Accounting for limited liability partnerships
Accounting for limited liability partnerships (LLPs) is a specialist area that requires expertise and an understanding of the business structure. On this page you can access a range of articles, books and online resources providing quick links to Statements of Recommended Practice, guidance and news.
Limited Liability Partnerships
Limited Liability Partnerships (LLP’s) are a half way house between partnerships and a limited company. You get the benefit of limited liability (unlike a partnership where each partner is personally liable for the debts of the partnership), so you can sleep easier at night. The limited liability part means you only risk the amount of capital you put in. You can’t be held personally responsible for other debts which the partnership incurs.
Partners are taxed on their share of the partnership profits and will need to file personal tax returns each year, as well as a tax return for the partnership.
Unlike basic partnerships, LLP’s have reporting requirements more like a limited company, so you must file accounts with Companies House within 9 months of the year end and these will be publicly available.
Many large professional services firms such as lawyers and accountants use LLPs as their business structure. The equity partners are the senior executives and owners of the business and it is often much easier to manage their introduction or exit as a partner, than it would be if they were shareholders in a limited company. This makes the LLP structure suitable if you plan to add to or change the number of business owners on a regular basis.
If you are going to have a steady ownership team, then it is probably better to consider a limited company. The reporting requirements are not much different to those of a LLP but it is often advantageous from a tax standpoint, particularly once you are a higher rate taxpayer.