Q. I have operated a successful business partnership for many years in the borough. However, no business is immune from the present economic trading conditions and I am considering taking the precaution of converting the business to a Limited Liability Partnership (LLP) to protect my home and savings from creditors. How does an LLP work and will it achieve my aim?
A. An LLPs has the legal characteristics of a limited company in that it is a separate legal entity to its members and as such may enter into contracts, borrow money, hold property and do anything that any legal "person" may do. The financial liability of each member of an LLP (and both an individual and/or a company can be a member) is limited to the available assets of the LLP itself. Generally this will protect your assets from any creditors of the LLP. However, as with a limited company, LLP status will not offer protection against personal guarantees and securities given by members or to individual member who is shown to have been personally negligent
Q. What's the downside? Will it affect how much tax I pay?
A. The basic principles of taxation of LLP's is identical to that of a partnership with each member being personally liable for tax on their share of the LLP profits. It is therefore tax neutral. However, an LLP does require more administrative formality than a partnership as it must file documents and accounts at Companies House. These documents can be viewed by the public and therefore your business affairs will be more transparent that is presently the case.
Should you have a queries regarding a legal matter please contact Keith Swan of Patterson, Glenton & Stracey Solicitors by email at ks@pgslaw.co.uk or by telephone on 0808 231 7043. Patterson, Glenton & Stracey have provided legal advice to the people of South Tyneside for over 125 years. For details of their full range of services and to view previous Gazette articles please log on to www.pgslaw.co.uk.
