Accounting for LLPs: Five common pitfalls

Preparing accounts for LLPs can be perceived as being tricky to some practitioners, owing to the newness of their 10-year existence.

However, being aware of potential trip-ups as well as the LLP Statement of Recommended Practice (SORP) should make them just as understandable as regular clients.

CCH has outlined the five most common pitfalls when preparing accounts for LLPs...

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  • The members’ interest note
  • Debt vs equity distinction for members’ interests
  • Transfer of a business into an LLP
  • A members’ report is required in place of a directors’ report
  • Group structures with an LLP

Continued...

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Comments
bookmarklee's picture

What a great article and set of useful tips    2 thanks

bookmarklee | | Permalink

Years ago I used to advise on partnerships and LLPs - but have not done so since I left practice in 2006. For a few years after that I continued lecturing on the subject and have long been surprised by the limited(!) interest shown by many accountants in this alternative form of business structure.

It's not just that it's new - indeed it's now ten years old. I think there is an element of chicken and egg involved. Many accountants are unfamiliar with LLP accounts and do not have access to the LLP module in their accounts production system. This means the accountant is less likely to advocate LLPs as an option. And of course until they have some clients who need LLP accounts there's no need to access the LLP module or to become familiar with LLP accounts.

For those accountants who do advocate LLPs there is a related issue to consider. This is that there is an even greater need for the members of the LLP to have a members' agreement in place than there is for a conventional partnership to have a partnership agreement in place. It doesn't need to be complicated though. It just needs to cover off some key basics to avoid the default legal provisions causing problems.

I was involved with an LLP related project last year and this resulted in the creation of an automated online template to create tailored LLP agreements. The site also addresses a load of FAQs on the topic.Click here for more details>>>

Mark