LIMITED LIABILITY PARTNERSHIPS  - May 2008

53A.1 Introduction

This chapter gives information and advice concerning the statutory requirements relating to Limited Liability Partnerships (LLPs), and the actions to be taken by the official receiver when dealing with the liquidation of a LLP.  The advice will focus on the key differences between LLPs, partnerships and limited companies, particularly where this impacts on the dealings of the official receiver. 

53A.2 Background

A partnership works best where the members are well known to, and work closely with, each other and can, therefore, limit their exposure to liability by taking active control over the affairs of the business.  Increasingly today, partnerships (particularly those of professional businesses) are growing beyond the size over which an individual can exercise any effective control of the actions of other individual members, leaving him/her open to personal liability arising from the negligence of another member of the partnership.

To deal with this situation, the Limited Liability Partnerships Act 2000 created a new legal entity known as an LLP.  An LLP can be incorporated by two or more persons who wish to go into business together, and gives the benefits of the organisational flexibility and tax efficient treatment of a partnership with the limited liability aspects of a limited company.  Similar to a limited company, an LLP has a legal identity separate to that of its members, but there is no distinction between the owners and managers (such as the distinction between shareholders and directors in a limited company). 

In essence, it should be noted that the legal treatment (particularly in relation to insolvency proceedings) of an LLP is very closely akin to that of a limited company.  

53A.3 Scope of this Chapter

In the event that this Chapter is silent on any aspect of matters relating to LLPs it can be taken that the current advice relating to limited companies may be followed.

53A.4 The chapter is divided into the following parts:

Part 1 – History and legislation relating to LLPs (paragraphs 53A.5 to 53A.9)

Part 2 – General information relating to LLPs (paragraphs 53A.10 to 53A.49)

Part 3 – Insolvency proceedings relating to LLPs (paragraphs 53A.50 to 53A.70)

The following abbreviations are used in this chapter:

CA1985 – Companies Act 1985

LLP – Limited Liability Partnership

LLPR2001 – Limited Liability Partnership Regulations 2001