Converting an LLP to a limited company

An LLP cannot be turned into a limited company by re registration. Instead the members form a new company, the LLP transfers its business and assets to it, contracts and employees move across with the consent or consultation the law requires, and the LLP is then closed by strike off or liquidation. Each step has its own company law, employment and tax consequences.

Why can’t an LLP simply convert?

Re registration under the Companies Act 2006 is a route for companies only. Section 89 lets “a company” alter its status, for example from private to public or from limited to unlimited, but there is no equivalent that turns an LLP into a company. An LLP is a separate body corporate under section 1(2) of the Limited Liability Partnerships Act 2000, and the company will be another separate legal person.

Regulators treat the move the same way. The FCA’s change of legal status table shows that a firm moving from an LLP to a private limited company must submit a new authorisation application rather than a simple notification, and the new firm must sign a deed poll declaration taking on complaints from existing customers. The reverse journey, from partnership to LLP, is covered at converting a partnership to an LLP.

What are the main steps?

1. Members agree the plan. Check the LLP agreement for the majority needed to sell the business. Without an agreement, regulation 7(6) of the Limited Liability Partnerships Regulations 2001 allows ordinary questions to be decided by a majority but requires everyone’s consent to change the nature of the business, so unanimous written approval avoids later dispute.
2. Form the company. Incorporate the new company, usually with the members as shareholders and directors; see how to incorporate a company.
3. Sign a business transfer agreement. This lists the assets, liabilities, contracts and employees moving across, the price and how it is paid, typically in shares.
4. Move each asset and contract. Property, leases, intellectual property, bank facilities and customer and supplier contracts each need their own transfer documents and, often, consent.
5. Deal with employees. Inform and consult before the transfer, then move payroll.
6. Update registrations. VAT, PAYE, regulators and professional bodies.
7. Close the LLP. Once it holds nothing and owes nothing, by strike off or a members’ voluntary liquidation.

Can the company use the LLP’s name?

Not straight away. Under Schedule 3 to the Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015, words listed in Schedule 2, including “Limited”, “Ltd”, “Limited Liability Partnership” and “LLP”, are disregarded at the end of a name when Companies House decides whether two names are the same. “Smith Design LLP” and “Smith Design Limited” are therefore treated as the same name.

Regulation 8 allows a same name to be registered with the existing body’s consent, but only if the new company forms, or is to form, part of the same group as that body, with “group” taking its meaning from section 474(1) of the Companies Act 2006. Where the members will own the company directly, that condition is unlikely to be met, so the practical route is for the LLP to change its own name first, on form LL NM01, and for the company then to register the freed name.

Which consents and notices are needed?

• Members. As above, under the LLP agreement or the regulation 7 defaults.
• Counterparties. Contracts are with the LLP. Each customer, supplier, landlord and lender needs to agree to a novation or assignment unless the contract itself allows transfer. The FCA’s guidance on change of legal status says firms must contact customers with ongoing agreements to amend existing contracts or agree new ones.
• Secured lenders. A lender with a registered charge over the LLP’s assets will need to release it or take new security from the company.
• Employees. Consultation duties under the TUPE Regulations apply, below.
• Regulators. FCA authorisation does not pass to the company; a new application is needed and the LLP’s permissions must be cancelled before approval.
• HMRC. The company can ask to keep the LLP’s VAT number by applying for VAT registration together with form VAT68, which HMRC says applies where the legal status of a business changes.

What happens to the employees?

Moving the whole business is a relevant transfer under regulation 3(1)(a) of the Transfer of Undertakings (Protection of Employment) Regulations 2006, because an economic entity is transferred and keeps its identity. Regulation 4 then moves each assigned employee’s contract to the company as if originally made with it, together with the LLP’s rights, powers, duties and liabilities under the contract. Under regulation 13 the employer must inform, and where measures are envisaged consult, appropriate representatives long enough before the transfer. LLP members themselves are not employees, so this only covers staff. The payroll side is at TUPE transfers and PAYE.

What tax points come up?

While an LLP carries on a business with a view to profit, section 59A of the Taxation of Chargeable Gains Act 1992 treats its assets as held by the members as partners, so the gains on transferring goodwill and property arise to the members, not the LLP. HMRC’s Capital Gains Manual at CG65700 confirms that incorporation relief under section 162 is available to individual members where the whole LLP business is transferred to a company as a going concern, and that it is computed separately for each member. It is not available where the business is transferred into an existing corporate member. The conditions are covered at incorporation relief.

Other points to check:

• VAT. A transfer of the business as a going concern may be outside the scope of VAT; see transfer of a going concern.
• Stamp Duty Land Tax. Paragraph 18 of Schedule 15 to the Finance Act 2003 applies special rules where a chargeable interest passes from a partnership to a partner or to a person connected with a partner, so check whether the company is connected; see SDLT partnership rules.
• Liquidation. Section 59A(4) ends transparency on the appointment of a liquidator. HMRC’s Spotlight 69 warns against schemes that move property through an LLP and then use a members’ voluntary liquidation, and says section 59AA of the 1992 Act was introduced for liquidations entered into on or after 30 October 2024.

How is the LLP closed afterwards?

Once the business has gone, the LLP is usually an empty shell. If it has no assets and no debts, the members can apply to strike it off once three months have passed since it last traded or changed its name, as explained at striking off an LLP. Section 59A(3) keeps the LLP transparent for capital gains during a winding up after a permanent cessation, provided the winding up is not connected with tax avoidance and is not unreasonably prolonged. A liquidation is the alternative where there are assets to distribute or creditors to deal with formally.

How might this look in practice?

Illustration only. A three member consultancy LLP decides to incorporate. The members sign a unanimous resolution, file LL NM01 to rename the LLP, and form a new company with the original trading name, each member taking shares in proportion to their capital accounts. The business transfer agreement transfers goodwill, equipment, debtors and the office lease for shares. The landlord consents to the lease assignment, the bank releases its charge and lends to the company, and the five staff move across after consultation. The company registers for VAT with form VAT68 to keep the number. Four months after the last LLP invoice, with its bank account closed and final accounts prepared, the members apply to strike the LLP off.

What mistakes are common?

• Assuming the company automatically takes over the LLP’s contracts, leases and authorisations.
• Trying to register the company name before the LLP has changed its own name.
• Leaving some business assets behind in the LLP, which can put incorporation relief at risk.
• Skipping TUPE consultation because the same people own both businesses.
• Applying to strike off the LLP within three months of its last trading activity.

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Related Accountapedia entries

• Partnership, LLP or limited company
• Converting a partnership to an LLP
• LLP or limited partnership: the differences
• Limited liability partnerships (LLPs) explained
• Converting a client to new accounting software

Sources

• legislation.gov.uk: Act 2006 c. 46, section 89
• legislation.gov.uk: Act 2000 c. 12, section 1
• FCA: Change legal status
• legislation.gov.uk: SI 2001/1090, regulation 7
• legislation.gov.uk: SI 2015/17, schedule 3
• legislation.gov.uk: SI 2015/17, schedule 2
• legislation.gov.uk: SI 2015/17, regulation 8
• GOV.UK: Limited liability partnerships incorporation and names
• GOV.UK: Vat request for transfer of a registration number vat68
• legislation.gov.uk: SI 2006/246, regulation 3

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.