What is an LLP?
A Limited Liability Partnership (LLP) is an English legal structure that falls somewhere between the Dutch vof or maatschap and the private limited company (besloten vennootschap, bv). Like the vof or maatschap, it is a cooperation between at least 2 (legal) persons. But like the bv, the LLP is a legal personality and the LLP is liable for any debs rather than you personally. The Netherlands has no legal structure that combines these characteristics. But the LLP is fully recognised in our country.
Due to the limited liability, an LLP can be a good legal structure for a cooperation between small entrepreneurs. Or as an alternative for the maatschap, a legal structure often chosen by people in independent professions.
Members and designated members
You can start an LLP when you are with at least 2 people, the so- called members. There are ‘regular’ members and designated members. The designated members are responsible for the financial administration of the LLP and filing the financial statement, among other things. Each LLP has at least 2 designated members. The maximum number of designated members has not been determined.
Register your LLP in the British business register
Because the LLP is a British legal structure, you need to arrange the incorporation administratively in England. You need a British notary to do so. You submit an incorporation document, which is registered in the British business register, Companies House. Your LLP has to have a registered office in England. Usually, an intermediary takes care of such a postal address.
Or you can choose to hire a broker who takes care of everything.
Register your LLP at KVK
After the incorporation in England, you need to register your LLP at KVK. To do so, you need:
- a Certificate of Incorporation
- a Formation contract (LLIN01)
- a Current Appointments Report
- a completed KVK registration form for a foreign business
Incorporating an LLP comes with obligations and costs that return annually:
- Registering and annual maintenance of the LLP in the British business register;
- Drawing up and filing the financial statement (the annual accounts);
- Annually filing an overview of members (the annual return);
- Any maintenance costs, if you have been assisted by intermediaries.
When establishing an LLP, it is important to ensure you get good information and guidance. That is why you do not incorporate an LLP alone. There are multiple consultancies and financial advisers that establish an LLP for a fee. And they can support you fiscally and legally. That costs about an average of €500. After the incorporation, you can register the LLP yourself at KVK at a one-time fee.
The LLP in England is ‘fiscally transparent’ by law. This means that the income taxes come from you as a member and not the LLP itself. In the Netherlands this is different. The LLP can either be fiscally transparent or not, depending on the facts and circumstances. In other words, the Dutch Tax and Customs Administration (Belastingdienst) can get income taxes from you as a member of the LLP or from the LLP itself (as corporate income tax). When the LLP is classified as fiscally transparent in the Netherlands, you can get tax benefits under certain circumstances. These include tax relief for new companies (startersaftrek), private business ownership allowance (zelfstandigenaftrek), and the SME profit exemption of 14% of the profit.
To be eligible for these tax benefits, you as a member of the LLP need to be considered an entrepreneur for tax purposes by the Dutch Tax Administration (Belastingdienst). For independent professionals working together in an LLP that is usually the case. Explain your situation to the Tax Administration beforehand, so you will not face any surprises.
If your work takes place in the Netherlands, then the LLP does not have to pay taxes in England. You do have to send annual financial statements to the British business register within 9 months after closing the year.
As a member of an LLP you are not personally liable for debts of the LLP. Unless serious mismanagement has taken place. The liability is with the LLP itself, similar to a bv. Additionally, you as a member are liable for any professional errors you make. Make sure you get the right information about what limited liability means for you in your specific case.
Important to note: English law
LLP is a British legal structure. The rules and formal obligations with regard to incorporation, management, liability, and ending the business are subject to English law. If something goes wrong regarding those aspects, you have to go to court in England. Other legal issues, such as bankruptcy or conflict between partners, are subject to Dutch law.