In the world of business, limited liability partnerships are quite common. Even, it can be possible that you have dealt with some without realizing them. When you will take a look a proper look at your town centre, you will notice few business signs and nameplates showing short form - LLP after their business names, generally, solicitors and accountants who made partners to shares their knowledge and skills.
Two Heads are better than One
Basically, a limited liability partnership LLP is a general partnership made between two or more people by their mutual understanding. They form partnership with the aim to share their resources and skills to establish a ‘for-profit’ firm. Or in simple words, two or more people work jointly to earn money. When a partnership is made between some family members or close friends with a shared interest - that kind of partnership can be very informal or relaxed.
The relaxed nature of a general partnership can have its own drawbacks. You need to draw a clear agreement between all the partners taking part in the partnership. Describe the responsibilities, roles, and liabilities of each and every partner clearly. Otherwise, it can create some problems and misunderstandings in case any problem occurs in your business in the future. So it is crucial to clearly describe everything properly before starting. For example, if something serious happens, like, if your business has to deal with economic disasters in the future, then all of the partners have to share the liability equally to return all the debt to creditors.
To be on the safe side, most of the partners build a company formation just to turn into a limited liability company (LLC) or a formal limited liability partnership (LLP). The company starts working as a business in its own rights with an LLC. And assume all the liability for any kind of monetary losses rather than leaving it on the individual partners themselves. This is quite helpful for all business partners. They can protect their personal property/assets from creditors from being swallowed up.
Why should we choose an LLP?
According to some experts, it is very beneficial to build a company formation which is little bit precise or customized than an ordinary limited liability company (LLP). An LLP includes a very clear and formal business structure. This business structure describes the roles and responsibilities of every partner clearly to make the business flow in simple and hassle-free manner for everyone. Each partner is free to take a part in the management of the company. And it is very exciting and profitable on the business point of view, when each partner with different key skills and experiences keep his/her ideas and suggestions in front of others. All their knowledge and expertise can be utilized in the company’s role. It can build a great balance between different partners of an LLP and this can result in a very creative, productive, and beneficial structure.
Majority professionals mostly prefer to start LLPs. This is because these kinds of businesses depend on creating a good reputation. For example, a team of solicitors with great experience who have created a list of customers over the years can band their assets and possessions under one roof. It results into lowering the expenses of handling business and carry on to enhance their professional reputation among the local areas. The LLPs can enhance their reputation and earn great profits by sharing their business employees, properties, and premises together rather than working individually.
The staff working in an LLP can become its partner in the future, if they want so. They are known as associated or junior partners in the company, but in actuality - they don’t have shares of the LLP. In other words, an LLP can also employ workers who don’t want to become part of the LLP in future.
The most important advantage of building an LLP is that it has the ability to attract and engage new partners with it whenever there is any requirement. Also, you can release the existing registered partners from the agreement if they want to retire or leave. To release them from the agreement, write their names out of the partnership by making an outline within your contract.
It can be really beneficial for your business if you want to draw new partners that can bring new contracts. All the existing partners of a business take this decision together whether they want to add new partners to their business or not. This flexibility makes a limited liability partnership LLP a better choice for some companies over a standard limited liability company LLC.
Forming an LLP online is really very simple and easy; especially through ZDK Formations that has a professional team specialized in online limited company formation. We offer several formation services based on different company types including companies limited by guarantee, companies limited by shares, and limited liability partnerships. As an officially registered e-Filling agent, we are certified as an agent of official company formation by Companies House. With us, you can form your limited liability partnership immediately. In maximum cases, by using our online formation system, you can register your partnership within five minutes. In simple words, this is one of the easiest and simplest methods to register a new business in the UK.
How is this formation a Limited Liability?
Full and actual details of an LLP will depend on the area where you form it. Your personal assets as a partner will be protected from legal action. Basically, the liability is limited in the sense that you will lose assets in the partnership, but not those outside of it (your personal assets). The partnership is the first target for any suit, although a specific partner could be liable if he or she personally did something wrong like wrongful trading or any kind of fraudulent activity. Another protection that an LLP provides is: defending the name of registered partners from the negligence or wrongdoing.
New Changes Implemented in 2016
In the UK, from the beginning of April 2016, LLPs and registered companies need to have a ‘PSC Register’. And make is disclosed among the people who have the control over them. This new PSC register is available publicly and has a record of all individuals who are the most valuable and helpful owners of the company. This step is a great decision to improve the corporate transparency. This method will surely work in case of decreasing several criminal activities like money laundering, tax avoidance, etc.
In the present time, it has become a compulsion to all LLPs and incorporated companies in the UK to stick to a high level of transparency as compared to others businesses in the country. They must have to submit all the information related to their accounts and shareholders to Companies House each year. But these new PSC laws consist various equivalent measures from the Fourth Money Laundering Directive of the European Union. This is a new rule passed by the Europe and it must be accepted by all the members before June 2017.
It clearly represents that there is a compulsion to all UK based companies to Identify PSCs. And also necessary to take some logical steps to classify people with major controls over the LLP or company. These new laws of PSC are mainly described in Part 21A of the Companies Act 2006. This can be classified as someone who reaches one or more of the following PSC Criteria:
The register must include full detail of a PSC including personal info such as name, date of birth, residential address, service address, and nationality, no matter where they live, either in the UK or abroad. It should also include the detailed information about the date an individual become a PSC or the nature of control exercised. From the starting of June 2016, the register must be kept at the registered office address of the company. All the stored information about the PSCs of the company should be submitted to the Companies House as part of the return delivered by UK Companies annually.
People who are linked with the company commercially or financially cannot be considered as the PSCs of the company. People who don’t meet PSC criteria are advisors, directors, employees, and consultants who are linked to the company for different roles.
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