Limited Liability Partnerships (or LLPs) are a hybrid entity offering limited liability but allowing members to organise themselves as in a traditional partnership.
An LLP member may be an equity member who receives a share of profits or a fixed share member who has a fixed share of profits.
Since LLP members are self-employed for tax purposes, they obtain the cash flow benefit of a delayed payment of tax compared to an employee taxed under PAYE and save the business the cost of employer’s National Insurance Contributions (NICs).
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Each LLP member’s rights and obligations are contained in the LLP agreement, which is a written agreement covering matters such as:
- management and decision-making;
- admission of new members;
- retirement and expulsion of members; and
- the entitlements and obligations of outgoing members, including confidentiality obligations and restrictive covenants.
Although LLP members do not qualify for employment protection rights, they have similar rights to employees not to suffer unlawful discrimination on the grounds of race, sex, age, sexual orientation, religion or belief and disability.