A Limited Liability Partnership (LLP) is similar to an ordinary partnership - in that a number of individuals or limited companies share in the risks, costs, responsibilities and profits of the business.
The difference is that liability is limited to the amount of money they have invested in the business and to any personal guarantees they have given to raise finance. This means that members have some protection if the business runs into trouble, compared to normal partnership rules where there is no limit on the members' liability if the business becomes insolvent.
Each member of the partnership must register as self employed, and is therefore subject to the same Income Tax and National Insurance class 2 and 4 system as a member of a standard partnership. The main difference is that the LLP must file accounts with Companies House.
Generally speaking, firms of accountants who wish to limit their professional negligence exposure use LLPs as limited companies cannot become auditors. For most businesses, a company limited by shares is generally the best entity to trade through when friends enter into business together. However, you must always seek professional advice before committing yourself to any business venture so please ensure you speak to your local TaxAssist Accountant before proceeding.