Administration and Management - GBLLP2

Contents

 

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Introduction

This booklet is a guide to administering and managing a limited liability partnership. It covers limited liability partnerships formed and registered in England, Wales and Scotland.

The booklet:

  • explains some of the main responsibilities of a limited liability partnership's members and designated members; and
  • deals with the key filing requirements as they relate to Companies House.

You will find the relevant law in the Limited Liability Partnerships Act 2000, and in the Limited Liability Partnerships Regulations 2001 which apply parts of the Companies Act 1985 (as amended in 1989 and later) to limited liability partnerships and in the Financial Service and Markets Act 2000 (Consequential Amendments) Order 2004 (S.I. 2004/355).

If after reading this booklet, you are in doubt about your responsibilities, you should seek professional advice from a solicitor or accountant.

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CHAPTER 1
Members' and designated members' responsibilities

Section 1.1 Membership of a limited liability partnership

1. Who are the members of a limited liability partnership?

When a limited liability partnership is formed, the members are the people named on the incorporation document. At least two members must be appointed as 'designated members' - see question 4 below.

A limited liability partnership must have at least two members. If membership falls to only one member and the limited liability partnership continues to carry on business for more than 6 months, then the benefits of limited liability are lost.

Every member is the agent of the limited liability partnership and the partnership is bound by anything done by a member on its behalf unless:

  • the member had no authority to act in that capacity on behalf of the limited liability partnership; and
  • the person with whom the member is dealing knows that they had no authority to act or had no knowledge of his or her membership of the limited liability partnership.
2. When does a member cease to be a member of a limited liability partnership?

Members cease to be members:
  • on death (or dissolution in the case of a corporate member); or
  • by agreement with the other members; or
  • by giving reasonable notice to the other members.
In dealings with other people, a former member will be regarded as still being a member unless notice that the former member had ceased to be a member had been:
  • given to the person with whom the former member was dealing; or
  • delivered to the Registrar.
Ex-members must not interfere with the management or administration of the limited liability partnership.

3. Must any change of members be notified to the Registrar?

Yes. Notice that a person has become a member or ceased to be a member must be delivered to the Registrar within 14 days on the following forms: If, on appointment, a member is also appointed as a 'designated member', this is stated on Form LLP288a.

Notice that an existing member has changed their name or address must be delivered to the Registrar within 28 days on the following form: 4. Who are the 'designated members' of a limited liability partnership?

There must be at least two designated members.

The incorporation document must say:
  • that the partnership has specific individual designated members; or
  • that all members are designated members.
The members may decide at any time to reverse the position by delivering notice to the Registrar on Form LLP8. If the Form LLP8 says that specific members will be designated members, then details of each member's status must be delivered to the Registrar within 28 days on Form LLP288c.

Where specific members are designated members, a member may become a designated member - or vice versa - at any time by agreement with the other members. Again, notice of the member's change of status must be delivered to the Registrar within 28 days on Form LLP288c.

A designated member that ceases to be a member is automatically no longer a designated member.

If, for any reason, the number of designated members falls to one, or none, then all members will be deemed designated members.

5. What responsibilities do the designated members have?

Designated members have the same rights and duties towards the limited liability partnership as any other member. These mutual rights and duties are governed by the limited liability partnership agreement or by law. However, the law also places extra responsibilities on designated members. In particular, designated members are responsible for:
  • appointing an auditor (if one is needed);
  • signing the accounts on behalf of the members;
  • delivering the accounts to the Registrar;
  • notifying the Registrar of any membership changes or change to the registered office address or name of the limited liability partnership;
  • preparing, signing and delivering to the registrar an annual return (Form LLP363); and
  • acting on behalf of the limited liability partnership if it is wound up and dissolved.
Designated members are also accountable in law for failing to carry out these legal responsibilities.

6. Must a change of registered office address be notified to the Registrar?

Yes. It is vital that you keep us informed of the location of your registered office.

Every limited liability partnership must have a registered office: it is the 'home' of the limited liability partnership to which all official documents, notices and court papers have to be sent by law. The address must be a physical location, not just a post office box. This is because people have the right to visit your office to inspect certain registers and documents, and to deliver documents by hand.

You can change your registered office by sending a completed Form LLP287 to the Registrar. The change becomes legally effective only when we have registered the form.

Section 1.2 Quality of documents

1. What happens to documents sent to Companies House?

The documents and forms you deliver to Companies House are scanned to produce an electronic image. The original documents are then stored, and the electronic image is used as the working document.

When your business contacts view the limited liability partnership's record they see the electronic image reproduced on-line. So it is important not only that the original is legible but that it can also produce a clear copy.

This section lays down a few quality guidelines to follow when preparing a document for filing with the Registrar at Companies House.

