Running a Business as an LLP in the UK: Complete Guide for Entrepreneurs
Running a Business as an LLP – For many professionals and small business owners, striking a balance between flexibility and protection is key. That’s where the Limited Liability Partnership (LLP) comes in.
An LLP combines features of a traditional partnership with the limited liability of a company. It’s a popular structure for professional service firms like accountants, solicitors, architects, and consultants — but it’s also useful for any group of entrepreneurs who want to share profits without exposing their personal assets.
In this guide, we’ll explore what it means to run a business as an LLP in the UK, including setup, responsibilities, pros and cons, tax implications, and tips for managing growth.

What Is an LLP?
An LLP is a hybrid business structure that:
-
Must be registered with Companies House.
-
Has its own legal identity, separate from its members.
-
Provides limited liability to members, protecting personal assets.
-
Is run by members (the equivalent of partners in a partnership).
Unlike a limited company, an LLP has no shares or shareholders. Instead, profits are divided among members according to an agreement.
Key Features of an LLP
-
Legal personality: The LLP can enter contracts, own property, and employ staff in its own name.
-
Members: Minimum of two designated members required (who take on extra admin responsibilities).
-
Flexibility: Internal arrangements are governed by an LLP agreement.
-
Limited liability: Members are only liable up to the amount they’ve agreed to contribute.
Setting up an LLP
Step 1: Choose a name
-
Must be unique and end with “LLP” or “Limited Liability Partnership”.
-
Check Companies House for availability.
Step 2: Register with Companies House
-
Complete an LLP incorporation form (LL IN01).
-
Provide registered office address, member details, and LLP agreement.
Step 3: Draft an LLP agreement
-
Not legally required, but strongly recommended.
-
Sets out how profits are shared, decision-making processes, responsibilities, and exit arrangements.
Step 4: Register with HMRC
-
LLP itself registers for Self-Assessment.
-
Each member must also register individually for tax.
Responsibilities of LLP Members
-
Members of an LLP share responsibilities, but designated members have extra duties:
-
Filing annual accounts at Companies House.
-
Submitting an annual confirmation statement.
-
Ensuring proper records are kept.
-
Acting lawfully and in the best interests of the LLP.
All members must:
-
Pay Income Tax and National Insurance on their share of profits.
-
Follow the LLP agreement.
-
Advantages of an LLP
-
Limited liability
Protects personal assets from business debts (except in cases of fraud). -
Flexibility
Internal structure is flexible — profits can be shared however the members agree. -
Professional credibility
LLP status often reassures clients, suppliers, and investors. -
Perpetual succession
LLP continues even if members join or leave. -
Privacy of members’ earnings
Unlike company directors, members’ individual income isn’t published — only overall LLP accounts.
Disadvantages of an LLP
-
Public filing
Annual accounts and details of members are filed at Companies House. -
Administration
More paperwork than a general partnership (similar to a limited company). -
Tax treatment
Members are taxed as self-employed, which can be less efficient than a limited company for higher profits. -
Profit withdrawal
All profits are taxed when earned — cannot be retained in the LLP for future tax planning like a limited company can. -
Perception
Less familiar than “Ltd” to some clients and suppliers.
Taxes for LLPs
An LLP is tax transparent — the LLP itself doesn’t pay tax. Instead:
-
The LLP submits a partnership tax return.
-
Each member pays Income Tax and Class 2 & Class 4 NICs on their share of profits.
If turnover exceeds the VAT threshold (£90,000 in 2025/26), the LLP must register for VAT.
LLP vs Ordinary Partnership vs Limited Company
Feature | LLP | Ordinary Partnership | Limited Company (Ltd) |
---|---|---|---|
Legal status | Separate entity | Not separate from partners | Separate entity |
Liability | Limited (members protected) | Unlimited (joint & several) | Limited (shareholders protected) |
Tax | Members taxed personally (Income Tax + NIC) | Partners taxed personally (Income Tax + NIC) | Company pays Corporation Tax; owners taxed on salary/dividends |
Set‑up | Register LLP with Companies House; draft LLP agreement | Register with HMRC; partnership agreement recommended | Incorporate at Companies House; articles & registers |
Admin burden | Medium–High (accounts + filings) | Low (HMRC returns) | Medium–High (accounts + filings) |
Profit retention | Not retained (profits taxed on members) | Not retained (taxed on partners) | Can retain profits within company |
Funding & perception | Good for professional firms; flexible profit splits | OK for small teams; less investor‑friendly | Best for raising investment; widely understood |
Insurance for LLPs
Even with limited liability, insurance is important:
-
Professional indemnity insurance — vital for service firms.
-
Public liability insurance — protects against injury or damage claims.
-
Employers’ liability insurance — required if employing staff.
Common Mistakes in LLPs
-
Skipping an LLP agreement → leads to disputes later.
-
Not budgeting for tax → profits are taxed immediately, unlike companies.
-
Failing to file accounts → penalties apply even if dormant.
-
Unequal workload vs profit split → can cause friction if not agreed in writing.
-
Ignoring VAT → must register if threshold exceeded.
Growing an LLP
An LLP can scale effectively by:
-
Adding new members with different expertise.
-
Expanding services into complementary areas.
-
Hiring staff for delivery and support.
-
Converting to a limited company if retaining profits or raising equity investment becomes important.
Who Should Consider an LLP
An LLP suits:
-
Professional firms (law, accountancy, consulting, architecture).
-
Businesses run by multiple owners who want liability protection.
-
Groups wanting flexible profit sharing without the rigidity of shares.
It may not suit:
-
Solo entrepreneurs (minimum two members required).
-
Startups seeking venture capital investment (investors prefer limited companies).
-
Businesses wanting to retain profits in the company for growth.
Pros and Cons of Running an LLP
Factor | LLP Advantage | LLP Disadvantage |
---|---|---|
Setup | Credible Companies House registration; flexible agreement. | More complex Than a general partnership. |
Liability | Limited Members’ personal assets protected. | Obligations Filing duties; designated members accountable. |
Tax | Pass‑through No double taxation at entity level. | No retention Profits taxed immediately on members. |
Privacy | Member income private Only LLP accounts published. | Public filings Accounts & member details at Companies House. |
Flexibility | Custom profit splits Highly adaptable agreement. | Less familiar Some clients prefer “Ltd”. |
Running a Business as an LLP Final Thoughts
Running a business as an LLP offers a useful middle ground between the simplicity of a partnership and the protection of a limited company. It’s particularly well-suited to professional service businesses that value flexibility, credibility, and limited liability.
But it’s not perfect. The inability to retain profits and the extra filing requirements may make a limited company a better option for some.
At GrowMyAcorn, we recommend assessing your long-term goals: do you want maximum tax efficiency, or do you prioritise liability protection with partnership-style flexibility? An LLP may be the right stepping stone.
Read our in-depth guide to forming a limited company.
Compare options with our Choosing the Right Business Structure guide.
Try our Sole Trader vs Limited Company Calculator to see if incorporation might save tax as you grow.