Limited liability partnerships
A limited liability partnership combines the flexibility of a partnership with the limited liability and separate personality of a company. SQE1 tests how an LLP is formed, how it is taxed and how it differs from both companies and general partnerships.
What "Limited liability partnerships" covers
- An LLP is a body corporate with separate legal personality and its members enjoy limited liability (s.1 LLPA 2000).
- An LLP is incorporated by registering form LL IN01 at Companies House; it must have at least two members, of whom at least two are designated members responsible for filing.
- Despite being a body corporate, an LLP is tax transparent — it is taxed like a partnership, with members taxed on their share of profits rather than the LLP paying corporation tax.
- The relationship between members is governed by the LLP agreement; where there is none, the default provisions in the LLP Regulations 2001 apply.
- The 2001 default provisions mirror the Partnership Act: equal share of capital and profits, no entitlement to remuneration, and unanimity to change the business or admit a new member, regardless of capital contributed.
- Every member is an agent of the LLP (s.6 LLPA 2000), but a member is not liable merely by being a member; personal liability arises for their own negligence.
- An LLP must file annual accounts and a confirmation statement, so it lacks the privacy of a general partnership; withdrawals may be clawed back on insolvency (s.214A IA 1986).
Key cases & statutes
The authorities and provisions most likely to matter for this subtopic:
How it's tested in SQE1
SQE1 uses single best answer questions: a short factual scenario, one precise question, and five options of which only one is the best answer on the law applied to the facts. For limited liability partnerships, expect to be asked what the correct legal position is, what a party may or must do, or which outcome follows — with more than one option looking arguable. Reading the facts carefully and eliminating the near-misses is the skill that earns the mark.
Where candidates lose marks
- Thinking an LLP pays corporation tax like a company — it is tax transparent and taxed as a partnership.
- Assuming members automatically owe the CA 2006 directors' duties — their duties derive from the LLP agreement and general law, not ss.171-177.
- Forgetting the default equal profit share under the 2001 Regulations applies irrespective of unequal capital contributions.
Learn this subtopic in the course
A video lesson, notes and exam-style practice on limited liability partnerships.
FAQ
Is limited liability partnerships tested on SQE1?
Yes — limited liability partnerships is part of the SQE1 Business Law and Practice syllabus (FLK1) and can appear in single best answer questions.
How is limited liability partnerships examined in SQE1?
SQE1 tests it by application: you're given a realistic scenario and choose the single best answer from five options. The focus is on using the law correctly, not reciting it — knowing the leading authorities (s.1 LLPA 2000, s.2 LLPA 2000) helps.