2. What happens if my documents do not meet the guidelines?

Companies House can reject documents that cannot be captured electronically, giving a notice saying why they are unacceptable. An acceptable copy must be delivered within 14 days of the notice, otherwise we treat the original as not having been delivered.

3. How should documents be set out?

Every document delivered to the Registrar must state in a prominent position the registered number of the limited liability partnership, and must comply with any requirements specified by the Registrar relating to the layout of that document.

Briefly, documents should be on A4 size, plain white paper between 80gsm and 100gsm in weight with a matt finish. Text should be black, clear, legible, and of uniform density. Letters and numbers must be at least 1.8mm high, with a line width of at least 0.25mm.

 
When you fill in a form:
  • use black ink or black type;
  • use bold lettering (some elegant thin typefaces and pens give poor quality copies);
  • don't send a carbon copy;
  • don't use a dot matrix printer; and
  • remember - photocopies can result in a grey shade that will not scan well.
When you complete other documents, please remember:
  • the points already made about completing forms;
  • to use A4 size paper with a good margin;
  • to supply them in portrait format (that is with the shorter edge across the top);
  • to include the limited liability partnership number in the top right-hand corner of the first page.



Important: coloured ink can drop out (disappear) when a document is scanned to produce an image. To prevent this, always use black ink to complete and sign all documents.

4. What is the most common problem to avoid?

Glossy accounts
If you are producing colour-printed glossy accounts, please save them for your members and others who will appreciate them. We still need black on white with a matt finish. A typed unbound version or printer's proof is ideal, provided it has the necessary signatures.

5. Can I find out more about this?

For further guidance on print requirements, contact 0870 333 3636

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CHAPTER 2
Annual Return

Section 2.1 Completing an annual return

1. 1 Which limited liability partnerships must send an annual return to Companies House?

Every limited liability partnership must deliver an annual return to Companies House within 28 days of its made-up date (see question 3). A limited liability partnership's designated members are responsible for ensuring that the annual return:

  • is delivered to Companies House within 28 days after the anniversary of incorporation or the anniversary of the made-up date of the last annual return; and
  • gives a true picture of the membership of the limited liability partnership at the made-up date.
Remember: It is a criminal offence not to deliver the limited liability partnership's annual return within 28 days of the made-up date, for which designated members may be prosecuted.


2. What is an annual return (Form LLP363)?

An annual return is a snapshot of information at the made-up date (see question 3). It is separate from a limited liability partnership's annual accounts. An annual return must contain the following information:
  • the name of the limited liability partnership;
  • its registered number;
  • its registered office address;
  • the address where certain limited liability partnership registers are kept if not at the registered office;
  • the name and address of each member;
  • if only some members are designated members, which of them are designated members.
In some cases there may be information on related undertakings annexed to the annual return.

3. What is the made-up date?

This is the date at which all the information in an annual return must be correct. The made-up date is usually the anniversary of:
  • the incorporation of the limited liability partnership; or
  • the made-up date of the previous annual return registered at Companies House.
4. When must the annual return be delivered to Companies House?

All annual returns must be delivered to Companies House within 28 days of the made-up date given on the form.

5. Completing the annual return Form LLP363

All the details you give on Form LLP363 must confirm the limited liability partnership information already held on the Companies House public record at the made-up date. The details you should give are stated under question 2 of this section. You may only change the details by sending one or more of the following statutory form(s) with the document:
  • change of registered office address. Use Form LLP287;
  • appointment of a member. Use Form LLP288a;
  • termination of an appointment of a member. Use Form LLP288b;
  • change of details of a member or designated member, for example, address. Use Form LLP288c;
  • location, or change of location, of the register of debenture holders. Use Form LLP190;
We will not register an annual return Form LLP363 if it shows information that differs from the public record unless we have been notified of the change on the appropriate statutory form.



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CHAPTER 3
Accounts and Accounting Reference Dates

Section 3.1 Accounting reference dates

1. What is a financial year?

Every limited liability partnership must prepare annual accounts that report on the financial performance and position of the limited liability partnership during the year. The period reported on in the accounts is called the financial year. This starts on the day after the previous financial year ended or, in the case of a new limited liability partnership, on the day of incorporation.

 

Another term for a 'financial year' is an 'accounting reference period'.


The accounting reference period ends on the accounting reference date (ARD) - see questions 2 and 3 - or a date up to seven days either side of the ARD, if this is more convenient.

2. How is the ARD fixed?

For a new limited liability partnership, the ARD is set using its date of incorporation - see question 3. You can change the first accounting reference period and subsequent accounting reference periods by changing the ARD - see question 4 and 5.

