LLPs: What you really need to know

It is nearly twenty‑five years since limited liability partnerships (“LLPs”) have existed under English law. Whilst often used by professional services firms, they are an increasingly popular choice for holding real estate and for joint venture holding companies. So what are they, why are they considered advantageous to investors, and how do they differ from other structures?

What is an LLP?

Joint venture structures and asset‑holding vehicles can take many forms. Some, like companies, offer limited liability for stakeholders, whilst others, like limited partnerships, deliver favourable tax treatment. A limited liability partnership is a type of legal business structure often viewed as a hybrid between a company and a partnership. Most LLPs established in the UK (nearly 147,000 in 2021) have been formed for professional services firms, such as solicitors.

In the real estate space, an LLP is increasingly being used as a joint venture or property‑holding vehicle. It is a tax‑transparent vehicle, combining partnership flexibility with corporate liability protection, making it suitable for property investment, development, and management. It holds property, files accounts at Companies House, and passes profits directly to its members for tax assessment, avoiding double taxation. It has its own legal personality, meaning it can enter contracts, own assets, and incur liabilities independently of its members.

Like a traditional partnership, members of an LLP can manage the LLP directly and share profits. However, in the LLP structure, whilst members benefit from limited liability, they are not personally responsible for the LLP’s debts beyond the capital they contribute. This makes LLPs particularly appealing for ventures where parties want flexibility without exposing themselves to unlimited personal liability.

How to form an LLP

1. Select a name – the words Limited Liability Partnership or LLP must be at the end of the name. The rules for names are similar to those applicable to companies, i.e. no offensive or sensitive words and must not be the same as, or too similar to, existing registered names.
2. Designate a registered office – this needs to be a physical address, not a PO Box. This will be publicly available on Companies House, so a corporate address is often used.
3. Identify designated members – there always needs to be at least two designated members. These members (who are partners in the LLP) have special responsibilities, such as submitting information to Companies House and maintaining accounting records.
4. Register the LLP – upon completing form LL IN01 and paying a fee, an LLP is registered at Companies House.
5. Enter into a members’ agreement – this is not a requirement, but it is recommended that members of the LLP enter into an agreement to formalise how the LLP will operate and be managed. This will contain provisions dealing with governance, duties owed by the members to the LLP, decision‑making, exit arrangements, funding, and the distribution of profits.

Key characteristics and advantages of an LLP

LLPs, Limited Companies and General Partnerships Compared

Consideration and risk factors

While LLPs offer significant benefits, key considerations include:

• An LLP must have at least two members.

• An LLP can be a Collective Investment Scheme under FSMA 2000 if members do not have day‑to‑day control over the management of assets.

• Members of an LLP can be liable to contribute to the assets of an LLP on a winding up if guilty of fraudulent or wrongful trading.

• Special clawback provisions apply to LLP members in certain winding‑up situations.

• Like directors of companies, LLP members may be personally liable for their own negligence if they have assumed a personal duty of care and have acted in breach of that duty.

• LLPs must comply with filing and disclosure obligations, including the filing of annual accounts.

• Financial information is publicly available, which may not suit all ventures.

Conclusion and our experience

LLPs offer a compelling balance of flexibility, shared control and limited liability, making them a strong option for professional practices and joint ventures. However, they need careful structuring to allow investors to benefit from their advantageous features.

Burges Salmon’s Corporate Real Estate team have in-depth experience in establishing and acting for LLPs and their members. 

With a team of Built Environment lawyers qualified across England, Wales, Scotland and Northern Ireland, we support clients on real estate matters across jurisdictions and project types. Our Corporate Real Estate team works closely with colleagues in construction, planning, tax, litigation, environmental and finance to provide integrated support throughout the lifecycle of real estate assets.

We have experience across many sectors including logistics, hospitality, office, residential (including build-to-rent and student accommodation), and large-scale regeneration schemes. If you would like to explore any of the topics discussed above, please contact Jonathan Cantor (Partner, Corporate and M&A) and Ceren Ghanem (Solicitor, Corporate and M&A).