PM131420 - LLP: Types of member

A LLP must have at least two registered members. These are persons who are registered as a member of the LLP with Companies House.

The first members are those who signed the document incorporating the LLP. Other people can become registered members of the LLP by agreement with the existing members.

Where a person becomes a member of a LLP or ceases to be a member of a LLP, the LLP must give notice of this to the Registrar of Companies within 14 days.

If a new member has, as a matter of fact, been admitted to the partnership by entering into an agreement with the other members, but the LLP failed to update their register of members, then the new member is still a member of the LLP and liable for tax on their share of the profits.

Individuals, corporates (including other LLPs), and Scottish partnerships are eligible to be members of a UK LLP.

No entity without a discrete, separate legal identity can be a member of an LLP. In particular, a firm such as an English partnership (or an English Limited Partnership) cannot, itself, be a member of a UK LLP

Designated members

The term designated member is used in the LLP legislation. It simply means a member with additional duties under the LLP legislation. The term has no significance for tax purposes.

Some of the responsibilities of a designated member include:

  • register the business for Self-Assessment with HMRC - you must also register separately as an individual
  • register the partnership for VAT if you expect your business’s sales to be more than £85,000 a year
  • prepare, sign and send annual accounts to Companies House
  • send a confirmation statement (previously annual return) to Companies House
  • tell Companies House about any changes to the partnership
  • act for the LLP if it’s wound up and dissolved.

Nominee members

Where a person admitted as member is a nominee, acting under the instructions of a principal. It is necessary to decide who is taxable on the LLP profit share. The person taxable on the profit share is the LLP member, whatever the context in which they have become a member. The LLP member is the person who has entered into an agreement with the other members, either to form the LLP or to be admitted as a member and whom the LLP is required to register as a member of the LLP. The relief available to members of a LLP for losses and interest may be subject to special restriction: see PM131500 to PM131520.

Companies House must be updated with any changes to partners or membership, as HMRC may refer to Companies House to check if there have been any changes or updates to the firm.

Indirect

Where a LLP is itself a partner in another partnership or member in another LLP then profits may be allocated from the first partnership or LLP to the second and so on until the profits are allocated to a partner who is chargeable to tax.

A person is an indirect partner in a partnership if the person is a partner in

(a) a partnership which is a partner in the underlying partnership, or

(b) any partnership which is an indirect partner in the underlying partnership.

For example partnership A allocates profits to partnership B, and partnership B then allocates profits to Person C.

Partnership B is a partner in partnership A. Person C is a partner in partnership B. Person C is therefore also an indirect partner is partnership A.