3. What period must a limited liability partnership's first accounts cover?

For all new limited liability partnerships, the first accounting reference period is automatically set as the first anniversary of the last day in the month in which the limited liability partnership was incorporated. For example, if the limited liability partnership was incorporated on 10 June 2001 its ARD would be set at 30 June, and the first accounts would cover a period from 10 June 2001 to 30 June 2002 - or up to seven days either side of that date. Although the ARD is set on incorporation, you can change it - see question 4.

4. Can the ARD be changed?

Yes, by completing Form LLP225 and sending it to Companies House. But the change can only be made to the current or the immediately previous accounting period and you have to register the new ARD before the filing deadline of the accounts. In other words, if Companies House is expecting accounts for a particular accounting reference period and they become overdue, it is too late to say that you wanted to change the ARD.

Limited liability partnerships normally have 10 months to send their accounts to Companies House. The period allowed for sending a limited liability partnership's first accounts is calculated differently and this is explained in section 3.2.

5. Are there any restrictions on changing the ARD?

You may change an ARD by shortening an accounting reference period as often as you like and by as many months as you like. However, there are restrictions on extending accounting reference periods:
  • You may not extend a period so that it lasts more than 18 months from the start date of the accounting period.
  • You may not extend more than once in 5 years unless:
    1. the limited liability partnership is subject to an administration order; or
    2. the Secretary of State has directed this; or
    3. the limited liability partnership is aligning its accounting reference date with that of a subsidiary or parent undertaking established within the European Economic Area. Countries comprising the European Economic Area are as follows:
Iceland Norway
Finland Sweden
Ireland United Kingdom
Denmark Germany
Netherlands Belgium
Luxembourg Austria
Portugal Spain
France Italy
Greece Liechtenstein
Czech Republic Estonia
Cyprus Latvia
Lithuania Hungary
Malta Poland
Slovenia Slovakia


Section 3.2 Preparing and filing accounts

This section explains the basic rules on preparing and filing accounts. It applies to all limited liability partnership accounts irrespective of whether any filing exemptions apply to the content of the accounts.

1. Do all limited liability partnerships have to keep accounting records?

Yes. All limited liability partnerships, whether or not they are trading, must keep accounting records.

2. What does a set of accounts include?

Generally, accounts must include:
  • a profit and loss account;
  • a balance sheet signed by a designated member;
  • an auditors' report signed by the auditor (if appropriate);
  • notes to the accounts; and
  • group accounts (if appropriate).
This booklet cannot go into the detailed information that these documents must contain - for this, see the Act. Certain information may be omitted from the accounts of medium-sized and small (including dormant) limited liability partnerships prepared under the special provisions of Part VII of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001). These limited liability partnerships may further abbreviate the accounts they file at Companies House - see section 3.3 of this chapter. Certain small limited liability partnerships and dormant limited liability partnerships may also be exempt from audit - see sections 3.4 and 3.5.

3. Do all limited liability partnerships have to deliver their accounts to the Registrar?

Yes.

4. What period must the accounts cover?

A limited liability partnership's first accounts cover the period starting on the date of incorporation, not the first day of trading. They end on the accounting reference date (ARD) or up to 7 days either side of that date. ARDs and how to change them are covered in section 3.1.

Subsequent accounts start on the day after the period covered by the previous accounts ended. They finish on the ARD or up to 7 days either side of it.

5. How long do I have to file my limited liability partnership's first accounts?

If you are filing your first accounts and they cover a period of more than 12 months, they must be delivered to the Registrar within 22 months of the date of incorporation or 3 months from the ARD, whichever is longer. The definition in the box below of a period of months in connection with filing the accounts also applies to the first accounts. For example, a limited liability partnership incorporated on 1 January 2005 with an Accounting Reference Date (ARD) of 31 January has until midnight on 1 November 2006 (22 months from incorporation) to deliver its accounts, not 30 November.

6. How long do I normally have to file my accounts?

Unless you are filing your limited liability partnership's first accounts (see question 5) the time normally allowed for delivering accounts is 10 months from the ARD.

However, if the accounting reference period has been shortened, the time allowed for filing the accounts is the longer of:
  • 10 months from the ARD; or
  • 3 months from the date of the notice (Form LLP225).
For more information on the “corresponding date” rule relating to filing times see Chapter 5 question 3.

7. Can the time allowed for delivering accounts be extended?

 

If a limited liability partnership carries on business or has interests overseas, and the financial year begins before 1 January 2005, a 3-month extension to the normal filing period can be claimed by delivering Form LLP244 to Companies House. This form must be delivered before the normal filing deadline and this must be done for every year that the limited liability partnership wishes to claim the extension. It does not automatically apply from one year to the next. (Form LLP244 cannot be used for financial years, which begin on or after 1 January 2005 but an extension to the filing period may still be granted in exceptional circumstances – see below.)

