LLP members are partners in a limited liability partnership. You need two or more members to register an LLP at Companies House, and at least two of these members must be ‘designated’.
A designated member has more duties and legal responsibilities than an ordinary member. Their role is to ensure that the LLP and all of its members comply with the statutory requirements of the Limited Liability Partnership Act 2000, the Limited Liability Partnership Regulations 2001, and any other sources of legislation and regulations that may be relevant to the business.
Duties of designated LLP members
The duties of designated LLP members are similar to those of limited company directors and company secretaries. They have exactly the same rights and duties as any other member, but they have additional management duties and statutory responsibilities regarding the LLP. Where applicable, designated LLP members are required to:
- Register the LLP for Self Assessment with HMRC
- Register the LLP for VAT (if required)
- Register the LLP as an employer and set up PAYE
- Maintain statutory LLP registers, including the PSC register
- Keep accounting records
- Maintain the LLP’s registered office, signage, and stationery
- Prepare and file annual accounts
- Sign accounts on behalf of the LLP and all members
- Prepare and file confirmation statements
- Submit the LLP’s VAT returns and ensure that VAT bills are paid on time
- Ensure that all PAYE tasks are completed
- Appoint an accountant and/or auditor
- Tell Companies House about any changes to the LLP
- Sign contracts and other documents on behalf of the LLP
- Ensure that the business follows rules on data protection
- Make sure that the LLP is appropriately insured, e.g. Employers’ Liability; Public Liability; Professional Indemnity
- Represent the LLP in any legal proceedings
- Act on behalf of the business if it is wound up and dissolved
- Any additional management duties set out in the LLP agreement
Designated members are legally accountable if they fail to carry out their statutory responsibilities.
Who can be a designated member of an LLP?
Provided that other members agree, any individual can be an ordinary member or a designated member of an LLP, unless they:
- are under the age of 16
- have been disqualified from acting as an LLP member or a company director
- are an undischarged bankrupt
In some cases, the Court may grant special dispensation to allow disqualified persons and/or undischarged bankrupts to be appointed as LLP members.
Corporate bodies, such as limited companies and other LLPs, can also be appointed as ordinary members or designated members of an LLP. In such instances, they are known as ‘corporate members’.
How to appoint a designated member
Every limited liability partnership is required to formally appoint a minimum of two designated members. If your LLP has only two members at any time, both members will be designated. If you do not nominate at least two designated members, Companies House will automatically deem all members as designated.
Designated members can be appointed during and after the incorporation process. You can change the status of any member from designated to ordinary, and vice versa, at any time.
Appointing a designated member during LLP incorporation
To appoint a designated member during the LLP incorporation process, you must check a box under section B1 (individual member) or section C1 (corporate member) of Companies House form LL IN01 to indicate that a particular member consents to be designated.
However, if all members are to be appointed as designated members, you will select ‘Yes, in section A5 of the form. Alternatively, if you incorporate your LLP company with Quality Company Formations’ LLP Package, you will be given the option to select a member as a designated member via a tick box.
Appointing a new designated member after incorporation
To appoint a new LLP member who consents to act as a designated member, Companies House form LL AP01 must be completed and filed within 14 days. In section 3 under ‘Appointment type’, select ‘Yes’ to indicate that the person consents to being appointed as a designated member rather than an ordinary member. To appoint a new corporate member, form LL AP02 must be used instead.
Changing the designated status of existing LLP members
To change the status of an existing LLP member from ordinary to designated, or designated to ordinary, Companies House form LL CH01 must be completed and filed within 14 days. In section 7 of the form, check the relevant box to indicate that the person consents to act as either a ‘designated member of the LLP’ or ‘member of the LLP’.
To change the details of a corporate member, form LL CH02 must be used instead.
Alternatively, if an existing LLP wishes to change its status from all members being designated to only specified members being designated, or vice versa, Companies House form LL DE01 should be filed. Where appropriate, form LL CH01 or LL CH02 may also have be filed to identify the existing members who consent to act as designated members.
Defining members’ responsibilities in an LLP agreement
The rights, duties, and responsibilities of LLP members are set out in the LLP Act 2000 and the LLP Regulations 2001, but it is advisable to also prepare a written LLP Agreement before setting up a limited liability partnership.
This important document, which becomes legally binding once agreed upon and signed by all members, clarifies how the partnership must operate, including information about:
- the mutual rights and duties of all members
- the rights, duties, and responsibilities of designated members
- the defined roles and specified rights of individual members (i.e. to reflect specific duties, specialties, and seniority)
- the investment contribution of each member
- the distribution of profits (or losses) and capital
- regulating decision-making procedures
- membership requirements
- the procedure for the appointment of new members
- the procedure for the resignation or retirement of existing members
- dispute resolution
- what should happen in the event of an LLP member’s incapacitation or death
Whilst optional, it’s good practice to put in place a carefully drafted LLP agreement, especially when there is variation between the rights and duties of different members. You can create your own LLP agreement, but it is often best to consult a solicitor for specialist help and advice.
In the absence of an LLP agreement, the default rules in the LLP Act and LLP Regulations will govern how the LLP operates. This means that all members will be treated equally, with equal voting rights and profit entitlement, which may not be appropriate for the LLP nor accurately reflect the contribution of individual members.
Register a limited liability partnership online
An LLP is now the most popular incorporated business structure for industry professionals, like solicitors and accountants, who generally operate as partnerships. The most significant benefit of registering an LLP instead of a traditional partnership is the limited liability provided to each LLP member.
At Quality Company Formations, our LLP registration package is available for just £29.99 plus VAT, offering excellent value and providing online incorporation in 3 to 6 working hours. Digital and printed LLP incorporation documents and a free draft LLP Agreement are included, providing you with everything you need to set up and start running an LLP today.