What is a limited liability partnership actually?

A limited liability partnership – or LLP – is a business setup in which each partner’s responsibility for company debts is restricted to the sum they invest in the business.

LLPs benefit from limited liability, ensuring individual partners cannot be personally pursued for company debts beyond the investment they’ve made in the business.


How insolvency impacts Limited Liability Partnerships (LLPs)

If you’re a partner in a limited liability partnership and facing the possibility of your LLP becoming insolvent, it’s crucial to act promptly to evaluate your choices and safeguard your creditors from enduring additional financial losses.


Is it possible for an LLP to be liquidated?

Liquidation is a formal procedure where a licensed insolvency practitioner is appointed to wrap up the affairs of a limited liability partnership that is insolvent or no longer required.

Limited liability partnerships are closer in nature to limited companies than to unincorporated partnerships regarding their treatment when insolvent. This is largely because of their operational structure, which provides partners with limited liability concerning business debts.

According to the Limited Liability Partnership Act of 2000, an LLP is defined as a separate legal and corporate entity. This implies that similar to any limited company, if an LLP becomes insolvent, it can undergo formal insolvency procedures like liquidation.

In this process, all trading will cease while the appointed insolvency practitioner identifies and sells company assets, addresses outstanding creditors, and concludes the partnership in an orderly manner.

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Exploring the liquidation options for a Limited Liability Partnership?

There are three common types of LLP liquidation. The suitable option will vary depending on factors like who instigates the liquidation and the LLP’s financial standing at the time.

1. Members Voluntary Liquidation (MVL) – An MVL occurs when the partners/members in an LLP opt to liquidate the business, despite it being solvent and capable of settling its debts. 

This is frequently preferred when all partners have agreed to retire, pursue a new venture, or cease trading for another motive.

2. Creditors Voluntary Liquidation (CVL) – A CVL is a typical choice for a limited liability partnership when it cannot settle its debts. When the partners conclude that winding up the LLP is the best course of action due to insurmountable debt, they appoint an insolvency practitioner to handle the company’s creditors and remaining matters.

3.Compulsory Liquidation – This occurs when the court orders the liquidation of the limited liability partnership, typically in response to a petition submitted by dissatisfied creditors. 


A creditor can initiate this form of liquidation if they are owed more than £750. If you’ve received a winding-up petition, it’s imperative to act swiftly and seek advice from a licensed insolvency practitioner without delay to avoid your company being compelled into liquidation.
For more details on limited liability partnership liquidation and insolvency, contact Vanguard Insolvency today.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.