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Setting up a limited liability partnership (LLP)

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Posted by Robert Lee on 15 October 2020

Robert Lee - Head of Corporate Law
Robert Lee Partner - Head of Corporate

Setting up a business, particularly if it is your first venture, can be complicated and a little daunting. There are many types of business structure, each has its own benefits and risks, so it is advisable to get a thorough understanding of each so you can decide the most appropriate route forward. 

Here we look at a Limited Liability Partnership (LLP) which is a structure often chosen by professional service firms.

An LLP is a form of legal business entity with limited liability for the members

One of the key advantages to an LLP is the reduced liability for the individuals in the partnership. It is the LLP that is responsible for any debts, not the individuals in the partnership. There is also no corporation tax to pay; the individual members pay tax on their profits, like an unincorporated partnership. However, although flexible, an LLP is more complicated to set up and run, and there are more regulations to consider than if you were a sole trader or unincorporated partnership. 

An LLP is designed to be used by a business looking to make a profit. The requirements for operating an LLP are very similar to those of a limited company. It is not an appropriate business structure for non-profit entities. 

Members of the LLP

An individual cannot set up an LLP. To set up and register an LLP, it must have two or more members. There are two types of membership, 'ordinary' members and 'designated' members. It is worth noting; designated members are legally accountable. 

An LLP has to have at least two 'designated' members, but it can be more. If there are no 'designated' members, then each ‘ordinary’ member would be deemed 'designated'. This can bring its own issues because 'designated' members tend to have more responsibilities than ‘ordinary’ members, including certain legal obligations.  

In normal circumstances, the members of an LLP share in both the profit and responsibility of the business. The individual rights and responsibilities for each member are set out in the partnership deed, commonly known as the partnership agreement or LLP agreement. 

Designated members are responsible for registering and updating Companies House on accounting, annual returns, changes to the membership in terms of personnel or registered offices and acting on behalf of the LLP if it is ever dissolved or wound up.  

LLP agreement

While there is no legal requirement to have a written agreement, it is advisable to do so. An LLP agreement (also referred to as a limited liability partnership agreement, members' agreement, partnership agreement or deed of partnership) is legally binding, but there is no need to file it with Companies House meaning it remains a private agreement between the members. 

The agreement should cover who the members are, the contributions and capital shares of each member, highlight the decision process, define the responsibilities and entitlements of each member, risk management and the process if a member leaves the partnership or retires from the partnership.  


Before incorporating your LLP by applying to Companies House, it is essential to have all the relevant documentation ready. You can do this yourself, or you can use a formation agent or a corporate solicitor. The benefit of using a solicitor is that they can offer advice and draw up any legal documentation you need, including your partnership agreement.

Incorporating your LLP

You can register an LLP yourself by completing an LL IN01 application form, which you can access here and submitting the application to Companies House. If you struggle with the registration, Companies House can guide you through the process, or you can instruct a solicitor to complete the process for you. It is important to note, you will need to update Companies House with any changes to your partnership on an ongoing basis.

The name of your LLP

It isn't always possible to have the name you want for your LLP. The name of your LLP should be unique. It cannot be the 'same as' an LLP which is already registered. You also cannot register a name that suggests your business is anything to do with the Government or Royalty. Your registered name cannot contain any offensive words. Your name must end in 'Limited Liability Partnership' or 'LLP'. 

The first step would be to check the registrar's index of names using the WebCHeck service on the Companies House website to make sure a similar name hasn't been registered. 

You can trade using a different name to your registered LLP name. This is known as a 'business name'. If you wish to stop other businesses trading under the same name as your business, you will need to register a trademark. 

There are benefits to setting up an LLP, but this may not be the most appropriate business structure for your business or the individuals who own the company, it is, therefore, important you seek professional advice before proceeding.

Tags: Corporate

About the author

Robert Lee

Partner - Head of Corporate

Robert specialises in mergers and acquisitions, and corporate restructuring.

Robert Lee

Robert specialises in mergers and acquisitions, and corporate restructuring.

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