An application may be made to the Secretary of State for Trade and Industry to extend the time for laying and delivering accounts if there is a special reason for doing so; for example, if there has been an unforeseen event which was outside the control of the limited liability partnership and its auditors. The application must be made in writing, be delivered before the filing deadline, and must contain a full explanation of the reasons for the extension and the length of the extension needed.

For limited liability partnerships incorporated in England or Wales, write to:

The Secretary of State for
Trade and Industry
c/o Limited Liability Partnerships Team
Companies House
Cardiff CF14 3UZ

DX 33050 Cardiff		 For limited liability partnerships incorporated in Scotland write to:

The Secretary of State for Trade and Industry
Companies House
37 Castle Street
Edinburgh EH1 2EB

DX ED235 Edinburgh 1

LP – 4 Edinburgh 2


8. What if the accounts are delivered late?

There is an automatic civil penalty for late filing. The amount depends on how late the accounts arrive. The fixed penalties are as follows:

 
Length of delay

3 months or less
3 months one day to 6 months
6 months one day to 12 months
More than 12 months

Amount of penalty

£100
£250
£500
£1000



Failing to deliver accounts on time is also a criminal offence for which designated members may be prosecuted. Late filing penalties are fully explained in chapter 5 of this booklet, 'Late filing penalties'.

 
Please note: if a filing deadline expires on a Sunday or bank holiday the law still requires accounts to be filed by that date. So you should ensure that they are posted in time to arrive before such a deadline.


9. Who can approve and sign accounts?

The accounts must be approved by the limited liability partnership's members and signed before they are sent to Companies House.
  • The balance sheet must be signed by a designated member, with any statements about accounting or filing exemptions appearing above the designated member's signature.
  • If an auditors' report or special auditors' report is attached to the accounts, then it must state the names of the auditors and be signed and dated* by them.
* Applies to accounts covering a period beginning on or after 1 January 2005.

10. Does Companies House give technical advice on accounts?

No. We can give general guidance, but not advice on specific accounting issues. Firstly, giving technical advice is not a role that the Government has given us. Secondly, it is not practicable: your accounts are subject to complex legal requirements, and we do not know enough about your limited liability partnership to be confident that we are giving you proper advice.

Consult an accountant if you need this sort of advice.

Section 3.3 Small and medium-sized limited liability partnership exemptions

1. What exemptions are available?

Certain small or medium-sized limited liability partnerships may prepare accounts for their members under the special provisions of sections 246 and 246A of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001). In addition, they may prepare and deliver abbreviated accounts to the Registrar.

This section explains the exemptions available to small and medium-sized limited liability partnerships. Certain small limited liability partnerships with a turnover of less than £5.6 million and assets of less than £2.8 million can claim exemption from audit. These are dealt with in section 3.4 of this chapter.

The period accounts have to cover and the time allowed for sending them to Companies House is covered in section 3.2.

2. What is a small or medium-sized limited liability partnership?

Certain limited liability partnerships, especially in the regulated sectors, cannot qualify as small or medium-sized companies. Similarly, limited liability partnerships which are part of a group which has members who are public companies or companies in the regulated sector cannot qualify as small or medium-sized (except in certain circumstances – see section 3.4). For other limited liability partnerships, the size of the limited liability partnership (and in the case of a parent limited liability partnership the size of the group headed by it) in terms of its turnover, balance sheet total (meaning the total of the fixed and current assets) and average number of employees determines whether it is classed as small or medium-sized. A summary of the conditions is given below.

To be a small limited liability partnership, at least 2 of the following conditions must be met:

 
  • annual turnover must be £5.6 million or less;
  • the balance sheet total must be £2.8 million or less;
  • the average number of employees must be 50 or fewer.

Please note: The above accounting exemption thresholds apply to financial years beginning on or after 30 January 2004. For earlier financial years, to be a small limited liability partnership, at least two of the following conditions must be met:

  • annual turnover must be £2.8 million or less;
  • the balance sheet total must be £1.4 million or less;
  • the average number of employees must be 50 or fewer.

To be a medium-sized limited liability partnership, at least 2 of the following conditions must be met:

  • annual turnover must be £22.8 million or less;
  • the balance sheet total must be £11.4 million or less;
  • the average number of employees must be 250 or fewer.
Please note: The above accounting exemption thresholds apply to financial years beginning on or after 30 January 2004. For earlier financial years, to be a medium-sized limited liability partnership, at least 2 of the following conditions must be met:
  • annual turnover must be £11.2 million or less;
  • the balance sheet total must be £5.6 million or less;
  • the average number of employees must be 250 or fewer.

