PM131410 - LLP: overview

This section looks at the tax treatment of Limited Liability Partnerships (‘LLP’) governed by the Limited Liability Partnership Act 2000.

LLPs are ‘bodies corporate’ with legal personality separate from their members, except where specifically provided for in the LLP legislation. Partnership law does not apply to LLPs. The way that LLPs are regulated is similar to that for companies and a number of provisions of the Companies Act 2006 also apply to LLPs.

An LLP can be formed by two or more persons who are carrying on a partnership type business. The LLP has to be registered at Companies House.

LLPs are seen as a flexible business model. As with partnerships, LLPs are governed by the agreement between the members. There are default positions set out in the LLP regulations, however in most cases these will be over-ridden by the agreement between the members.

Although there may be a document that is titled ‘LLP Agreement’, the term is defined at Regulation 2 of the 2001 Regulations as:

‘“limited liability partnership agreement”, in relation to a limited liability partnership, means any agreement express or implied between the members of the limited liability partnership or between the limited liability partnership and the members of the limited liability partnership which determines the mutual rights and duties of the members, and their rights and duties in relation to the limited liability partnership.’

As a result the LLP agreement will also include the deed of adherence by which a new member is admitted together with any side agreements between the members.

For bodies formed outside the UK that are called Limited Liability Partnerships see PM131540.