George Bull, at Baker Tilly, says that LLPs offer companies “a very large measure of protection against liability while still being taxed as if they were self-employed”. He points out that companies taking up this status range from major accountancy firm Ernst & Young to a two-man band that washes cars by hand.

The basic criterion needed to set up an LLP is that the company must demonstrate it is operating with a “view to profit”. This must be clearly stated in documentation showing the intended direction of the business.

Bull says that it is “essential” to take advice from your accountant before applying to form an LLP. It is also “advisable to form a bespoke members’ agreement” for all those involved.

Application for LLPs must be made to Companies House, which will advise on the necessary actions and will provide official certification.

Companies House also provides guidance notes on forming an LLP and the management and administration involved. This is available from the .gov.uk website at here. It provides resources on all the application forms required as well as notes on the various rules and regs. The key rules are:

• You need at least 2 people (‘members’) to set up (‘incorporate’) a limited liability partnership (LLP). A member can be a person or a company, known as a ‘corporate member’.
• Each member pays tax on their share of the profits, as in an ‘ordinary’ business partnership, but isn’t personally liable for any debts the business can’t pay.
• You will need to choose a name and have a registered address (this will be publicly available).
• You will need to have an ‘LLP agreement’ that says how the LLP will be run.

Note that there will be a registration fee.