The Limited Liability Partnerships Act 2000 of U.K. came into force from 6 April 2001. The main purpose of this act was to provide a separate new legal entity – Limited Liability Partnerships (LLP). LLP is a partnership where every partner has limited liability and one partner is not responsible for other’s negligence or misconduct. It has also reduced the personal responsibility for business debts.

This act provides that, when two or more individuals come together for carrying a legal business with the profit making purpose, they have to register their names to an incorporation document. After subscribing, incorporation document or its approved copy has been sent to the Registrar of the Companies at the Companies House. LLP is not available for nonprofit making organizations in U.K.

The Registrar of Companies holds the incorporation documents or its copy and allots a certificate of incorporation, after completing all the formalities. The certificate of incorporation is regarded as final evidence that the company has completed all the incorporation formalities.

Only those who have subscribed to the incorporation documents can be the members of LLP. A person can become a new member of LLP; by making an agreement with existing members as well as he can also end up his agreement with members. As in normal partnership, a partner is considered as self employed, same is the case with LLP. If LLP is changing its membership, it is compulsory to inform registrar within 14 days and if member of LLP is changing address, it must be informed to registrar within 28 days.

If a person makes false statement, then he commits an offense and hence becomes liable for imprisonment for a period less than six months or a fine or both. The LLP was introduced to provide some security against huge negligence actions, where the risks were felt to be extreme.

As per trading income of the members of LLP in U.K., they have to pay income tax, as in case of normal partnership. In addition, they have to pay class 4 National Insurance contributions in a same way as any self-employed person pays. In case of winding up of LLP or insolvency of LLP, it is same as Companies Law of U.K.