Limited liability partnerships open new doors ;Coming soon ;In his recent pre-budget report, the Chancellor of the Exchequer announced that businesses will be able to register as limited liability partnerships (LLPs) from 6 April 2001, to coincide with the start of the tax year. ;The Society, through the LLPs working party, has been giving active support to the government for the introduction of this new form of business organisation. ;LLPs, which are introduced by the Limited Liability Partnerships Act 2000, are a form of body corporate. However, they will, in general, be treated as partnerships for tax purposes. The transition from partnership to LLP, if handled correctly, need not give rise to a tax charge. ;The tax treatment will make LLPs a more attractive vehicle than a traditional limited liability company for many professional partnerships. As with companies, it is the personal liability of members of an LLP that will be limited, not the liability of the LLP itself. However, the limitation does not extend to anyone connected with the LLP who has been personally negligent. ;Solicitors, who are already able to practise through a company, will also be able to practise through a LLP. Solicitors corporate practice is governed by the Administration of Justice Act 1985 and the Solicitors Incorporated Practice Rules 1988. LLPs, like other solicitors corporate bodies will need to become recognised bodies (i.e. recognised by the Law Society) in accordance with the Incorporated Practice Rules. ;New Incorporated Practice Rules ;The Solicitors Incorporated Practice Rules are being amended to accommodate LLPs as from the governments commencement date, and there will need to be consequential changes to the practice rules and other rules and codes. Copies of the current draft of the proposed rules are available from Professional Ethics on 0870 606 2577. Any comments on the proposed rules, addressed to Anne Philpot, Professional Ethics, the Law Society, Ipsley Court, Redditch, B98 0TD, are welcome. ;The Society will also prepare an information pack explaining how solicitor LLPs can become recognised bodies, and containing the relevant application form. ;There will not be any further consultation ;on these rules, as the amendments are technical and do not involve any changes in policy. ;Drafting pitfalls wills, trusts, leases, etc ;Solicitors have been able to practise in corporate form since 1 January 1992. Guidance was issued at that time reminding solicitors to make it clear in documents whether references to solicitor should include an incorporated practice. Special consideration may need to be given to transfers imposing restrictive covenants, leases, trust instruments and wills. ;The appointment of partners as executors when it is done using the firms name or by reference to their position as partners also needs thought. If that firm is later incorporated (whether as a company or a LLP), such an appointment may be rendered ineffective. A codicil varying the appointment of executors would be needed. ;Firms contemplating becoming LLPs may wish to review their standard clause used to appoint partners in the firm as executors to ensure that the appointment does not fail. ;More information ;A useful source of information on LLPs is the DTIs Web site (www.dti.gov.uk/cld/llpbill). Also keep an eye on the Inland Revenue Tax Bulletin for more detail on the tax treatment of LLPs. ; ; ;