Structuring a business as a limited liability partnership (LLP)
Generally, partnership profits are also taxed at a lower effective rate than equivalent amounts received as employment bonuses or dividends from a company, because there is only one level of taxation of profits and no employer’s national insurance contributions (NICs) on profit shares.
In the past, the price for the flexibility and tax efficiency of partnerships has been unlimited liability for the individuals involved. However the introduction of limited liability partnerships (LLPs) changed this position.
The purpose of this note is to outline the principal characteristics of an LLP and to consider the advantages and disadvantages of structuring a business as an LLP rather than as a company or a general partnership.