Generally, a limited liability partnership qualifies as 'small' or 'medium-sized' in its first financial year, or in any subsequent financial year if it fulfils the conditions in that year and the year before. If the limited liability partnership ceases to be small or medium-sized, the exemption continues for the first year that the limited liability partnership does not fulfil the conditions. The exemption continues uninterrupted if the limited liability partnership reverts to being small or medium-sized the following year - see the table below.


If you think the limited liability partnership might qualify as small or medium-sized, you should consult a professional accountant before you prepare 'special-provision' accounts.

If you abbreviate the accounts, you will also need a special auditor's report for filing with the Registrar, confirming that the limited liability partnership qualifies to produce such accounts. This report is not needed if the limited liability partnership is exempt from audit - see section 3.4 on very small limited liability partnerships.

The following table may help you decide whether you qualify to prepare 'small' or 'medium' accounts.

The table applies to small limited liability partnerships. For medium-sized limited liability partnerships simply substitute 'medium-sized' for 'small'.

 

 

Year 1 Year 2 Year 3 Qualified in:
  1st financial year
small     Yes
not small     No
  2nd financial year
small small   Yes
small not small   Yes
not small small   No
  3rd financial year
small small not small Yes
small not small small Yes
not small small small Yes
small not small not small No
not small small not small No
not small not small not small No


3. What does a small or medium-sized limited liability partnership have to deliver to the Registrar?

The limited liability partnership can deliver the accounts which were prepared for its members under the special provisions of Part VII of the Companies Act 1985 as applied to limited liability partnerships, or it can deliver an abbreviated version of these accounts.

Abbreviated accounts of a small limited liability partnership must include:
  • the abbreviated balance sheet and notes; and
  • a special auditor's report (unless the limited liability partnership is also claiming audit exemption - see sections 3.4 and 3.5).
Abbreviated accounts of a medium-sized limited liability partnership must include:
  • the abbreviated profit and loss account;
  • the full balance sheet;
  • a special auditor's report; and
  • notes to the accounts.
The special auditor's report should state that in the auditor's opinion the limited liability partnership is entitled to deliver abbreviated accounts and that they have been properly prepared in accordance with section 246(5) or (6) or 246A(3) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3(1) of the Limited Liability Partnerships Regulations 2001), as the case may be.

The balance sheet must contain a statement that the accounts are prepared in accordance with the special provisions in Part VII of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001) relating to small or medium-sized limited liability partnerships, as the case may be.

4. Are there special rules for small and medium-sized groups?

Yes, a parent limited liability partnership need not prepare group accounts or send them to the Registrar if the group is small or medium-sized and none of its members is a public company or a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity, or a person who carries on insurance market activity.

To qualify as small, a group must meet at least 2 of the following conditions:

 
  • aggregate turnover must be £5.6 million net (£6.72 million gross) or less;
  • the aggregate balance sheet total must be £2.8 million net (or £3.36 million gross);
  • the aggregate average number of employees must be 50 or fewer.

Please note: The above accounting exemption thresholds apply to financial years beginning on or after 30 January 2004. For earlier financial years, to qualify as small, a group must meet at least two of the following conditions:

  • aggregate turnover must be £2.8 million net (£3.36 million gross) or less;
  • the aggregate balance sheet total must be £1.4 million net (£1.68 million gross) or less;
  • the aggregate average number of employees must be 50 or fewer.
To qualify as medium-sized, a group must satisfy at least 2 of the following conditions:

 
  • aggregate turnover must be £22.8 million net (or £27.36 million gross);
  • the aggregate balance sheet total must be £11.4 million net (or £13.68 million gross);
  • the aggregate average number of employees must be 250 or fewer.

Please note: The above accounting exemption thresholds apply to financial years beginning on or after 30 January 2004. For earlier financial years, to qualify as medium-sized, a group must meet at least two of the following conditions:

  • aggregate turnover must be £11.2 million net (£13.44 million gross) or less;
  • the aggregate balance sheet total must be £5.6 million net (£6.72 million gross) or less;
  • the aggregate average number of employees must be 50 or fewer.

5. What if a small or medium-sized limited liability partnership is required to prepare group accounts?

A small parent limited liability partnership which has prepared individual accounts for its members using the special provisions of section 246(2) or (3) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001), may choose to prepare group accounts under the special provisions of section 248A. However, a small group cannot file abbreviated accounts at Companies House. Group accounts prepared under section 248A must contain a statement above the signature on the balance sheet, confirming that they are prepared in accordance with the special provisions of section 248A relating to small limited liability partnerships.

If a medium-sized limited liability partnership prepares group accounts, they must be full group accounts.

 
Format of accounts
The format of the accounts must follow the relevant Schedules to the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001). The provisions relating to the content of accounts for small and medium-sized limited liability partnerships are in Schedules 4, 4A, 5, 8 and 8A.


