The clampdown on disguised employment relationships in limited liability partnerships (LLPs) puts employee members at risk in event of insolvency, warns John Young, legal director of Mishcon de Reya, but there are ways to minimise the impact.
The introduction of new rules to combat disguised employment relationships in limited liability partnerships (LLPs) were introduced in 2014. Since then, many LLPs have focused on the tax implications of whether a member is treated as an employee.
Very little attention has been paid to the significant additional risk that employee members face compared to a self-employed member earning the same base pay should the LLP become insolvent.
This raises the issue of how to structure appropriate arrangements which would allow senior employees to become employee members of an LLP. This would allow the employee the prestige of the ‘partner’ title while retaining a fixed salary and avoiding the need to make a substantial capital contribution on becoming a member.
Read the full article here.