LLPs are Britain’s newest business vehicle especially suited to professional services companies. They may be seen as a hybrid between limited liability companies and traditional partnerships, in that they offer the limited liability available to limited company shareholders combined with the tax regime and flexibility available to partnerships. The number of partners is not limited but at least two have to be ‘designated members’ responsible for filing annual accounts.

Just as with a limited company the LLP model protects its members’ assets, limiting their liability to however much they have invested in the business and any personal guarantees they may have given when raising loans. But it doesn’t give you the same tax advantage.

As in an ordinary partnership, the members’ share of profit is taxed as income – each member has to register with HMRC as self-employed. LLPs also have to register at Companies House and there should be a members’ agreement stating what share of the profit each member should receive.

If the business you are starting is in the financial services space, for example, and you are hoping to grow it by attracting other professionals to join you it may be worth considering an LLP from the outset. It has been adopted with enthusiasm by some of the largest accountancy and law practices in the UK.