Limited Liability Partnerships (LLP) - for Non-UK Residents

Information for Non-UK LLP Company Formation1

1.  Corporate status- owners (partners) assets are protected because of the partnerships liability is limited.
2. Tax Neutral – No UK tax is payable by overseas partners on the partnership’s overseas earnings.
3. The UK’s “light touch” approach to regulation means that statutory filing requirements are not onerous for small companies.
4. Partners can be individual or corporate bodies.
5. There are no restrictions on the residence or nationality of the members of an LLP

An LLP is formed by registration at Companies House in the UK. It must have its official address (Registered Office) in the UK. An LLP must have two or more partners and must be a lawful, commercial venture operating for profit. Partners can be individuals or corporate persons, and there is no restriction relating to their nationalities, residency or place of registration.

Companies House will not allow an LLP to use the same name as another company or LLP on its register and the name must end with the words 'limited liability partnership' or the abbreviation 'LLP'.

Partnerships do not need to file a written constitution with Companies House when they are registered; there is also no legal requirement to have a partnership agreement. However, to ensure a clear understanding between partners, it is recommended that a written agreement be entered into between the parties.

Usually, a partnership agreement would be expected to include details of the nature of the business, members’ shares and contributions, profit and loss sharing arrangements and management formalities as well as the duties of each respective member. Even in the absence of a written partnership agreement, or if there are certain items not covered by the partnership agreement, default provisions are contained in the Limited Liability Partnership Regulations. These provisions address, amongst others, the following matters:

1. That all members are entitled to have equal share of capital and profit.
2. That all members participate in management.
3. That the LLP would indemnify members in respect of expenses incurred on behalf of the LLP.

An LLP must have at least two designated members. Designated members are responsible for the management of the LLP and have statutory duties which ordinary members do not, such as:

Signing the annual accounts. Ensuring accounts are filed at Companies House. Notifying Companies House of changes in the membership, location or name of the LLP. Appointing an auditor, if necessary.

A partner ceases to be a member when the LLP is dissolved. Membership also ceases in the event of death or by agreement. The partnership agreement can include provisions for the removal of a partner for breach of the partnership agreement.

Where the number of partners falls below 2 for a period exceeding 6 months, the remaining partner is liable for any the payment of any debts arising after the 6 month period has expired.

An LLP must maintain records of its financial transactions in sufficient detail to enable the financial position of the LLP to be determined at any time.

Accounts must be delivered to the Registrar of Companies no later than 9 months after the relevant period end. There are penalties for late delivery.

Only LLPs that do not qualify as small are required to have their accounts audited. To be considered as small an LLP must meet 2 of the following three conditions for two out of the last three years:

1. Annual turnover £6.5m or less.
2. Balance sheet total £3.26m or less.
3. Average number of employees not more than 50.

LLPs are ‘tax transparent’ which means that each member, not the partnership, will be assessed to tax on their share of the LLP’s income or gains. Any non-UK source profits or gains made by an LLP will not be subject to UK tax unless the members are UK resident individuals or companies.

There are no restrictions on the residence or nationality of the members of an LLP. If the members of the LLP are non-resident and the income of the LLP is derived from a non-UK source, the LLP will not be subject to UK taxation. It is, therefore, possible to have an LLP set up in such a way as to not be liable to any UK taxation.

There is an obligation for an LLP to file an annual partnership tax return whether the partners are taxed or not.