• An LLP offers a halfway house between a partnership and a limited company.
• All profits and all losses accrue to the partnership (subject to taxation).
• All assets of the business are owned by the partnership.
• All debts business – Members responsible to the extent to which they have given personal guarantees. A negligent member can still be held liable personally.
• This means that the members have limited liability.
• Partnership exists as soon as you start doing business.

Managing Finances & Administration

• A new type of business structure became available as from April 6th 2001 when the Limited Liability Partnerships Act 2000 came into effect.
• LLP is a separate legal entity, conferring full limited liability on its members.
• It is created by registration at Companies House. There must be at least 2 members, but there is no upper limit. At least 2 of the members must be named as 'designated members', who accept responsibility for sending information to Companies House.
• An LLP is subject to the same rules as a private limited company for the registration, statutory accounts, auditing and exemptions from these requirements.
• The Act does not impose a structure for the management of an LLP.
• There are no statutory provisions for general meetings, directors, company secretary, share allotments, etc.
• As with the existing partnership, these are matters for the partnership agreement (if any).
• There is no statutory requirement to register (or even to have) a written partnership agreement, but such an agreement is essential in practice.
• Implied terms, which apply in the absence of agreement to the contrary, are set out in the Limited Liability Partnerships Regulations 2001.
• Introducing a new partner has no tax implications and merely requires the members' agreement to be amended.
• Have a good accounts filing system and you may at least need a book-keeper or a full time accountant depending on the volume of work.
• You can hire any number employees – Employer Help Line 0845714 3143,08456070 143.
• You can hire sub contractors. Better to draft a Service Level Agreement (SLA).
• Insurances – Need to get Professional Indemnity, Employer & Public and Product Liability depending on the nature of business.
• Health & Safety Insures and Corporate Manslaughter Act and issue.

Managing Taxes

• The LLP is treated for tax purposes as an ordinary partnership: i.e. each partner is liable to income tax under Schedule D for his or her share of the profits, and to Capital Gains Tax in respect of any gains made on the disposal of partnership assets.
• In general, and as far as taxes are concerned, a partnership is no more than a convenient term for describing a group of persons who are actually taxed as if they were individuals.
• Certainly in the context of the taxation of business profit or capital gain, a simple statement that the partners are taxed on their shares as if they were individuals would be an accurate (and very concise) statement of the rules.
• Need to do a Partnership Tax return – SA 800 - 0845 9000 444.
• As well as individual returns from each partner – SA 100, Self employed - 0845 915 4515 to get a Unique Tax Reference Number.
• Partnership and the legal and tax implications starts to exist as soon as the Partnership does its first job.
• National Insurance Contribution (NIC) – 2009/2010.
  'Class 2' NIC at a flat rate - £2.40/week, 'Class 4' NIC - 8% between £5,715 and £43,875 and1% over £43,875.
  Earnings less than £5,075 entitled to the Small Earnings Exception, on Class 2 NIC - you can apply for Small Earnings Exception certificate n form CF10.
• VAT registration – If annual turnover over £70,000 (2009/2010).

Advantages

Avoid Double taxation if you carry out your business through a company.

• As Corporations are separate entities from their owners they pay corporation tax on any taxable profits.
  1. Owners will pay tax on their individual income.
  2. As a partner, you will not pay double tax on your partnership income because the law makes no difference between you and your partner's income and is treated as your personal income.
• More credibility and less risky as 2 or more people are involved and carried limited liability.

Disadvantages

• A business organized as a partnership faces difficulty in raising own capital since shares of the business cannot be sold.
• Hiring employees may also be difficult.
• When the business grows, the risks accompanying the business also tend to grow.