Types of Partnerships in UK Incorporation and the Limited Liability Partnerships Act 2000

13 Oct
  • In order to open ltd company in UK there are different rules and regulations that govern the formation of such a company. The Limited companies that are limited by liabilities are discussed in this article. The benefit of a limited liability is the restricted amount of usage of the capital of company. For those who are interested in knowing how to set up a business UK, this topic reveals some of the available options for forming companies. Limited liability partnership is one of them and will be discussed in detail.


An organisation may have different types. Of them some have formations more or less resembling the formation of companies. However, isolated legislation may administer each formation. A UK company incorporation may also be formed by another type of business technique. This technique when used with a limited liability forms a new structure of business which will be discussed later. However, this technique is known as Partnership. Partnerships do not consist of a single or isolated body. It may be constituted from two or more firms that appreciate to work together. Partnerships may have different types.

  • Ordinary Partnerships

Such partnerships provide the option of unlimited liabilities to their members in case of debts or any other requirement of the company.

  • Limited Partnerships

Every active member enjoys an unlimited liability whereas every inactive member is given the option of limited liability.

  • Limited Liability Partnerships

This is the kind of partnership which may involve an isolated body. The members of such a partnership are given a limited liability.

Concept of a Separate Legal Body 

Isolated legal body along with the limited liability that is given to the members of any company are crucial for the formation of a limited company. The idea of a “person” in general language is someone who has a separate existence. However, in terms of law, the word “person” is used for a company that is independent regarding its rights and the members of that company have no influence on it. Moreover, the company’s rights are free from the influence of any director or shareholder as well. Hence, law defines the term “person” as a subject of responsibilities and authorities. Therefore, the term separate personality may be used for a corporation.

Limited Liability Partnerships Act 2000

This act governs the formation of limited liability partnerships. Some of the rulings regarding the formation of limited liability partnerships will be studied under this act.  Hence the following topics present provisions of Limited Liability Partnerships Act 2000:

Definition of a Limited Liability Partnership

Section 1 of this Act states the basic traits of an LLP.

  • Limited liability partnership is a new type of lawful body.
  • It may be characterised as a partnership having an isolated legitimate personality i.e. its personality is isolated from the members and this partnership may be formed via following the rulings provided by this Act.
  • The capacity of a limited liability partnership is unbounded.
  • In case of liquidation, the nature of the liability that has to be paid upon the belongings by each of the members of a limited liability partnership is defined by this Act.
  • A limited liability partnership has exemption from the rulings provided for regular partnerships. However, they may be applicable if it is mentioned as a provision in this Act or any other legal agreement.
  • The information regarding the names and the offices where the limited liability partnership is registered is taken into account by a schedule and such a schedule is effective.

Regulations for Incorporation of Limited Liability Partnership

Any limited liability partnership that intends to get incorporated has to go through the process defined in Section 2 of this Act which is as follows:

  • If a group of at least two persons intend to work together and gain profit via any business that is legal, they have to subscribe their names in a document for incorporation.
  • After preparing this document it should be submitted to the Registrar. One is allowed to submit a copy of the document of incorporation to the Registrar. However, the document must be validated by a method for which the Registrar has given approval.
  • The Registrar must also approve a declaration of the fact that all the requirements mentioned in the first provision under this Section have been fulfilled rightly. This declaration should be provided to the Registrar by either a solicitor who has taken part in setting up the company or someone from the subscribers of document of incorporation.
  • The documentation being prepared regarding the incorporation should have the following features:
  • The Registrar may give his approval to the document.
  • The name of the limited liability partnership must be mentioned in the document.
  • The location of the registry office should be mentioned. It may be in Wales, England or in Scotland.
  • Moreover, the address of the office where the limited liability partnership has been registered must be mentioned in the document.
  • The document must also include the details about all those persons who intend to own a membership in the limited liability partnership. The details must include the names followed by the addresses of each expected member.
  • Regarding the post of designated member, the persons who amongst the members, intend to be the designated members must be clearly mentioned in the document. If that is not the case, then it should be mentioned that every person who intends to be a member from time to time of the limited liability partnership may be considered as a designated member.
  • If the statement that is submitted to the Registrar to ensure that all the requirements have been fulfilled for the incorporation of a company is false or cannot be considered true and the person who submitted it, has knowingly submitted a false statement then he has committed an offensive act.
  • Hence, the person who has committed the previously mentioned offensive act, may be subjected to the following punishments:
  • He may either be locked up in a prison for a duration of 6 months or he may have to pay a fine that is equivalent to the limit defined in the statute. Or it may also be possible that he has to go through both the punishments. These penalties may get enforced in case of summary conviction.
  • For the case of conviction on indictment, the guilty person may have to stay in the prison for a duration of two years. Alternatively, he may have to pay a fine. And it may also happen that he is liable to both the penalties.