6. How long do I have to deliver accounts to Companies House?

The same time applies as for all other accounts. The same penalties are imposed for late filing. See section 3.2 in this chapter.

Section 3.4 Audit exemption for small limited liability partnerships

1. What exemption is available?

There is total exemption from audit for certain small limited liability partnerships if they are eligible and wish to take advantage of it. Further details about how to claim exemption are in this section.

2. Which small limited liability partnerships qualify for audit exemption?

To qualify for total audit exemption, a limited liability partnership must:

 
  • qualify as small;
  • have a turnover of not more than £5.6 million; and
  • have a balance sheet total of not more than £2.8 million.

Please note: The above audit exemption thresholds apply to financial years ending after 30 March 2004. For earlier financial years, to qualify for total audit exemption, a limited liability partnership must:

  • qualify as small (see section 3.3);
  • have a turnover of not more than £1 million; and
  • have a balance sheet total of not more than £1.4 million.

3. Are all types of small limited liability partnership eligible for the exemption?

No. Audited (rather than unaudited) accounts must be delivered to Companies House if the limited liability partnership falls into any of the following categories:

(a) A parent limited liability partnership or subsidiary undertaking (unless dormant for the period during which it was a subsidiary) except where the group:

 
  • qualifies as a small group or would qualify if all the bodies corporate in the group were companies ; and
  • the turnover for the whole group is not more than £5.6 million net (or £6.72 million gross); and
  • the group's combined balance sheet total is not more than £2.8 million net (or £3.36 million gross).

Please note: The above audit exemption thresholds apply to financial years ending after 30 March 2004. For earlier financial years, a parent limited liability partnership or subsidiary undertaking (unless dormant for the period during which it was a subsidiary) cannot qualify except where the group.

  • qualifies as a small group or would qualify if all bodies corporate in the group were companies; and
  • the turnover for the whole group is not more than £1 million net or £1.2 million gross; and
  • the group's combined balance sheet total is not more than £1.4 million net (£1.68 million gross).

(b) A member of a group in which any member is:
  • a public company or body corporate which (not being a company) has power under its constitution to offer shares or debentures to the public;
  • a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity;
  • a person who carries on insurance market activity.

(c) A person (other than a banking limited liability partnership) who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity.

(d) For accounts delivered to the Registrar after 5 September 2005 a person who was during the relevant financial year an appointed representative within the meaning of s39 of the Financial Services and Markets Act 2000 (other than an appointed representative whose scope of appointment is limited to activities that are not regulated activities – see below).

“Regulated activity” does not include:
 
  • arranging regulated mortgage contracts;
  • assisting administration and performance of a contract of insurance;
  • advising on regulated mortgage contracts; or
  • dealing as agent, arranging deals in investments or advising on investments – where the activity concerns relevant investments that are not contractually based investment.

(e) A special register body or employers association under the Trade Union and Labour Relations (Consolidation) Act 1992.

4. What does an audit-exempt limited liability partnership need to send to Companies House?

If the limited liability partnership qualifies (see question 2 and question 3), unaudited accounts may be delivered to the Registrar in the form of an abbreviated balance sheet and notes containing statements to the following effect above the designated member's signature:

  1. For the year ended . . . (date) the limited liability partnership was entitled to exemption under section 249A(1) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001).
  2. The members acknowledge their responsibility for:
    • ensuring the limited liability partnership keeps accounting records which comply with section 221; and
    • preparing accounts which give a true and fair view of the state of affairs of the limited liability partnership as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the limited liability partnership.
  3. The accounts have been prepared in accordance with the special provisions in Part VII of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001) relating to small limited liability partnerships.
If the limited liability partnership chooses, it may deliver the unabbreviated accounts prepared for its members. The same statements must appear on the unabbreviated balance sheet.

Please Note:
The statements for audit exemption should not include reference to section 249b(2), the members not requiring an audit. This section of the Act does not apply to LLPs and the statement should not be included on the balance sheet.

5. How long do I have to deliver accounts to Companies House?

The same time applies as for all other accounts. The same penalties are imposed for late filing. See section 3.2.

6. Does an audit-exempt limited liability partnership still have to send accounts to its members?

Yes. In accordance with the Act, members have a right to receive and demand copies of the accounts.

 
Possible drawbacks of unaudited accounts
Banks and credit managers rely on information available from Companies House to assess a limited liability partnership's creditworthiness and currently look for the reassurance of an independent audit. If it qualifies for audit exemption, a limited liability partnership will need to decide whether unaudited accounts are appropriate to its own circumstances.

7. Are annual accounts required if a limited liability partnership is not trading?

All limited liability partnerships, whether they trade or not, must prepare and deliver accounts to Companies House. However, a limited liability partnership may claim exemption from audit as a 'dormant limited liability partnership' if it has not traded during a financial year, and provided it meets certain other criteria (see section 3.5).

