Ltd or LLP – Is your business structure still the right one?

And yet, 100% of LLP businesses surveyed stated that they were very happy with their LLP structure and reaped significant rewards as a result of this structure. Tax and legal advantages and increased flexibility were listed as the top three benefits – the key finding of the research is that the vast majority of businesses could be missing out on the significant financial and cultural benefits of becoming an LLP.
 
For those companies that have already changed to an LLP structure, the advantages clearly go beyond purely financial. 57% responded that the biggest advantage was the ability to build staff loyalty by making them partners. 
 
The survey also highlights a lack of knowledge about how the LLP structure can benefit a wider range of industries.  A belief traditionally held is that service based industries reap the rewards of the LLP structure more than other industries.  In reality, the benefits can apply across a wide range of industries; in any company that has its people as a key asset.
 
Of those respondents that had considered and decided against an LLP structure, reasons for this decision included “we’re too small”, “we felt it was a bit too stuffy” and “more appropriate for bigger companies”.
 
The research, undertaken in conjunction with renowned business intelligence service, mergermarket, surveyed 100 businesses. Of the 90% that admitted to never having thought about changing their structure, 80% were limited companies. 54% did not have a specific reason for not considering an LLP structure and the research highlighted a general lack of understanding of the benefits and challenges – over half (54%) weren’t aware of the benefits.
 
Commenting on the findings, Nick Davis, Head of the Corporate Department at Mishcon de Reya, said: “Whatever the size of your business it is important to reassess company structure at each stage of your businesses life cycle. Conversion to an LLP structure can be a flexible and beneficial solution for many types of “people businesses” both financially and in terms of boosting staff morale.”
 
He continued: “In a time of recession and austerity changing your business structure is a smart way to increase your profit margins and to eke out value wherever possible.”
 
The report also highlighted the importance of ensuring that the process of converting to LLP is carefully managed, with existing LLPs listing challenges as including exit strategies, junior members seeking to participate in management decisions and dealing with the quasi-employment status of their members.
 
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