Cooperatives NorthWest

Choosing the Limited Liability Partnership (LLP) option

We are seeing more new-start cooperatives set up as LLPs and even some conversions of existing co-operatives. software.coop has written up their personal experience of setting up a Limited Liability Partnership and some of the practical things you should know.

Software.coop is a tech worker co-op centred on web and GNU/Linux development and maintenance, with particular interests in library management systems, email services and Django, Drupal and Wordpress web applications. As well as being strongly in favour of Free and Open Source Software (FOSS) because of its importance for co-operative values, we’re also fairly unusual in being a Limited Liability Partnership (LLP) instead of a Ltd company.

We incorporated Turo Technology LLP in 2002, which may make us the oldest LLP co-operative. We became a Co-operatives SW member in 2006, a CooperativesUK member in 2007 and have recently joined Co-operativesNW.

Why we chose the LLP model

“The essential feature of an LLP is that it combines the organisational flexibility and tax status of a partnership with limited liability for its members.” (Explanatory Notes to the Limited Liability Partnerships Act 2000).

The Pros and Cons of being an LLP

The main benefits are:

• lower overheads;
• an “inherently co-operative model” according to some;
• no requirement to file our rules, so we could fix initial mistakes fairly cheaply.

We actually used this feature when we replaced our original rules with a modified set that made it more obviously co-operative in 2005.

But there were drawbacks:

• LLPs had poor support from banks, even up to 2007. Thanks to Norwich and Peterborough Building Society’s Cambridge branch for patiently learning about LLPs in 2002.
• LLPs get fewer services from Companies House than Limited companies. There is a specialist LLP Team there, but LLPs are excluded from discounted online filing.
• LLPs get poor support from HMRC.
• LLPs are not always understood or promoted as an option by some Coop Development Advisers and many Social Enterprise Advisers.

Being asked to explain co-operative partnerships so many times means that co-operative status has probably been a slight net cost for software.coop so far, but we believe in the long-term benefits. The pros are very compelling and long-term, while the drawbacks seem to be mostly short-term: banks are becoming friendlier, Companies House and HMRC should catch up eventually, which just leaves raising awareness with advisers and the wider movement. www.software.coop