Dormant limited liability partnerships do not need to appoint auditors and can deliver even simpler annual accounts to Companies House. For more information about dormant accounts, see the next section of this booklet.

Section 3.5 Audit exemption for dormant limited liability partnerships

1. What exemption is available?

Dormant limited liability partnerships can claim exemption from audit and need only deliver to Companies House an abbreviated balance sheet and notes. A profit-and-loss account does not have to be included in dormant accounts filed at Companies House. However, fuller accounts must still be prepared for members, possibly including a profit and loss account if the limited liability partnership traded in the previous year.

2. What is a dormant limited liability partnership?
 

A limited liability partnership is dormant if it has had no 'significant accounting transactions' during the period.

'Significant accounting transactions' are transactions which are required to be entered in a limited liability partnership's accounting records, but when considering whether the limited liability partnership is dormant, you can disregard the following financial transactions:

  • fees paid to the Registrar for a change of limited liability partnership name and filing annual returns; and
  • civil penalties imposed for delivering accounts to the Registrar after the statutory time allowed for filing.

A limited liability partnership may not take advantage of dormant status if it is a person (other than a banking limited liability partnership) who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity.

If the limited liability partnership has not been dormant since incorporation, but has become dormant, it may take advantage of the exemptions provided that:

  • it has been dormant since the end of the previous financial year; and
  • it does not have to prepare group accounts for that year; and
  • it qualifies as a 'small limited liability partnership' in relation to that year (see section 3.3), or would have qualified as small but for the fact that it is a member of a group which included: a public company or body corporate which (not being a company) has power under its constitution to offer shares or debentures to the public, a person who has permission under Part 4 of the Financial Service and Markets Act 2000 to carry on a regulated activity, or a person who carries on insurance market activity.
3. What information must dormant accounts contain?

Dormant accounts filed at Companies House need not include a profit-and-loss account. Model balance sheets are shown at the end of this section.

Unaudited dormant accounts are much simpler than those of a trading limited liability partnership but must show:
  • an abbreviated balance sheet containing a statement above the designated member's signature to the effect that the limited liability partnership was dormant throughout the accounting period (the full text of the required statements is at question 4 below);
  • the previous year's figures for comparison - even though these may be the same as the current year's;
  • certain notes to the balance sheet - a full list of items to be covered appears at the end of this section.
4. What statements are needed on the balance sheet?

The following statements must appear above the designated member's signature
  1. For the year ended . . . (date) the limited liability partnership was entitled to exemption under section 249AA(1) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001).
  2. The members acknowledge their responsibility for:
    • ensuring the limited liability partnership keeps accounting records which comply with section 221; and
    • preparing accounts which give a true and fair view of the state of affairs of the limited liability partnership as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the limited liability partnership.

    Please Note:
    The statements for audit exemption should not include reference to section 249b(2), the members not requiring an audit. This section of the Act does not apply to LLPs and the statement should not be included on the balance sheet.
5. How long do I have to deliver dormant accounts to Companies House?

The same time applies as for all other accounts. The same penalties are imposed for late filing. See section 3.2.

6. What happens if my limited liability partnership starts trading again?

Any limited liability partnership exempt from the need to appoint auditors by reason of being dormant will cease to be exempt if the limited liability partnership:

  • begins commercial or trading activities during the financial period; or
  • disposed of an asset, settled a liability or conducted some other non-exempt transaction; or
  • would no longer qualify for some other reason.

If any of these happened, fuller accounts would be required for the financial year in which the limited liability partnership ceased to be exempt, and the members might need to appoint auditors for the limited liability partnership. It may be that the limited liability partnership would qualify for certain exemptions as a medium-sized or small limited liability partnership. More information about limited liability partnership accounting requirements and audit exemption for small limited liability partnerships is given in sections 3.3 and 3.4 of this chapter.

Model balance sheets for dormant limited liability partnerships

The balance sheets shown on the following pages are referred to at question 3 above.

These formats provide a guide to the information you need to include. These formats are designed to reflect all possible assets and liabilities that a Limited Liability Partnership may have but you only need to include a particular heading if there is an amount other than nil to be shown.

These model balance sheets are for illustration only. They should not be photocopied and filled in.

If the Limited Liability Partnership has traded in a previous financial year, bear in mind that your previous year's balance sheet will show the Limited Liability Partnerships financial position as it was then. If there have been no accounting transactions since, you could just be carrying forward the figures from last year.

There are two formats - marked A and B - either of which may be followed. The content of the two formats is identical; they simply present the balance sheet headings in a different order.

