Dealing with creditors including HMRC when you are in a Limited Liability Partnership
At Real Business Rescue, our business recovery experts offer in-depth debt management and insolvency advice to partners within limited liability partnerships to help turnaround the fortunes of a struggling LLP – getting it back on its feet or, if necessary, finding the best insolvency process to enter into.
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There are infinite reasons why a thriving LLP might suddenly find itself in financial difficulty; such as losing a key client, your credit facility being closed at short notice, quicker-than-anticipated growth, negligence by a fellow partner or a dispute within the firm, fraud within the partnership, theft from the business etc. Or maybe you’ve just had bad luck or made decisions that you regret.
If, consequently, you and your partner(s) have escalating debts within the firm and s such as HMRC are turning up the heat, our expert licensed insolvency practitioners and business rescue staff can devise the right plan of action to suit your needs. LLP insolvency can seem like a slightly complex subject and we’ll do our best to shed more light on it, but do not hesitate to contact us should you require more personalised advice.
Understanding Your Responsibilities
A limited liability partnership is similar in many ways to a standard business partnership but the ‘limited’ aspect of the structure is what attracts many professional service companies to opt for an LLP – it means heavily reduced personal responsibility for any debts the business incurs. Partners in an LLP are not personally liable when the business cannot pay its debts; instead, their liability is limited to the capital they have invested into the LLP.
However due to their operational structure, limited liability partnerships are dealt with in a similar manner to companies when they become insolvent. Under the Limited Liability Partnership Act of 2000, an LLP is defined as a distinct legal and corporate entity. This means that – like any limited company – an LLP can be insolvent, and can be dealt with in a similar way to an insolvent company.
By law, LLPs are described as 'bodies corporate' which leads to similar scrutiny as that of a limited company, but are treated as standard partnerships when it comes to tax.
As a member of an LLP, the partnership itself is responsible for any debt to the full extent of its own assets... whereas the partners are not individually liable. If a partner has contributed to the LLP’s assets e.g. injecting personal capital into the firm, he/she risks losing that amount to creditors if funds need to be released in an insolvency process.
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If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
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Legally, a limited liability partnership is an entity in itself. It has its own identity separate from the business owners. So if an LLP can't pay its debts, the partners only have to pay out any money they've invested into the firm and nothing more. Their liability is limited. Unless you've put a personal guarantee on a loan to the LLP, or you've been found to have traded wrongfully, your own property and personal assets are safe.
For more information on creditor debts in a limited liability partnership and where you stand, you can arrange a free consultation with one of our licensed insolvency practitioners in your area. Alternatively you can call people.