiscal liability is dependent on the physical location of the 'managing' partners. In other words, if the 'managers' were resident in Germany the fiscal consequences would fall within the German jurisdiction perhaps with the requirement to register a local branch of the LLP; likewise, if the 'managers' were resident in a tax free jurisdiction the UK LLP would in effect become a British registered tax free vehicle ....... something that has been denied as a possibility to UK private limited companies since the introduction of S.66(1) of the Taxes Act, 1988*

LLP Partners are taxed as individuals ..... an LLP is not a taxable entity in its own right

An LLP is a seperate legal entity just like a private limited liability company

LLPs can be formed by anyone and may have significant tax benefits

LLP Partners can be either individuals or company and may or may not be resident in the UK

LLP can be, unlike UK limited companies, non-resident in structure

All LLPs must have a registered office address within either the English & Welsh jurisdiction or the Scottish jurisdiction

The limited liability partnership agreement is very flexible

Professionals such as solicitors and accountants can benefit greatly from forming a LLP

LLPs have their own VAT Number and enter into contacts in their own name and not that of the individual partners