Incorporating and Naming a Limited Liability Partnership (LLP) in the UK
A Limited Liability Partnership (LLP) is a popular business structure in the UK that combines the flexibility of a partnership with the liability protection of a company. If you are planning to start a business, incorporating an LLP can be an excellent choice. This guide will walk you through the process of setting up an LLP, covering legal requirements, naming rules, and compliance steps.
1. What is a Limited Liability Partnership (LLP)?
A Limited Liability Partnership is a business structure designed for professional service providers, such as lawyers, accountants, and consultants. Unlike a traditional partnership, an LLP is a separate legal entity, which means it can own assets, enter contracts, and be held accountable for its liabilities.
Key Features of an LLP
- LLP members have limited liability, protecting their personal assets.
- The LLP itself is responsible for debts, not individual members.
- Members have flexibility in managing the business and sharing profits.
- LLPs must be registered with Companies House and follow reporting requirements.
- Unlike limited companies, LLPs are taxed as partnerships, meaning profits are taxed as personal income.
2. Benefits of Incorporating an LLP
Limited Liability
Members are not personally responsible for business debts beyond their capital contributions.
Flexibility
An LLP agreement can be tailored to suit business needs, including profit-sharing and decision-making structures.
Separate Legal Entity
The LLP can enter contracts, own property, and operate independently of its members.
Credibility and Professionalism
An LLP is widely recognized, making it an attractive structure for professional firms.
Tax Efficiency
Unlike a limited company, an LLP is not subject to corporation tax. Instead, members pay tax on their share of profits through Self-Assessment.
3. How to Incorporate an LLP in the UK
Step 1: Choose an LLP Name
Before registering an LLP, you must select a unique and compliant business name.
LLP Naming Rules
- The name must end with “Limited Liability Partnership” or “LLP”.
- It cannot be identical or too similar to an existing company name.
- Certain words require approval, such as “Bank” or “Royal”.
- The name should not be offensive or misleading.
Check availability using the Companies House name checker.
Step 2: Prepare the LLP Agreement
An LLP agreement is not legally required but highly recommended. This document outlines:
- Member roles and responsibilities.
- Profit and loss distribution.
- Decision-making processes.
- Dispute resolution mechanisms.
Without an agreement, the LLP operates under default rules set by the Limited Liability Partnerships Act 2000.
Step 3: Register the LLP with Companies House
You can incorporate an LLP through Companies House either online or by post.
Online Registration (Fastest Method)
- Register at Gov.uk LLP registration.
- Fee: £50 (standard) or £78 (same-day service).
- Processing time: Usually within 24 hours.
Paper Registration (Slower Method)
- Complete Form LL IN01.
- Fee: £71 (paid via cheque).
- Processing time: Up to 10 days.
Required Information:
- LLP name.
- Registered office address.
- Names and addresses of members.
- Statement of compliance.
Once registered, you will receive a Certificate of Incorporation, confirming your LLP’s legal status.
4. Post-Incorporation Steps
Step 4: Register for Taxes with HMRC
After incorporation, the LLP must register for tax purposes.
Key Tax Registrations:
- Self-Assessment – Each member must register for Self-Assessment tax returns.
- VAT Registration – If the LLP’s annual turnover exceeds £90,000, VAT registration is mandatory.
- PAYE Registration – Required if the LLP employs staff.
Register via the HMRC Online Services.
Step 5: Open a Business Bank Account
A separate business bank account is essential for managing finances. Most banks require:
- The LLP Certificate of Incorporation.
- The LLP agreement (if available).
- Proof of identity and address for members.
Compare different business accounts to find one that suits your needs.
5. Ongoing Compliance for LLPs
Annual Filing Requirements
LLPs must comply with annual reporting obligations to avoid penalties.
Annual Confirmation Statement (LL CS01): Confirms LLP details are accurate.
Annual Accounts: Submitted to Companies House, detailing financial performance.
Self-Assessment Tax Returns: LLP members must file tax returns each year.
VAT Returns: If applicable, LLPs must submit VAT returns to HMRC.
Maintaining Statutory Records
LLPs must keep updated records of:
- Members and their capital contributions.
- Financial transactions.
- Partnership decisions.
Failure to comply can result in fines or LLP dissolution.
6. LLP vs. Limited Company: Choosing the Right Structure
| Feature | LLP | Limited Company (Ltd) |
|---|---|---|
| Legal Status | Separate entity | Separate entity |
| Liability | Limited for members | Limited for shareholders |
| Taxation | Income tax (Self-Assessment) | Corporation tax |
| Profit Distribution | Flexible | Dividends based on shares |
| Management Flexibility | High | Structured (directors, shareholders) |
| Suitable for | Professional services | Any business type |
An LLP is ideal for businesses that prioritize flexibility and tax efficiency, while a limited company may be better for businesses seeking structured ownership and corporate taxation.
Also Read: Set Up a Limited Company: Step by Step Guide
7. Common Questions About LLPs
Can a single person set up an LLP?
No, an LLP requires at least two members.
How long does LLP registration take?
Online applications are processed within 24 hours, while postal applications take up to 10 days.
Do LLPs pay corporation tax?
No, LLPs are taxed as partnerships, meaning members pay tax on their individual profits.
Can an LLP have a trading name?
Yes, but the LLP must disclose its registered name alongside any trading name.
What happens if an LLP has only one member?
If an LLP operates with one member for more than six months, the remaining member may become personally liable for business debts.
Final Thoughts
Incorporating an LLP in the UK is a straightforward process that offers limited liability protection and operational flexibility. By following the steps outlined in this guide, you can ensure a smooth and legally compliant LLP registration.
Check name availability
Register with Companies House
Comply with tax and reporting obligations
For more details, visit Gov.uk LLP Registration.
Source / Ref.: Gov.uk Gov.uk Contains public sector information licensed under OGL v3.0.
