{"id":11656,"date":"2018-05-30T20:59:04","date_gmt":"2018-05-30T20:59:04","guid":{"rendered":"https:\/\/examchum.uk\/?p=11656"},"modified":"2023-01-22T09:33:30","modified_gmt":"2023-01-22T09:33:30","slug":"forms-of-practice","status":"publish","type":"post","link":"https:\/\/examchum.uk\/landscape-architecture\/forms-of-practice\/","title":{"rendered":"Forms of Practice"},"content":{"rendered":"

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\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
<\/th>\nSole Practitioner<\/th>\nPartnership (simple)<\/th>\nLimited Liability Partnership (LLP)<\/th>\nPrivate Company<\/th>\nPublic Company<\/th>\n<\/tr>\n<\/thead>\n
Formation<\/b><\/td>\n\n

Register with Landscape Institute. Obtain Professional Indemnity Insurance.<\/p>\n

No other formal documentation required for setting up\/constitution.<\/td>\n

\n

More than one individual comes together, to carry out business in common with the intention of making a profit.<\/p>\n

Formed under the Partnership Act 1890 with rights and duties sets out in a Partnership Agreement.<\/p>\n

“Form of Contract” with default duty of good faith.<\/td>\n

Certificate of incorporation issued by Registrar of Companies House under the Limited\u00a0Liability Partnerships Act 2000<\/td>\nCompanies Act 2006<\/a><\/td>\nCompanies Act 2006<\/a><\/td>\n<\/tr>\n
Legal status and management<\/strong><\/td>\n\n

No acts of parliament governing practice.<\/p>\n

Business has no separate identity from the individual running it. Individual has absolute control and full responsibility.<\/td>\n

\n

Partnership Act 1890<\/a>.<\/p>\n

A partnership has no legal entity itself (except in Scotland), only the legal entities of each partner.<\/p>\n

It is managed by the partners, who are governed by the Partnership Agreement<\/td>\n

\n

Limited Liability Partnership Act 2000<\/a>.<\/p>\n

An LLP is a legal person in its own right. LLP has unlimited capacity & is able to undertake full range of business activities a Partnership could undertake. LLP’s are governed by its members; at least 2 people must be named in incorporation document meaning they are not employed by the LLP as it\u2019s a separate legal
\nidentity.<\/p>\n

Use of LLP Agreement similar to P.A.<\/td>\n

\n

Controlled by the Companies Act 2006<\/a> which covers formation and operation.<\/p>\n

Owned by members or shareholders and governed by its directors or MD with supervision of shareholders.<\/p>\n

A company is a distinct & separate legal entity in law from its members and directors. It can own property, sue\/be sued & enter into contract in its own right.<\/p>\n

Company continues whoever leaves or joins for whatever reason.<\/td>\n

\n

Controlled by the Companies Act 2006<\/a> which covers formation and operation.<\/p>\n

Owned by members or shareholders and governed by its directors or MD with supervision of shareholders.<\/p>\n

A company is a distinct & separate legal entity in law from its members and directors. It can own property, sue\/be sued & enter into contract in its own right.<\/p>\n

Company continues whoever leaves or joins for whatever reason.<\/td>\n<\/tr>\n

Finances \/ Accounts<\/strong><\/td>\n\n

No legal requirements regarding form of accounts, annual returns (except for Inland Revenue) or statutory books.<\/p>\n

Self-Employed for tax purposes.<\/td>\n

\n

Partnerships are liable to income tax on their profits whether they are drawn out or left in the practice.<\/p>\n

Annual tax returns required for the partnership but each partner is liable for own tax Profits are shared equally – or as stated in the P.A.<\/p>\n

No audit is required of the business accounts.<\/td>\n

\n

Taxation situation the same as a Partnership ensuring that commercial decision between becoming an LLP or Partnership is a tax neutral one.<\/p>\n

Accounts are filed at Companies House.<\/td>\n

\n

Directors\u2019 report, balance sheet and accounts need not be filed at Companies House.<\/p>\n

Profits are distributed among shareholders in accordance with rights of their shares.<\/p>\n

Directors and employees are paid salaries out of the profits which are tax deducted.<\/td>\n

\n

Directors\u2019 report, balance sheet and accounts must be filed with the Register of Companies. Reduced requirements for medium companies.<\/p>\n

Profits are distributed among shareholders in accordance with rights of their shares.<\/p>\n

Directors and employees are paid salaries out of the profits which are tax deducted.<\/td>\n<\/tr>\n

Tax<\/strong><\/td>\nSelf-assessment<\/td>\nSelf-assessment<\/td>\nSelf-assessment<\/td>\nCorporate tax<\/td>\nCorporate tax<\/td>\n<\/tr>\n
Size<\/strong><\/td>\nNo limit to number of employees although appropriate administration and taxation will be required (Income tax and National Insurance).<\/td>\nNo size limit for architecture (or similar) professions provided at least 3\/4 of partners are registered with relevant professional body<\/td>\nNo restrictions<\/td>\nThe number of shareholders, which a company may have, is unlimited<\/td>\nThe number of shareholders, which a company may have, is unlimited<\/td>\n<\/tr>\n
Liabilities<\/strong><\/td>\nAll business and personal assets are at risk. There is no legal continuity on death<\/td>\n\n

All partners are liable for the others actions (in contract and torts).<\/p>\n

If action is brought jointly and severally then partners may be sued individually or together until full amount is paid.<\/p>\n

Partners are not liable for the criminal actions of others unless they were aware of such actions.<\/p>\n

New partner not liable for debts committed before starting. Retired partner is still liable and on death their estate will be liable. Partnership may indemnify a partner against consequences of their liability.<\/td>\n

