A partnership is formed by two or more persons carrying on a business in common with a view of profit. The Partnership Act 1890, which still applies today, provides that a Scottish firm has separate legal personality from its partners, enabling it to enter into contracts and hold property in its own name. However, it should be noted that the partners of the firm are personally liable for the debts of the firm.
Limited Liability Partnership (LLP) is the latest business vehicle in the UK which was introduced on 6 April 2001 after the Limited Liability Partnerships Act 2000 received Royal Assent on 20 July 2000. The introduction date was used to coincide with the Inland Revenue tax year due to the way that LLP's are taxed. LLP may be seen as a hybrid between limited liability companies and traditional partnerships, in that it offers the limited liability available to limited company shareholders combined with the tax regime and flexibility available to partnerships. Prior to this legislation, it was only a Private or Public Limited company that offered limited liability to all of its members. The key advantage of a LLP compared with a traditional partnership is that the members of the LLP (it is important that they should not be called partners but members) are able to limit their personal liability if something goes wrong with the business, in much the same way as shareholders in a limited company are able to.
Scottish LLPs must use the suffix Limited Liability Partnership or LLP to denote limited liability and can use any name unless it includes words such as Empire, Crown, Imperial, Windsor, Royal, Assurance, Bank, Building Society British, National, Great Britain, United Kingdom, England, English, Scotland, Scottish, Wales, Welsh, Ireland or Irish. The initials "GB" or "UK" do not require approval. "European" - will not be approved if they imply unjustifiable connection with EU. "International" - as prefix major activity must be overseas trading, as suffix, company activity must be in 2 or more overseas countries or any other words deemed sensitive or offensive.
An LLP should draw up a "Deed of Partnership" at the time of formation - a legally binding agreement between members which lays out the rights and responsibilities of each party to the agreement. Alongside administrative details such as the names and addresses of members, the deed will also include details on the amount of capital each partner will inject into the business, what their individual roles and responsibilities will be in running the business and what would happen if a partner leaves the business.
Individuals or existing businesses can be members of a Limited Liability Partnership, and the LLP must have at least 2 members. The minimum capital contribution is £2. The rights and responsibilities of all members would usually be laid out in a "Deed of Partnership". Designated members have the same rights and duties towards the LLP as any other member. The LLP agreement and the general law govern these mutual rights and duties.
The LLP would typically select a "Designated Member" (or members) who would be responsible for maintaining communications with the Companies House, preparing accounts and acting for the LLP if for some reason it is dissolved further down the line.
The members of an LLP are free to agree among themselves the relationship between them, rather as partners do in a partnership, the LLP itself is a separate legal entity, owned by the members. This means that the LLP is able to enter into contracts and hold property and the LLP is able to continue in existence independent of changes in membership. What is important is ensuring that the agreement between members addresses the issue of management, particularly as an LLP does not have to have a formal member’s agreement on creation.
There is no statutory requirement for a Company Secretary to be appointed.
Every LLP must have a registered office in Scotland, which is the address to which any formal communications may be sent. The LLP may change its registered office at any time by completing a special form, but the change only takes effect when it is registered at the Companies House. The registered office must be a physical location as people have the right to visit the office to inspect certain registers and other documents. They should also be able to deliver documents there by hand.
Company meetings need not be held in the UK or Scotland.
TIME NEEDED FOR FORMATION
Usually it is 5 working days.
RECURRING AND MAINTENANCE FEE AS FROM 2ND YEAR
- Provision of registered office
- Provision of company Secretary
- Preparing and Submission of Annual Return