Limited liability partnership LLP

A limited liability partnership (LLP) is a form of ownership that works like a partnership but gives each member limited liability. Members share ownership, decision-making and profits according to the LLP agreement, but their personal financial risk is lower than in an ordinary partnership.

In law, an LLP is a separate legal entity from the members who own it. The business itself can own assets, sign contracts and owe debts, so an LLP is closer to a private limited company than to an ordinary partnership.

How it is run

The owners are called members. Each invests an agreed amount of capital, and the LLP agreement sets out how decisions are made and how profit is split. The split need not be equal, so a member who invests more or works full time can take a bigger share.

For example, Aisha and Ben set up an LLP running a dog-grooming salon and a pet-sitting service. Aisha invests £6,000 and grooms dogs full time; Ben invests £3,000 and handles bookings and marketing part time. Their agreement gives Aisha 60% of profits and Ben 40%, and says either can spend up to £400 on supplies, but larger purchases need both to agree.

Why members choose it

• Limited liability caps each member's loss at the capital they invested, so their personal savings and belongings are protected if the LLP cannot pay its debts.
• Shared skills and workload: members divide tasks and bring different experience, as in an ordinary partnership.
• Shared decision-making means more than one person shapes the business, though it can slow decisions down.

If the pet-care LLP owes a supplier £25,000 and has no money left, Aisha's loss is limited to her £6,000 investment, so she does not lose her home. In an ordinary partnership, both partners could be chased personally for the full debt.