Limited Liability Partnerships Act 2000
Encyclopedia
The Limited Liability Partnerships Act 2000 (c.12) is an Act
of the Parliament
of the United Kingdom
which introduced the concept of the limited liability partnership
into English and Scots law. It created an LLP as a body with legal personality separate from its members (unlike a normal partnership) which is governed under a hybrid system of law partially from company law and partially from partnership law. Unlike normal partnerships the liability of members of LLP on winding up is limited to the amount of capital they contributed to the LLP.
Section 2 of the act provides that an LLP may be incorporated when two or more persons associated for the purpose of carrying on legal business subscribe their names to an incorporation document; that incorporation document, or an approved copy of it, has been delivered to the Companies Registrar at Companies House
; and a statement either by a solicitor or one of the subscribers that the formalities have been complied with has also been delivered to the registrar. The incorporation document must take either the prescribed form or a form as close to the prescribed form as possible. It must contain the address of the registered office
of the LLP, state the name of the LLP, state the name of the members of the LLP on incorporation, state which of those members are to be "designated members" or that all members will be "designated members" and also say whether the LLP's registered office is to be situated in England and Wales, Wales or Scotland.
Section 3 provides that once the formalities have been complied with the registrar retains the incorporation document or a copy of it and issues a certificate of incorporation. That certificate is regarded as conclusive evidence that the incorporation formalities have been complied with.
Membership of the LLP is initially those who subscribed to the incorporation document. A person may become a new member of an LLP with the agreement of existing members and cease to be a member with their agreement as well. As with a normal partnership a partner of an LLP is not regarded as being employed by the LLP—they are self employed. The relationship between members is governed by agreement between the members. If such an agreement does not exist the act provides that regulations may be made specifying the default form of such an agreement. As with normal partnerships the members of an LLP are agents of the LLP, and the LLP is liable for the actions of a member when that member acts in a wrongful way or makes an omission. However unlike a normal partnership the members of an LLP are not jointly and severally liable for the actions of another member. This is due to the fact that the LLP itself has legal personality separate from its members. If the membership of an LLP changes then the registrar must be informed within 14 days and if a member changes address the registrar must be informed within 28 days.
Members of an LLP are subject to income tax
on their income as trading income in the same way as a normal partnership. They also pay class 4 National Insurance
contributions in the same way as anyone else who is self employed. Capital gains tax
applies to members of LLPs as to those in a normal partnership. Within one year of incorporation of an LLP there is an exception to stamp duty
on land transferred to the LLP if the person transferring the property is a member of the LLP and that the proportions of the property are the same as those before the transaction.
LLP's are wound up and subject to insolvency
in much the same way as companies. Section 14 of the act makes provision for regulations to be made applying certain provisions of the Insolvency Act 1986
to LLP's. Similarly section 15 makes provision for the making of regulations to apply company law or disapply company law and to apply partnership law as seem appropriate.
Complementing the Limited Liability Partnerships Act 2000, much of the law on LLPs is in statutory instruments made under it that apply other legislation. Most importantly many elements of the Companies Act 2006
are applied to LLPs by regulations made in 2008 and 2009.
Act of Parliament
An Act of Parliament is a statute enacted as primary legislation by a national or sub-national parliament. In the Republic of Ireland the term Act of the Oireachtas is used, and in the United States the term Act of Congress is used.In Commonwealth countries, the term is used both in a narrow...
of the Parliament
Parliament
A parliament is a legislature, especially in those countries whose system of government is based on the Westminster system modeled after that of the United Kingdom. The name is derived from the French , the action of parler : a parlement is a discussion. The term came to mean a meeting at which...
of the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
which introduced the concept of the limited liability partnership
Limited liability partnership
A limited liability partnership is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence. This is an important...
into English and Scots law. It created an LLP as a body with legal personality separate from its members (unlike a normal partnership) which is governed under a hybrid system of law partially from company law and partially from partnership law. Unlike normal partnerships the liability of members of LLP on winding up is limited to the amount of capital they contributed to the LLP.
