Limited Partnerships (LPs) registered in England and Wales are governed by the Limited Partnership Act 1907. The characteristics of LPs registered in England and Wales differ slightly to those of LPs registered in Scotland. The key features of Scottish LPs were discussed in our blog '6 Essential Facts on Scottish Limited Partnerships'.
The main features of LPs registered in England and Wales are as follows:
In order to establish an LP a duly completed and signed Form LP5, together with the filing fee of £20, must be submitted to Companies House in Cardiff.
The Form LP5 contains the following information:
- The name of the LP, which must end in Limited Partnership or LP. A Limited Partnership registered in Wales may end in Partneriaeth Cyfyngedig or PC;
- The general nature of the business;
- The principal place of business address;
- The full name of the general partner and each limited partner;
- The term of the partnership, if any;
- A statement of limited liability
- A statement of the capital contribution of each Limited Partner
Provided that the Form LP5 is in order, the LP will come into existence on registration of the form at Companies House.
LPs must have at least one general partner and one limited partner at all times. Partners can be individuals or corporate bodies and there is no restriction as to the nationality, or residence, of the partners.
The general partners are responsible for the management of the LP and are jointly responsible for the debts and obligations of the LP. In contrast, the Limited Partners play a passive role in the business affairs, simply providing capital contribution. The Limited Partners are afforded the benefit of limited liability protection, provided that they do not engage in the management of the LP.
The Partnership Agreement
While not legally required, it is recommended that the partners enter into a private, written partnership agreement. Such an agreement would generally detail the nature of business, the administration of the LP, the division of profits and the dissolution arrangements.
LPs must keep appropriate records of their financial affairs to enable the financial position of the LP to be determined at any time. LPs are not required to file their accounts with Companies House unless the Partnership (Accounts) Regulations 2008 apply.
LPs are tax transparent, therefore, in order to assess tax liability, the UK tax authorities will look to the partners of the LP rather than to the LP itself. In addition, if the LP does not trade in the UK, and the partners are not resident in the UK, the partners will not be subject to UK taxation.
Regardless of whether the partners are subject to UK taxation or not, LPs are required to file an annual Partnership Tax Return and accompanying accounting schedules with HMRC. The return must show each partner’s share of the profits or losses of the activities of the LP.
In the event of the dissolution of an LP, the general partners are required to wind up its affairs. It is best practice to notify Companies House of the dissolution, however, the LP will continue to exist on the index of names held by Companies House.