Learning Outcomes
This article outlines the statutory process for forming a Limited Liability Partnership (LLP) in England and Wales. It details the key steps involved in registration at Companies House, including the necessary documentation and information required. For the SQE1 assessments, you will need to understand the specific requirements for incorporating an LLP under the Limited Liability Partnerships Act 2000 and associated regulations, distinguishing this process from other business formations like general partnerships or companies. Your understanding will enable you to identify and apply the relevant legal rules to SQE1-style questions concerning LLP formation.
SQE1 Syllabus
For SQE1, you are required to understand the procedures and documentation required to form an LLP and other steps required under companies and partnerships legislation to enable the entity to commence operating. This includes understanding the constitutional documents and Companies House filing requirements specific to LLPs.
An appreciation of the formal incorporation process for LLPs is essential for advising clients on setting up this type of business structure.
As you work through this article, remember to pay particular attention in your revision to:
- the distinction between LLPs and general partnerships regarding formation formalities
- the specific documents and information needed for LLP registration at Companies House
- the role and responsibilities of designated members in the registration process
- the significance of the certificate of incorporation for an LLP.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
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Which Act primarily governs the formation of Limited Liability Partnerships in the UK?
- Partnership Act 1890
- Companies Act 2006
- Limited Liability Partnerships Act 2000
- Insolvency Act 1986
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What is the minimum number of designated members required for an LLP?
- One
- Two
- Three
- No minimum
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True or false? An LLP comes into legal existence as soon as the members agree to form it.
-
Which form must be submitted to Companies House to incorporate an LLP?
- Form IN01
- Form LL IN01
- Form SH01
- Form NM01
Introduction
Unlike general partnerships formed under the Partnership Act 1890, Limited Liability Partnerships (LLPs) require a formal registration process to come into existence. LLPs are a distinct legal entity, separate from their members, providing the benefit of limited liability similar to a company, while often retaining the operational flexibility of a partnership. This section details the statutory procedure for registering an LLP with Companies House, a critical step mandated by the Limited Liability Partnerships Act 2000 (LLPA 2000).
The Incorporation Process for LLPs
Formation of an LLP is achieved through incorporation by registration with the Registrar of Companies at Companies House. This process confers upon the LLP its separate legal personality and limited liability status.
Key Requirements for Formation
Section 2 of the LLPA 2000 sets out the core requirements for forming an LLP:
- Two or more persons: An LLP must be formed by at least two 'persons associated for carrying on a lawful business with a view to profit'. These persons can be individuals or corporate bodies.
- Incorporation Document: These persons must subscribe their names to an incorporation document.
- Delivery to Registrar: The incorporation document, along with other required information, must be delivered to the Registrar of Companies.
The Incorporation Document (Form LL IN01)
The primary document for registration is the incorporation document, currently Form LL IN01. This form requires specific information about the proposed LLP.
Key Term: Form LL IN01
The official application form submitted to Companies House for the incorporation of a Limited Liability Partnership.
Key information required on Form LL IN01 includes:
- Name of the LLP: The proposed name must comply with regulations, typically ending with "Limited Liability Partnership" or "LLP" (or Welsh equivalents). Restrictions apply regarding similarity to existing names and the use of sensitive words.
- Registered Office: The location of the LLP's registered office (e.g., England and Wales, Wales, Scotland, Northern Ireland) and its full address must be provided. This address serves as the official point of contact.
- Members' Details: The names and service addresses of all proposed members must be listed.
- Designated Members: At least two members must be identified as 'designated members'. If not specified, all members are deemed designated members.
Key Term: Designated Member
A member of an LLP who has specific statutory responsibilities, primarily relating to administrative and filing duties with Companies House, similar in function (though not legal status) to a company secretary or director in certain aspects.
Statement of Compliance
A statement must be delivered to the registrar confirming that the requirements of the LLPA 2000 regarding registration have been complied with. This statement can be made by a solicitor involved in the formation or by one of the subscribers to the incorporation document.
Registration Fee
The appropriate registration fee must accompany the application documents submitted to Companies House. Fees vary depending on the method of submission (paper or electronic) and the desired speed of incorporation (standard or same-day).
Certificate of Incorporation
Upon successful registration, the Registrar of Companies issues a Certificate of Incorporation.
Key Term: Certificate of Incorporation (LLP)
The official document issued by Companies House confirming that the LLP has been legally incorporated and specifying the date of incorporation and the LLP's registered number.
The LLP legally comes into existence on the date stated on the Certificate of Incorporation (s 3(1) LLPA 2000). This certificate is conclusive evidence that the requirements of the LLPA 2000 regarding registration have been met.
Worked Example 1.1
Asha and Ben wish to form an LLP to run their new graphic design business. They have chosen a name ('A&B Creative LLP'), identified a registered office address, and agreed they will both be designated members. What is the next essential step they must take to legally form the LLP?
Answer:
They must complete and submit the incorporation document (Form LL IN01), including all required details (name, address, member details, designation), along with the statement of compliance and the registration fee, to Companies House. The LLP will only legally exist once Companies House issues the Certificate of Incorporation.
The LLP Agreement
While not required for registration, an LLP agreement is a key internal document governing the relationship between the members and the LLP's operation.
Key Term: LLP Agreement
A private contractual agreement between the members of an LLP setting out their mutual rights and duties, profit sharing, decision-making processes, and rules for joining or leaving the LLP.
In the absence of an LLP agreement, the default provisions of the Limited Liability Partnerships Regulations 2001 will apply. These default provisions mirror many aspects of the Partnership Act 1890, such as equal sharing of profits and capital, and entitlement of all members to participate in management. These defaults may not be suitable for all LLPs.
Worked Example 1.2
Farah, Gita, and Hari form an LLP but do not create a written LLP agreement. Farah contributes 60% of the capital and works full-time, while Gita and Hari contribute 20% each and work part-time. How will profits be shared according to the default provisions?
Answer:
According to the default provisions in the Limited Liability Partnerships Regulations 2001, profits will be shared equally among Farah, Gita, and Hari, regardless of their capital contributions or working hours, unless they agree otherwise.
Exam Warning
Remember that while an LLP agreement is not needed for registration, its absence means the default statutory provisions apply. SQE1 questions might test your understanding of these default rules (e.g., equal profit sharing) in scenarios where no LLP agreement exists or where an agreement is silent on a particular point.
Revision Tip
Focus on the key differences between forming an LLP and a general partnership. LLPs require formal registration via Form LL IN01 at Companies House to gain separate legal personality and limited liability, whereas general partnerships can arise informally without registration. This distinction is fundamental.
Key Point Checklist
This article has covered the following key knowledge points:
- LLP formation requires formal registration with Companies House under the LLPA 2000.
- The primary document for registration is Form LL IN01, containing details like the LLP name, registered office, and member information.
- An LLP must have at least two members, and at least two designated members with specific statutory duties.
- A statement of compliance must accompany the registration application.
- The LLP legally exists upon the issuance of the Certificate of Incorporation by Companies House.
- An LLP agreement governs internal affairs; without it, default provisions apply.
Key Terms and Concepts
- Form LL IN01
- Designated Member
- Certificate of Incorporation (LLP)
- LLP Agreement
