• ​For tax purposes the business is treated as a partnership (so the members are generally taxed on their share of profits rather than the LLP paying corporation tax).

• It offers flexibility in management and profit-sharing arrangements via a partnership agreement (often called an LLP agreement).

If you’re looking for a vehicle that gives partnership-style flexibility plus the protection of limited liability, a limited liability partnership could be worth considering.

Why might a limited liability partnership suit your business?

There are several reasons why you might favour such a structure:

Flexibility in management and profit sharing

In a limited liability partnership you can set out in your LLP agreement how profits are split, who takes what role, decision-making mechanisms, exit protocols, new member admission and so on.

This lets you tailor the internal arrangements to your actual business rather than relying on statutory default rules.

Protection of personal assets

By forming such a partnership, the liability of each member is generally capped – meaning that their personal assets are protected (except in cases of fraud or wrongful trading).

That can be especially helpful if your business carries risk, has professional indemnity exposures or large contractual obligations.

Tax transparency and potential benefits

Because a limited liability partnership is taxed like a partnership, profits are passed through to individual members and are taxed in their hands rather than the entity paying corporation tax.

This can offer tax-planning flexibility. That said, you should get professional advice because specific circumstances vary.

Credibility and structure

Operating as a partnership often lends more credibility than an unincorporated partnership. It signals that the business has a formal legal entity, which may be important for clients, lenders or investors.

What are the challenges of a limited liability partnership?

Although the limited liability partnership route has many advantages, some of the potential drawbacks include:

• You cannot raise capital by issuing shares in the same way a company limited by shares can. That means if you expect substantial external investment or share-equity issuance, a company structure may be more suitable.

• You still have ongoing filing obligations: a limited liability partnership must file annual accounts with Companies House.

• Unless carefully managed, tax and NI-treatment for members can be complex – especially if members receive guaranteed payments or structured profits.

• Some lenders or clients may prefer a private company rather than a limited liability partnership, depending on their risk appetite or sector norms.

Key rule-changes for 2025/26 you must know for a limited liability partnership

When considering a limited liability partnership, it’s crucial to be aware of key regulatory changes coming in for 2025/26:

Identity verification and transparency requirements

From 18 November 2025, new rules under the Economic Crime and Corporate Transparency Act 2023 (ECTA) will require that all new members of limited liability partnerships and persons with significant control (PSCs) must verify their identity.

Failure to comply may lead to criminal offence or the LLP being unable to register or file filings.

This is part of the Government’s drive towards greater transparency and to crack down on economic crime.

Medium-sized accounts thresholds updated

For accounting periods beginning on or after 6 April 2025, to qualify as a medium-sized group headed by a limited liability partnership the thresholds are: turnover no more than £54 million (net) or £64 million (gross), balance sheet total no more than £27 million (net) or £32 million (gross), and average number of employees no more than 50.

Tax/NIC proposals under review

While previously there had been speculation about increasing National Insurance contributions or employer NICs for partners in limited liability partnerships, as of now the government has ruled out a change to employer NICs for LLPs in the upcoming Budget.

Nonetheless, given the level of commentary about taxing LLPs differently, it remains something to monitor.

Annual accounts filing obligations remain strict

You must file annual accounts for your limited liability partnership within 9 months of the accounting reference date (for non-first years). Dormant LLPs also must deliver accountsThese changes mean you can’t treat the limited liability partnership structure lightly — you need to plan compliance and governance right from the start.

How to decide whether a limited liability partnership is right for you

Here’s a checklist to help you determine if a limited liability partnership is the best vehicle for your business:

• Do you have at least two members (or will you soon)? Without at least two you cannot form a limited liability partnership.

• Do you want a flexible arrangement (both in management and profit share) rather than the more rigid formalities of a company?

• Are you comfortable with the members being taxed on profit share (as self-employed) rather than the entity paying corporation tax?

• Do you expect to bring in external investors via shares? If yes, then perhaps a company would be better.

• Are you aware of the ongoing reporting, identity verification and filing obligations that come with the limited liability partnership structure?

• Does the nature of your business benefit from the limited liability protection a limited liability partnership offers — for example if you are in a professional services sector with risk of claims?

If you answer “yes” to many of these, then the limited liability partnership model is likely to be a strong contender for your business structure.

​How Trueman Brown can help you explore a limited liability partnership

If you’re considering setting up a limited liability partnership — or converting your existing business into one — the team at Trueman Brown can support you every step of the way.

We will help you evaluate whether such a  partnership is suitable given your business model, draw-up a tailored LLP agreement, guide you through registration and compliance, and keep you on track with your annual obligations under Companies House and HMRC.

For more details or to book a consultation, email mark@truemanbrown.co.uk or call us on 01708 397262.

We’re here to make sure your business structure is set up correctly, efficiently and with full compliance for 2025/26 and beyond.

Frequently Asked Questions about a limited liability partnership

Q: Does a limited liability partnership pay corporation tax?
A: No – in the UK a limited liability partnership is treated as a partnership for tax purposes, so the profits are passed through to the members who then pay income tax (and Class 4 National Insurance where applicable).

Q: How many people do I need to form a limited liability partnership?
A: Minimum two members are required to form a limited liability partnership.

Q: What are ‘designated members’ in a limited liability partnership?
A: In a limited liability partnership, certain members can be designated members who carry extra statutory responsibilities (such as filing accounts, ensuring compliance) on behalf of the LLP.

Q: Are there new identity-verification rules for limited liability partnerships?
A: Yes — as of 18 November 2025 new rules apply requiring new LLP members and PSCs to verify their identity when being appointed, under the ECTA reforms.

Q: Can a charitable organisation form a limited liability partnership?
A: No — the guidance indicates that such a partnership must be set up as a profit-making business and cannot be used for charitable or non-profit purposes.

Q: What happens if a limited liability partnership fails to file its accounts or comply with obligations?
A: If an LLP fails to file annual accounts or satisfy its obligations, the registrar may assume the business is no longer active and could strike it off the register.

Disclaimer: This article is for general guidance only and does not constitute professional advice. Tax rules may change and your personal circumstances must be considered. For tailored advice please contact Trueman Brown.