If you are in a Limited Liability Partnership (LLP) with a business partner who wants to retire, you may start to wonder how your partnership can be maintained with only one partner left, and the options available to you if you wish to continue the partnership.
An LLP must have a minimum of two members and at least two designated members who have additional responsibilities. The designated members handle specific compliance tasks, such as preparing the accounts and maintaining the correct details at Companies House. You therefore need to consider who you want to be your partner and ensure you have a carefully worded member’s agreement that sets out key responsibilities.
So with that in mind you can choose anyone to be your new partner: a close relative, such as a spouse, or even your neighbour. You don’t need to give them any equity in the business but they may want to be rewarded. This could be a fixed sum or a share in the profits. Each has a different tax treatment and different risks, for you and the partner. You could even set up a limited company to act as the second partner to the LLP. This would mean additional administrative costs.
However, if you decide not to appoint a new partner, your business will become a sole trader business by default and you will lose limited liability status. You may then wish to transfer the business in full into a new limited company and close the LLP.
If you have any concerns, contact us for further advice.
Picture from: Mediskope
Information from: Sunday Times