SMEs across the region could be missing out on a whole host of financial and motivational benefits by failing to consider limited liability partnerships (LLPs). According to Lisa Richards, Partner - there is a widespread lack of awareness amongst business owners about the benefits that the LLP structure can bring to businesses of all sizes and market sectors.
A recent survey of businesses with various legal structures revealed that 90% of respondents had not reviewed the structure of their business since formation. And of those that have, the majority said that they have never considered a limited liability partnership (LLP) as a feasible option.
Business owners often assume that the LLP structure only applies to the professional service sector such as lawyers and accountants and isn't relevant to most small businesses.
However, small businesses operating across a range of market sectors may also be able to benefit from operating as an LLP.
Lisa adds: "The LLP structure offers the biggest benefits in the areas of tax and law. It also offers the ability to build staff loyalty by making employees partners – although I would always advise that this decision is thoroughly thought through. These benefits can apply across a wide range of industries and in any organisation whose people are its key asset.
"Many businesses that we speak to fail to consider an LLP structure because they think they're too small; but whatever the size of your business, it is important that you reassess your company structure at each stage of your business's life cycle."
Changing can be a smart way to increase profitability (through a combination of reduced costs and greater 'buy in' from key people) and add value at what remains a very difficult time for many businesses.
However, Lisa also warns that business owners thinking of converting should also be aware of the potential pitfalls of an LLP structure:
"Whilst converting to an LLP structure offers significant advantages for many businesses, you need to know what you're doing. It's important to consider the pro's and con's of all available structures, considering important issues such as tax and risk along the way.
"The main challenges facing small LLP businesses include exit strategies, junior members seeking to participate in management decisions and dealing with the quasi-employment status of members of the partnership.
"But by taking professional advice many of the risks can be mitigated substantially – my suggestion to businesses is to at least consider an LLP structure rather than dismiss it without due consideration."
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