An LLP (Limited Liability Partnership) gives UK law firm members limited liability for the firm's debts while preserving the tax-transparent treatment of a general partnership. Both structures are taxed identically — members pay personal income tax and Class 4 NI on their share of profit; the entity itself doesn't pay corporation tax. The LLP adds two things: Companies House filing of annual accounts and a separate legal personality that caps member liability.

For most multi-partner UK law firms with any meaningful liability exposure (and that's most law firms), LLP wins. This guide gives the side-by-side comparison, the conversion process, and the cases where staying partnership still makes sense.

Side-by-side: LLP vs general partnership for UK solicitors

Liability protection

  • General partnership: Each partner has unlimited personal liability for the firm's debts and obligations. Liability is joint and several — one partner's actions can crystallise the firm's full liability against any other partner's personal assets. Partners are personally liable for negligence claims that exceed PII cover, contract breaches, employment claims, and tax debts.
  • LLP: Each member's liability is limited to their capital contribution plus any personal guarantees they have given (commonly required by the firm's bank for borrowing). Personal assets beyond capital and guarantees are protected from the firm's debts. The LLP itself has separate legal personality, so it can hold property, enter contracts, and be sued in its own name.

Tax treatment

Identical for income tax purposes. Both LLPs and general partnerships are "tax-transparent":

  • Each member / partner is taxed personally on their share of profit at income tax rates (20% / 40% / 45% in 2025/26) plus Class 4 NI (6% / 2%)
  • The entity itself doesn't file a corporation tax return — no separate tax person at the entity level
  • SA800 partnership tax return shows total profit and allocation to each member
  • Each member files personal self-assessment with their share
  • Qualifying loan interest relief (ITA 2007 s.398) on borrowing to fund capital contribution applies identically in both structures

FA 2014 Salaried Member Rules

One material tax difference: the FA 2014 Salaried Member Rules apply to LLP members only, not to general partnership partners. The rules deem an LLP member as employee for tax (with PAYE on drawings) if all three conditions are met:

  • Condition A: "disguised salary" ≥ 80% of total reward (fixed rather than profit-linked)
  • Condition B: limited rights to influence the LLP's affairs
  • Condition C: capital contribution < 25% of disguised salary

Fixed-share and salaried members of LLPs are the audit territory. Pure profit-share equity members typically pass (variable reward, meaningful management influence, substantial capital). The fix is usually adjusting capital to break Condition C. See our partnership vs LLP pillar guide for the detailed mechanics and worked examples.

General partnerships don't have an equivalent rule — partners are partners for tax regardless of how their profit share is structured.

Capital and member economics

  • General partnership: capital contribution requirements set by the partnership agreement. Often lower than LLP because the unlimited liability creates a different risk profile. Capital interest typically paid annually at a rate set in the agreement.
  • LLP: similar mechanics. Members contribute capital under the LLP agreement. Buy-in loans for new members attract qualifying loan interest relief. Capital interest paid at the LLP agreement rate.

Filing and disclosure

  • General partnership: SA800 partnership tax return filed annually with HMRC. No Companies House filing. Accounts remain entirely private. No public disclosure of partner profit shares or firm financials.
  • LLP: Same SA800 partnership tax return PLUS annual LLP accounts filed at Companies House. Standard LLP accounts disclose total profit allocated to members and total members' funds; small-LLP filing exemption removes the requirement to disclose individual member shares but the aggregate firm profit and member count is public.

Administrative overhead

  • General partnership: Lighter. No Companies House filing. No requirement to maintain a register of members. Partnership agreement is private.
  • LLP: Heavier. LLP agreement filing of incorporation (LL IN01), annual confirmation statement at Companies House, annual accounts filing, member changes filed (LL AP02 / LL TM02). Approximately 2-4 hours of additional administrative work per year.

Banking and finance

  • General partnership: Bank lending typically secured by personal guarantees from partners (because no entity-level limited liability). Easier to obtain initial banking but personal exposure is real.
  • LLP: Bank lending secured by LLP assets plus typically personal guarantees from major members (because lenders still want personal accountability). The PG requirement makes the LLP liability protection partial in practice — but it protects against trading liabilities like negligence claims or staff disputes that exceed PII or insurance cover.

When general partnership still makes sense

Few cases, but they exist:

  • Two-partner firm with very low liability exposure. A wills-only or private-client-only practice with minimal client matter complexity and no commercial work may genuinely have low liability exposure relative to the administrative overhead of LLP.
  • Disclosure-sensitive practices. Some firms with high-net-worth client bases prefer not to disclose firm financials publicly via Companies House. The size of the modesty premium varies.
  • Practices planning to incorporate soon anyway. If the firm is going to convert to a Ltd / ABS structure within 12 months, the cost of converting partnership → LLP → Ltd is higher than partnership → Ltd directly.