Registration of a Limited Liability Partnership

Section 3 of Limited Liability Partnership Act 2000 states the regulations for the process of registration:

  • Two or more persons intending to work on a legal business subscribe in the document of incorporation, the paperwork of incorporation may be submitted to the Registrar and the Registrar will keep the documents. Further he may:
  • Complete this process of registration for the document.
  • Provide with a certificate that mentions the limited liability partnership’s name as suggested in the document.
  • When the statement mentioning that all the requirements regarding the process of incorporation’s documentation are rightly completed is submitted to the Registrar, he will accept it.
  • The Registrar should validate the certificate by signing on it or he may do this by stamping on it with his official seal.
  • Hence, it may be proved by the issuance of certificate that the requirements mentioned in the previous section for the registration of documents has been fulfilled and the name of the incorporated limited liability partnership is the same as that mentioned in the document of incorporation.

Membership in Limited Liability Partnerships

Members are an integral part of a UK company incorporation. There are certain rules for getting membership in a limited liability partnership. Section 4 of this Act is related to the memberships in limited liability partnership. Hence the provisions of this Section are as follows:

  • The persons who apply for subscription in incorporation document become the members of a limited liability partnership after its formation. However, this may exclude the deceased persons or those who have been dissolved due to some reason.
  • If any person wants to become a member of an already established limited liability partnership, he may become one by signing a pact with the present members of that partnership.
  • If any person who is also a current member of the limited liability partnership wants to withdraw from the membership, he may do any of the following:
  • Through the provisions of an agreement with the rest of the members.
  • And if there is no pact signed between the members, the person may send a notice to the rest of the members about his withdrawal from membership.
  • A person who has died or has been dissolved is considered withdrawn from the membership
  • Any person holding the membership of limited liability partnership, is not the employee of it. He may be considered an employee of limited liability partnership only in one situation and that is when he forms a partnership with other members.
  • Mutual Rights and Responsibilities of Members
  • It is important to protect the rights of members who form partnerships with one another and also the fair governance of their responsibilities. A practical solution for the protection is given by this act. This Section of Limited Liability Partnership Act 2000 states the methods by which the responsibilities along with the rights of limited liability partnership and its members may be guaranteed. It must be known these rights and duties must be governed as far as no provision in this act or any other act restricts it. The methods are the following:
  • An agreement should be signed between the limited liability partnership and its members. A group of members may also assent to a certain pact. This pact or agreement may be a source for the provisions of safety of rights and obligation of duties.
  • In case when there is no pact signed between either the members or the partnership and its members, Section 15(c) of this act provides for the regulations of rights and duties. Hence, Section 15(c) may be followed in such a situation.

Another interesting fact is that if any two or more than two members signed an agreement at the time of their subscription in to the incorporation document, the provisions of that agreement will remain effective. Hence, the rules and regulations of limited liability partnership must be governed via the provisions of that agreement. However, it should be known at the time of subscription that the agreement may become effective after the incorporation of limited liability partnership.

  • The members of the limited liability partnership have a limited liability. Hence, they are not responsible for all the debts of any UK incorporation company or partnership upon dissolution. This makes limited liability partnership a good option to be chosen as the form of new business. However, financially unstable companies should go for it. As it limits the usage of capital of a company. This is also why LLP provides a replacement for the traditional forms of companies. And provides answer to the question of how to set up a business UK, that is economical and according to the new techniques of business.
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