What a LLP is, and why it’s the right model for you
When you are starting a business, you’re generally keen to get on with things – so it’s not helpful to be given a whole raft of different options, requiring hours of research to establish which one suits you.
With this in mind, we’ve picked one broad scenario – independent freelancers looking to start a business together – and designed a legal model to fit the demands of this situation, and of the future more generally, structuring it to be fast, flexible and fair.
We think an LLP is the perfect model for a freelancers starting a business together because:
As a legal entity, an LLP can open a bank account, rent property, enter into contracts, and carry out all of the other functions of a business. This gives a partnership of freelancers the basic platform to build a business around.
Each member retains their self-employed status for tax purposes when doing work for the LLP, meaning they sort out their own individual tax affairs directly with HMRC. In many other company types, there is often a requirement to always register as a PAYE employee when doing work for the business, meaning that founders already self-employed or employed elsewhere in practice end up paying additional tax upfront, that they will only be reimbursed several months later.
Limited Liability means all member’s personal assets are protected from the liabilities of the business. As a separate legal entity, the business holds its own responsibilities.
LLPs are flexible – how the business operates and the profits are distributed is determined by the members through a written agreement – giving you flexibility on how you want your business to work
Clarity on profit distribution. Rather than be taxed centrally, at the end of each year profits can either be reinvested in the business, or split between the members
Level LLPs are also equal and democratic – you can read more about how that works and why it matters here.
For more detail on how LLPs work visit Companies House here.
During the process of registration you will have a chance to review an example of the model partnership agreement for your Level LLP – the legal document that will be registered at Companies House.
Why we started Level – read our article here
You can find more information on how Level works, what are the responsibilities etc in our FAQ – and we also emphasise the key points during the registration process.
Ready to go? Get started here