What is an LLP (limited liability partnership)?
An LLP, or limited liability partnership, is a UK business structure where members share profits like partners but have limited liability like company shareholders.
What an LLP means
A limited liability partnership is a legal entity registered at Companies House, separate from the people who own it. Its owners are called members, and an LLP needs at least two designated members, who take responsibility for filings. As with a company, members' personal assets are generally protected if the business fails: they can lose what they have invested but are not personally liable for the LLP's debts.
Inside, it works like a partnership. Members agree in a members' agreement how profits are shared, who makes decisions and what happens if someone leaves. There are no shares and no dividends.
How LLPs are taxed
An LLP is tax transparent. It does not pay Corporation Tax. Instead, each member is taxed personally on their share of the profit, as if they were self-employed: income tax at 20%, 40% or 45% and Class 4 National Insurance at 6% and 2%, through Self Assessment. The LLP files a partnership tax return, and every member files their own return.
Members are taxed on their share of profits whether or not they take the money out. Special salaried member rules can treat some members as employees for tax if their pay is mostly fixed and they have little real stake in the business.
Example
Two architects run an LLP that makes £180,000 profit. They share it 60:40.
| Member | Profit share |
|---|---|
| Member A | £108,000 |
| Member B | £72,000 |
Each pays income tax and Class 4 NI on their share through Self Assessment. Member A's income is above £100,000, so part of their personal allowance is withdrawn. If the practice kept £50,000 in the business for a new office, both would still be taxed on the full £180,000.
Why it matters for your business
LLPs suit professional firms such as solicitors, architects, surveyors and accountants, where partners want flexible profit sharing and protection from personal liability. They also file accounts at Companies House, which are public, and must send a confirmation statement every year.
LLP vs limited company
A limited company pays Corporation Tax at 19% to 25% and can retain profit at that rate, with owners taxed only on salary and dividends they take. An LLP's profits are taxed at members' personal rates straight away. For owners who need most of the profit to live on, an LLP can be simpler; for those who want to reinvest, a company is often more tax efficient.
Common questions
No. An LLP is transparent for tax, so its profit is taxed in the hands of the members through their personal Self Assessment returns. The exception is where a company is itself a member of the LLP, in which case that company pays Corporation Tax on its share.
At least two, and at least two of them must be designated members, who are responsible for filing accounts and confirmation statements. If membership drops to one for more than six months, that person can become personally liable for the LLP's debts.