The Difference Between Ordinary And Designated Members Of An LLP
Published on July 21, 2021
Understanding the Difference Between Ordinary and Designated Members of an LLP

LLP members can be considered as partners in the company. You require at least two members to incorporate your firm at Companies House, among which no fewer than two of these individuals need to be ‘designated’.

Designated members of an LLP have additional legal responsibilities and roles as opposed to ordinary members. The primary role of designated members is to ensure that the company, along with its partners, abides by the statutory obligations of the 2000 LLP Act, the 2001 LLP Regulations, and other legislative guidelines that might be applicable to the company.

Responsibilities Of Designated Members Of An LLP

The roles and responsibilities of designated members are identical to those of the secretaries and directors of a limited company. The rights of designated members are almost the same as other members, however, they must perform additional duties and take statutory responsibilities with regard to the LLP. Besides, designated members may need to:

Register the limited company for VAT and self-assessment.
Setup PAYE and register the limited liability partnership as an employer.
Look after statutory LLP registers, which also includes the PSC register.
Maintain accounting details.
Maintain the signage, stationery, and registered office of an LLP.
File annual accounting records.
Sign accounts for the LLP along with all its members.
Manage confirmation statements.
Submit VAT returns and ensure bills are paid in a timely manner.
Ensure timely completion of all the tasks relating to PAYE.
Appoint an auditor or accountant.
Make the registrar aware of any modifications to the model articles.
Sign contracts along with other related documents for the LLP.
Make sure the business abides by data protection rules.
Ensure the company is properly insured.
Speak for the LLP during any legal procedures.
Represent the business in case it’s dissolved and wound up.

Designated LLP members can be held accountable in the event they are unable to perform their statutory duties.

Eligibility Criteria For A Designated Member Of A Limited Liability Partnership

As long as the rest of the members don’t disagree, any person can act as a designated or ordinary member of a limited liability partnership, except if they are:

  • less than 16 years old
  • an undischarged bankrupt
  • ineligible to act as the director of a company or LLP member

At times, the Court could allow special dispensation so that undischarged bankrupt members or disqualified individuals can be offered the role of an LLP member.

Corporate entities, including limited firms and other LLPs, may also be given the role of designated or ordinary members. Here, they are recognised as ‘corporate members’.

Appointing The Designated Member Of An LLP

Every LLP must officially appoint no fewer than two designated members. In the event that a particular LLP has just two partners, both of them are likely to be designated. In case they fail to appoint a minimum of two designated members, the registrar will most probably deem all the partners as designated members of your LLP.

You are free to appoint the designated members during or even after the incorporation of your company. You may also change the role of a member from ordinary to designated, and vice versa, as per your requirement.

How To Appoint Designated Members During The Incorporation Of Your Company?

In order to appoint designated members while the incorporation procedure is still ongoing, be sure to check section C-1 of form LL IN-01 or the box under section B-1 (individual member) for specifying that the member agrees with his/her designation. If you wish to appoint all the members as designated, you must choose ‘Yes, in section A-5.

How To Appoint Designated Members After The Incorporation Of Your Company?

For appointing new members who agree to act as designated members, you must fill out form LL AP-01 & file it within two weeks. Also, tick ‘Yes’ under ‘Appointment type’ of section-3 to specify that the individual agrees with his/her appointment as a designated member instead of an ordinary member. For appointing new members, make sure you fill out form LL AP02 instead.

How To Modify The Current Status Of The LLP Members?

For changing the status of LLP members, you must fill out form LL CH-01 from the registrar within two weeks. Also, make sure to check the given box within the form specifying the person agrees to perform their duties as either an ‘ordinary member’ or ‘designated member’ of an LLP. For modifying corporate member information, form LL CH02 needs to be completed instead.

If an LLP wants to modify the status from every single member being designated to the designation of just some of the members, or the other way round, form LL DE-01 must be used. If required, form LL CH-02/CH-01 must be used for identifying the present members that want to act as designated LLP members.

How To Define The Responsibilities Of Members In An Agreement?

The roles, responsibilities, and duties of the members of an LLP are included in the 2001 LLP Regulations along with the 2000 LLP Act. It is important to set up an LLP Agreement in writing prior to establishing your LLP.

The above-mentioned document is crucial as it becomes legally binding after it’s been signed by all the members of an LLP. It demonstrates how the LLP needs to carry out its operations, which includes information with regard to:

  • the mutual duties and roles of each member including designated members
  • the rights and roles of individual LLP members (i.e., reflecting particular duties, seniority, and specialties)
  • profit/loss distribution along with capital allocated
  • contribution in terms of investment made by each LLP member
  • decision-making processes that must be followed
  • requirements of membership
  • the process to appoint new members
  • the process to be followed in case of retirement or termination of current members
  • resolution procedures for disputes among members of the LLP
  • procedures that must be followed if one of the members dies or becomes incapable of performing his/her duties

Although optional, you may also want to allocate an exclusive LLP agreement, particularly in case there is a variation between the duties or responsibilities of different LLP members. You may come up with your own individual agreement, however, we suggest you consult an experienced solicitor for proper advice and assistance.

If the LLP agreement is absent, the default guidelines within the LLP Regulations and LLP Act are likely to govern the operation procedures of an LLP.

This means that each member will have equal voting and profit entitlement rights. This may not suit an LLP nor accurately represent the contributions made by individual members.

A Limited Liability Partnership is currently the most popular structure when it comes to business incorporation. It perfectly suits industry professionals, including accountants and solicitors who typically work as partnerships. Among the biggest benefits of forming an LLP over a regular partnership is that it offers limited liability to each of its members. This is not the case with a regular partnership.

 

What Is A Confirmation Statement And How Do I File One?

What Is A Confirmation Statement And How Do I File One?

You can use the internet or postal service to file a confirmation statement for your company.

Nonetheless, the online method is much simpler, faster, and secure compared to the post. Besides, it only costs you £13.00, compared to the cost of around £40 when sending it by post of around £40.00. Using the post also takes far longer.

Everything You Need To Know About The UK VAT Threshold

Everything You Need To Know About The UK VAT Threshold

It is important for a business to register for VAT provided that during the previous year their ‘taxable supplies’ (typically based on the turnover and not the profits) have surpassed the threshold for VAT. This is applicable to all businesses in the United Kingdom, no matter whether you’re working as a limited partnership, company, or sole trader.

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