What is an LLP

An LLP, or Limited Liability Partnership, is a type of business structure that combines the flexibility of a traditional partnership with the legal protection of a limited company. It is a popular choice for professional firms such as solicitors, accountants, architects and consultants, but it is also used in a range of other industries where two or more individuals want to work together while limiting their personal financial risk.

Introduced in the UK under the Limited Liability Partnerships Act 2000, an LLP is a separate legal entity. This means it can enter into contracts, hold assets and be sued in its own name, rather than in the names of the individual partners.

How an LLP differs from other business structures

An LLP shares some similarities with both partnerships and limited companies but is legally distinct from both.

In a traditional partnership, the partners are personally liable for the debts of the business. This means that if the business fails, creditors can pursue the personal assets of the partners. An LLP, on the other hand, protects each partner’s personal assets. The liability of each member is generally limited to the amount they have invested in the business or agreed to contribute if the LLP is wound up.

Unlike a limited company, an LLP does not have shareholders or directors. Instead, it has members, who usually take part in the management of the business. The internal structure and responsibilities of each member are usually set out in an LLP agreement, which is not required by law but strongly recommended. This document outlines how profits will be shared, how decisions are made and what happens if a member wants to leave.

Key features of an LLP

• An LLP must have at least two members, who can be individuals or companies.

• It must be registered with Companies House and must file annual accounts and a confirmation statement.

• The LLP is taxed as a partnership, not as a company. This means that the LLP itself does not pay Corporation Tax. Instead, each member pays Income Tax on their share of the profits.

• Members of an LLP have limited liability, offering protection if the business incurs debts or legal claims.

Who should consider an LLP?

LLPs are ideal for businesses where two or more professionals want to collaborate under a shared brand but maintain flexibility in how they manage and split profits. This structure is especially useful for service-based businesses that do not require external investors.

For example, a group of consultants may want to operate jointly under one entity while remaining individually responsible for generating business. An LLP allows them to share costs and brand recognition without exposing their personal finances to unnecessary risk.

LLPs are also attractive to firms that want to retain a partnership-style approach but need the benefits of limited liability to meet client or regulatory expectations.

Legal and administrative obligations

While an LLP offers protection and flexibility, it comes with certain legal duties. It must maintain proper accounting records, prepare and file annual accounts, and submit a confirmation statement to Companies House. If its turnover exceeds certain thresholds, it must also have its accounts audited.

Each member is responsible for registering with HMRC for Self Assessment and paying tax on their share of the profits. The LLP must also register with HMRC for VAT if its taxable turnover exceeds the VAT threshold.

In many ways, an LLP operates in a similar administrative environment to a limited company, and failure to meet filing deadlines can result in penalties.

How to register an LLP

Registering an LLP in the UK involves choosing a unique name, appointing at least two members, and submitting an incorporation form to Companies House. You will also need a registered office address in the UK.

While the LLP agreement is not legally required to form the partnership, it is highly advisable to put one in place before trading begins. Without it, the default rules under the Limited Liability Partnerships Regulations 2001 will apply, which may not reflect how the partners actually want to operate.

As of 2025, the fee to register an LLP online with Companies House is £50.

Final thoughts

An LLP offers a blend of flexibility and protection that makes it a valuable structure for professional and collaborative businesses. By limiting personal liability while preserving a partnership-style working arrangement, it appeals to many entrepreneurs and firms seeking a modern, practical way to operate.

It is important to get the structure right from the start. A well-drafted LLP agreement and a clear understanding of each member’s rights and responsibilities are crucial. If you are considering setting up an LLP, it is worth speaking to a legal or accounting professional to ensure you meet all the legal requirements and choose the best setup for your needs.