The balance sheet must balance:
  • In format A, net assets must equate to the aggregate of capital and reserves.
  • In format B, assets must equate to liabilities (including capital and reserves as balancing items).
Each entry must be an amount in figures (not words) or '0.00'. Companies House will not accept any document which shows 'Nil' where a figure should appear.

Each column of figures should be headed with the date on which the current and previous financial year ended.

For both formats, the matters to be included in the notes to the balance sheet, if applicable, are listed here.

When you are preparing your accounts, please follow the guidelines in section 1.2.

DORMANT BALANCE SHEET FORMAT A

Limited liability partnership No. ............................

Limited liability partnership Name ..........................................

BALANCE SHEET AS AT ..../..../.......

  1. For the year ended . . . (date) the limited liability partnership was entitled to exemption under section 249AA(1) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001).
  2. The members acknowledge their responsibility for:
     
    1. ensuring the limited liability partnership keeps accounting records which comply with section 221; and
       
    2. preparing accounts which give a true and fair view of the state of affairs of the limited liability partnership as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the limited liability partnership.
Approved by the members on...............(date)
and signed on their behalf by......................(DESIGNATED MEMBER)

DORMANT BALANCE SHEET FORMAT B

Limited liability partnership No. ............................

Limited liability partnership Name ..........................................

BALANCE SHEET AS AT ../../....

 
  1. For the year ended . . . (date) the limited liability partnership was entitled to exemption under section 249AA(1) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001).
  2. The members acknowledge their responsibility for:
     
    1. ensuring the limited liability partnership keeps accounting records which comply with section 221; and
       
    2. preparing accounts which give a true and fair view of the state of affairs of the limited liability partnership as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the limited liability partnership.
Approved by the members on...............(date)
and signed on their behalf by......................(DESIGNATED MEMBER)

Notes to the dormant limited liability partnership balance sheet

The following must be given as notes to the balance sheet:
  • accounting policies, including those relating to depreciation and diminution in value of assets;
  • information about members' interests;
  • information about fixed assets;
  • details of indebtedness;
  • basis on which sums originally in a foreign currency have been translated into sterling;
  • in respect to every item above (other than fixed assets), the corresponding amounts for the previous year;
  • if the limited liability partnership has acted during the financial year as an agent for any person, then that must be disclosed.
In addition, the following information must be given about any subsidiary undertakings and other investments:
  • details of any subsidiary undertakings and of shares held in them, and why group accounts are not required;
  • details of any undertakings in which the limited liability partnership has a 'significant holding';
  • the name of the limited liability partnerships ultimate parent and (if known) its country of incorporation;
  • the names of certain parent undertakings, and their countries of incorporation or (if not incorporated) the addresses of their principal places of business.

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CHAPTER 4
Auditors

Section 4.1 Appointment of auditors

1. What is an auditor?

An auditor is a person who makes an independent report to a limited liability partnership's members as to whether its annual accounts have been properly prepared in accordance with the Act. The report must also say if a limited liability partnership's accounts give a true and fair view of its state of affairs and profit and loss for the year. Most limited liability partnerships are required to have their accounts audited - but see question 2 below.

2. Must all limited liability partnerships accounts be audited?

No. If they qualify for exemption and wish to take advantage of it, most small limited liability partnerships and dormant limited liability partnerships do not have to have their accounts audited.

  • To qualify for audit exemption as a small limited liability partnership:

     
    - For financial years ending after 30 March 2004, the limited liability partnership’s turnover must be £5.6 million or less with a balance sheet total of £2.8 million or less.

    - For financial years ending on or before 30 March 2004 the limited liability partnership’s turnover for a financial year must be £1 million or less with a balance sheet total of £1.4 million or less.

     
  • Dormant limited liability partnership audit exemption may be claimed by a limited liability partnership that has not traded during a financial year, and provided it meets certain other criteria. See section 3.5. Dormant limited liability partnerships do not need to appoint auditors and can deliver very basic accounts to Companies House.

More information about small limited liability partnership exemptions and dormant exemptions is set out in section 3.4 and 3.5.

3. How is an auditor appointed?

The designated members appoint the auditor of the limited liability partnership annually. The first auditor must be appointed before the end of the financial year for which they were appointed. Thereafter, an auditor must be appointed or re-appointed within two months of the approval of the accounts for the preceding financial year.

4. What does an auditor do?

The auditor will check the accounts and accounting records of the limited liability partnership and prepare a report for the limited liability partnership's members.

For financial years beginning on or after 1 January 2005, the auditors’ report must include:

  • An introduction identifying the accounts that were the subject of the audit and the financial framework that has been applied in their preparation (i.e. whether UK GAPP or IAS as adopted for use in the EU).
  • A description of the scope of the audit identifying the accounting standards used in the audit.