For everyone else (most multi-partner firms), LLP is the right answer.

The conversion process: partnership to LLP

Months 1-2: Decision and agreement

  • Partners agree to convert; vote per the partnership agreement
  • Update the partnership agreement into LLP agreement form. Most clauses transfer; some need adjustment for the LLP-specific context (members' duties, exit mechanics, capital account interest, FA 2014 awareness)
  • Consult the firm's bank on banking arrangements (new client and office accounts in the LLP's name)
  • Confirm PII renewal date — if the conversion can be timed to coincide with renewal, the PII change is administratively simpler
  • Notify HMRC of the intention to convert

Months 3-4: Incorporation

  • File LL IN01 at Companies House to incorporate the LLP
  • Open new bank accounts (client account, office account, deposit account) in the LLP's name
  • Notify the SRA of the structural change within 7 days of incorporation
  • Transfer trade and assets to the LLP at book value (no CGT event under standard treatment for capital interests)
  • Existing partnership continues briefly until full transfer is complete

Months 5-6: Transition

  • Novate client matters where the existing engagement letter terms require it (some bulk via standard novation letters; some bespoke for sensitive matters)
  • Update letterhead, website, email signatures, professional indemnity policy, professional directory listings
  • HMRC filings: partnership cessation tax return for the period up to conversion; LLP commencement tax return for the period from conversion forward
  • VAT registration: typically the LLP takes over the existing VAT number rather than starting a new one — keeps VAT continuity for clients
  • Payroll: re-register the LLP as employer with HMRC; staff continue under TUPE
  • First LLP accounts filed at Companies House (typically 9 months after the LLP's first year-end)

Conversion cost breakdown

For a typical 4-partner mid-market firm:

  • Solicitor fees for LLP agreement and partnership agreement amendments: £2,500-£6,000
  • Accountancy fees for conversion-year tax filings (partnership cessation + LLP commencement): £1,500-£3,500
  • Companies House filing fees: £40 (incorporation) + minor annual fees thereafter
  • SRA notification: no fee, but advisory time to draft the notification properly
  • Bank account setup: typically free but time-consuming (4-8 weeks for client account)

Total conversion cost: typically £4,000-£10,000 for a clean conversion. The cost recurs only at conversion — ongoing LLP administrative overhead is modest.

What about converting from partnership directly to limited company?

Possible but rarely the right call. The intermediate step through LLP is usually cleaner because:

  • LLP preserves the tax-transparent treatment partners are used to
  • Corporation tax (Ltd structure) introduces double taxation — corp tax at entity level plus dividend tax on extraction — which is rarely better than personal tax on partnership profit at typical UK law firm partner profit levels
  • The SRA regulatory work for incorporated firms (Recognised Body application or ABS licence) is more complex than the simpler change-of-form notification for LLP conversion

Direct conversion to Ltd makes sense in specific circumstances — typically pre-sale planning where a share-sale-friendly Ltd structure is desired with Section 162 incorporation relief — but those are minority cases requiring bespoke advice.

Decision framework summary

Convert to LLP if:

  • Three or more partners
  • Any meaningful liability exposure (conveyancing, commercial, regulated work, any client work where PII cover might not be sufficient)
  • Plan to grow partner headcount
  • Plan to admit fixed-share or salaried members (FA 2014 applies to LLP only, giving you the audit lever)
  • Want to preserve tax-transparent treatment but cap personal exposure

Stay general partnership if:

  • Two-partner firm with very low turnover and minimal liability exposure
  • Companies House filing obligation feels disproportionate to the protection gained
  • All partners explicitly comfortable with unlimited joint and several liability

Skip both and go straight to Ltd if:

  • Specific sale-preparation strategy involving Section 162 incorporation relief
  • Non-solicitor capital coming in (requires ABS licence)
  • Modelled comparison genuinely favours corporate structure on your specific numbers

What we'd do if you brought us in

Our structure-review engagement covers:

  • Three-structure comparison on actual numbers: partnership / LLP / Ltd
  • FA 2014 audit on each fixed-share or salaried member (or projected audit if you're considering admitting members of this type)
  • Conversion project management if you decide to move from partnership to LLP
  • Ongoing LLP tax compliance: SA800 partnership return, member self-assessment, member capital tracking

If you're a 2-5 partner firm currently structured as a general partnership and have never modelled the conversion, this is high-priority work. The cost of conversion is modest (£4,000-£10,000); the liability protection is permanent and substantial. Book a 30-minute scoping call below.