\n

Members\u2019 liability is limited to the extent of the assets of the LLP.<\/p>\n

Members are liable for fraudulent or wrongful trading.<\/p>\n

Members are liable in tort & the LLP will be liable to the same extent.<\/p>\n

A member is not liable for the torts of the LLP.<\/td>\n

\n

Shareholders: Not liable personally for torts obligations incurred by the company or by other shareholders. Directors:<\/p>\n

Liable for their own torts.<\/p>\n

Must prepare & disclose company accounts, prepare annual report on companies finances\/dividends, hold AGM, must be audited, (none of these have to be filed at Companies House), Only allowed remuneration as per memorandum, Director owes the company a duty of loyalty and faith.<\/td>\n

\n

Shareholders: liability to contribute to the Companies assets is limited to the amount unpaid on their shares.<\/p>\n

Shareholders may have different interest also e.g. 40% & 20% therefore their liability and profits will be different. Only liable for debts of the company to the amount unpaid on their shares if the company is limited.<\/p>\n

Shareholders: Not liable personally for torts obligations incurred by the company or by other shareholders.<\/p>\n

Directors: Liable for their own torts.<\/p>\n

Must prepare & disclose company accounts, prepare annual report on companies finances\/dividends, hold AGM, must be audited & filed with Register of companies, only allowed remuneration as per memorandum, Director owes the company a duty of loyalty and faith.<\/td>\n<\/tr>\n

Dissolution<\/strong><\/td>\nNo legal continuity on death CoC Standard 8: “You should have arrangements in place for the conduct of your business in the event of your death, incapacity or other absence from work.”<\/td>\n\n
    \n
  • End of fixed term or specific project (if applicable) death or bankruptcy of any partner.<\/li>\n
  • Partner gives notice.<\/li>\n
  • Mutual consent.<\/li>\n
  • Court dissolution.<\/li>\n<\/ul>\n<\/td>\n
\n
    \n
  • By agreement between the members.<\/li>\n
  • By being struck of the register (e.g. no certificate of incorporation).<\/li>\n
  • By winding up\/insolvency.<\/li>\n<\/ul>\n<\/td>\n
\n

Either by: Winding up\/liquidation under the Insolvency Act (1986) – Voluntary or compulsory – once wound up no judgement may be forced against it.<\/p>\n

Being struck of the register under the Companies Act (1985) when company is no longer conducting business or fails to present its annual accounts.<\/p>\n

Shareholders are personally liable for all debts and obligations in the case where the company is wound up.<\/p>\n

Liability is unlimited although it may be limited by agreement or entering into transactions and creditors.<\/p>\n

If a company is dissolved by winding up, both members and past members (within past 12 months) will be liable to contribute towards the assets of a company so it can meet its liabilities.<\/td>\n

\n

Either by: Winding up\/liquidation under the Insolvency Act (1986) – Voluntary or compulsory – once wound up no judgement may be forced against it.<\/p>\n

Being struck of the register under the Companies Act 1985) when company is no longer conducting business or fails to present its annual accounts.<\/p>\n

Shareholders are liable as guarantors for an amount set out in the memorandum in the event of the company being wound up.<\/td>\n<\/tr>\n

Companies House register<\/strong><\/td>\nNo<\/td>\nNo<\/td>\nYes<\/td>\nYes<\/td>\nYes<\/td>\n<\/tr>\n
Additional Notes (Governance \/ engagement of personnel)<\/strong><\/td>\n\n

Responsible for everything to do with running business. Limited to type and size of projects you can do.<\/p>\n

Where does the money come from if you have quiet spells?<\/td>\n

\n

Less formal than company Freedom of action and privacy of its affairs.<\/p>\n

Subject to unlimited liability with personal assets at risk Limited powers to borrow money Taxation position is complex<\/td>\n

\n

An LLP gives the benefits of limited liability in that it can protect your existing personal assets, while giving many of the tax advantages of a sole trader partnership.<\/p>\n

Members have the flexibility to organise the internal structure as a traditional partnership.<\/td>\n

\n

Easier to raise outside finance than for a partnership due to security of assets.<\/p>\n

Taxation position relatively simple.<\/p>\n

All employees subject to PAYE.<\/p>\n

Overall taxation likely to be less than partnership, all salaries deductible before calculation of profit for corporation tax purposes, easier to remove an unsatisfactory director than a partner.<\/td>\n

\n

Easier to raise outside finance than for a partnership due to security of assets.<\/p>\n

Taxation position relatively simple.<\/p>\n

All employees subject to PAYE.<\/p>\n

Overall taxation likely to be less than partnership, all salaries deductible before calculation of profit for corporation tax purposes, easier to remove an unsatisfactory director than a partner.<\/td>\n<\/tr>\n

Pros<\/strong><\/td>\nYou choose your work hours<\/td>\nMore expertise available from partners = bigger variety of work<\/td>\n\n
    \n
  • More expertise available from partners = bigger variety of work<\/li>\n
  • Simple to setup<\/li>\n
  • Protection of personal assets<\/li>\n
  • Less hustle than company<\/li>\n<\/ul>\n<\/td>\n
Directors are paid tax free salary, tax is paid from company<\/td>\n–<\/td>\n<\/tr>\n
Cons<\/strong><\/td>\n\n
    \n
  • Annual\/sickness leave payment unavailable<\/li>\n
  • Limited opportunities to projects<\/li>\n<\/ul>\n<\/td>\n
Equally liable for Partner\u2019s actions<\/td>\nProfits are public<\/td>\nPaperwork<\/td>\nPaperwork<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

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