A limited liability partnership is a hybrid of a limited company and a partnership, and comes into force on 6 April. It combines the freedom and managerial flexibility of the former with the limited liability and accounting transparency of the latter, providing the best of both worlds.
Who is it aimed at?
Partnerships of consultants such as engineers (54% of Association of Consulting Engineers members), architects (31% of RIBA members) and surveyors (46% of RICS members). Outside construction firms, accountants such as Ernst & Young and Deloitte & Touche are seriously considering turning to LLP in the near future.
What are the advantages?
If a partner is sued, you are not personally liable if you have not been negligent. You also keep your self-employed tax status.
What are the disadvantages?
Like a limited company, an LLP has to file accounts to enable creditors and clients to assess financial viability. This applies to LLPs with an income of £1m or above but there are plans to increase the threshold to £5m.
How much does it cost?
To convert a partnership into an LLP costs about 1% of turnover according to Bill Hill, senior partner at consulting engineer Campbell Reith Hill, one of the first practices to go down the LLP path. But lawyers' and accountants' fees, on top of internal restructuring costs, are difficult to estimate.
A practical guide to LLP will be published in April by the Construction Industry Council liability taskforce and the Centre for Construction Law at King's College, London University. Call 020-7637 8692 for details.