Section 2 of the act provides that an LLP may be incorporated when two or more persons associated for the purpose of carrying on legal business subscribe their names to an incorporation document; that incorporation document, or an approved copy of it, has been delivered to the Companies Registrar at Companies House
Companies House
Companies House is the United Kingdom Registrar of Companies and is an Executive Agency of the United Kingdom Government Department for Business, Innovation and Skills . All forms of companies are incorporated and registered with Companies House and file specific details as required by the...
; and a statement either by a solicitor or one of the subscribers that the formalities have been complied with has also been delivered to the registrar. The incorporation document must take either the prescribed form or a form as close to the prescribed form as possible. It must contain the address of the registered office
Registered office
Registered office is a term used to describe the address which is registered with the government registrar as the official address of a company, an association or any other legal entity. Generally it will form part of the public record...
of the LLP, state the name of the LLP, state the name of the members of the LLP on incorporation, state which of those members are to be "designated members" or that all members will be "designated members" and also say whether the LLP's registered office is to be situated in England and Wales, Wales or Scotland.
Section 3 provides that once the formalities have been complied with the registrar retains the incorporation document or a copy of it and issues a certificate of incorporation. That certificate is regarded as conclusive evidence that the incorporation formalities have been complied with.
Membership of the LLP is initially those who subscribed to the incorporation document. A person may become a new member of an LLP with the agreement of existing members and cease to be a member with their agreement as well. As with a normal partnership a partner of an LLP is not regarded as being employed by the LLP—they are self employed. The relationship between members is governed by agreement between the members. If such an agreement does not exist the act provides that regulations may be made specifying the default form of such an agreement. As with normal partnerships the members of an LLP are agents of the LLP, and the LLP is liable for the actions of a member when that member acts in a wrongful way or makes an omission. However unlike a normal partnership the members of an LLP are not jointly and severally liable for the actions of another member. This is due to the fact that the LLP itself has legal personality separate from its members. If the membership of an LLP changes then the registrar must be informed within 14 days and if a member changes address the registrar must be informed within 28 days.
Members of an LLP are subject to income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
on their income as trading income in the same way as a normal partnership. They also pay class 4 National Insurance
National Insurance
National Insurance in the United Kingdom was initially a contributory system of insurance against illness and unemployment, and later also provided retirement pensions and other benefits...
contributions in the same way as anyone else who is self employed. Capital gains tax
Capital gains tax
A capital gains tax is a tax charged on capital gains, the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property...
applies to members of LLPs as to those in a normal partnership. Within one year of incorporation of an LLP there is an exception to stamp duty
Stamp duty
Stamp duty is a tax that is levied on documents. Historically, this included the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions. A physical stamp had to be attached to or impressed upon the document to denote that stamp duty...
on land transferred to the LLP if the person transferring the property is a member of the LLP and that the proportions of the property are the same as those before the transaction.
LLP's are wound up and subject to insolvency
Insolvency
Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...
in much the same way as companies. Section 14 of the act makes provision for regulations to be made applying certain provisions of the Insolvency Act 1986
Insolvency Act 1986
The Insolvency Act 1986 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK.-History:...
to LLP's. Similarly section 15 makes provision for the making of regulations to apply company law or disapply company law and to apply partnership law as seem appropriate.
Complementing the Limited Liability Partnerships Act 2000, much of the law on LLPs is in statutory instruments made under it that apply other legislation. Most importantly many elements of the Companies Act 2006
Companies Act 2006
The Companies Act 2006 is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. It had the distinction of being the longest in British Parliamentary history: with 1,300 sections and covering nearly 700 pages, and containing 16 schedules but it has since...
are applied to LLPs by regulations made in 2008 and 2009.
External links
- The Limited Liability Partnerships Act 2000, as originally enacted, from the Office of Public Sector InformationOffice of Public Sector InformationThe Office of Public Sector Information is the body responsible for the operation of Her Majesty's Stationery Office and of other public information services of the United Kingdom...
. - Explanatory notes to the Limited Liability Partnerships Act 2000 from the Office of Public Sector Information.