Through self filing or an efficient company formation agent, LLP formation can be completed. This requires filing of an incorporation application which is available with the Companies House.
An LLP or a Limited Liability Partnership is quite similar to a standard partnership except that the individual members have lower or limited liabilities to any debts that arise from the running of the business. In a nutshell, LLP offers the flexibility of partnership while operating a limited company.
Steps in LLP Formation:
The first step in LLP Formation is finalizing a 'Deed of Partnership.' This is a legally binding agreement between the members as it elaborates the rights and responsibilities of each party.
The deed also details administrative details such as names and addresses of the members, the amount of capital that is contributed by each member in addition to individual roles and responsibilities. The agreement also mentions the changes that need to be made in case a partner intends to leave the business at any point of time.
LLP Formation does not require a Memorandum or Articles of Association. Once formed, the LLP is required to file annual returns and annual accounts with the Companies House.
For these purposes, at least two of the partners of the LLP must be 'designated members,' who would have to meet the statutory requirements pertaining to the LLP.
The two basic requirements for LLP formation are:
* A registered address
* At least two members or partners
* A legally binding agreement between them
LLP Formation and Tax Related Issues:
The LLP formation process also involves a nominated member who handles dealing with the Inland Revenue Department and filing the annual partnership tax return.
As all profits in an LLP are split between its members, the tax liability falls on them but it does not fall upon the LLP. Also, no corporate tax is involved. An LLP has to apply for VAT registration if the business expects to generate an income of £67,000 or more. Returns must also include a 'Partnership Statement' with details on the division of profits between various members.
Role of a Company Formation Agent in LLP Formation:
A company formation agent assists in LLP formation by helping in the preparation of a partnership agreement, deciding on a registered office. An agent can also provide post incorporation services such as assistance in bookkeeping or submission of the annual report and application for a VAT number.
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