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The new client type LLP should be used when creating a Limited Liability client.
The main theme of this SORP is the treatment and distinction between debt and equity. If LLP`s have discretionary rights then amounts are treated as equity. If the members have an automatic split set out in the agreement then amounts are treated as debt or liability and are charged as an expense in the profit and loss.
For accounting periods ending on or after the 31st March 2006 LLP’s should be adopting the SORP 2006. For those ending before this date the SORP can be adopted early, by making a selection in the data screens.
The profit shares need to be split between those which are automatic (and should be included as part of Members' remuneration charged as an expense) and those which are made at the discretion of the LLP.
To allow for this distinction the following should be used:
Automatic division of profits
For any fixed amounts use the following codes:
Dr 467/1 to 467/10
Cr 997
If the remaining profit to be split according to the profit sharing ratio is an ‘automatic division’ then ensure that the SORP 2006 data screen has a tick for automatic division.
These amounts will then be included within 'Members' remuneration charged as an expense':
Discretionary division of profits
For any fixed amounts use the following existing codes:
Dr 470 to 479
Cr 998
If the remaining profit to be split according to the profit sharing ratio is at the discretion of the LLP then ensure that the SORP 2006 data screen does not have a tick for automatic division.
Any profit that is not allocated for the year should be posted to the following codes:
Dr 490
Cr 999
This amount will be included in Other reserves and then be carried forward to Other reserves - 971/1
The capital accounts need to be reviewed to determine if they are considered equity or debt in accordance with FRS 25. If any are considered to be debt then the Capital account section of the SORP 2006 data screen must be completed. These amounts will then appear within 'Loans and other debts due from members'.
The EPST chart for partnerships, sole traders and LLPs should be used. The chart behaves differently when the client type selected is an LLP. There is a different group structure used and a number of new accounts appear. The result is that the chart is very similar to the ELTD chart that is used for limited companies but retains all of the partners accounts that are in the standard EPST chart.
The account codes used for an LLP which are not used by a limited company are as follows.
Account 465 Remuneration paid under an employment contract
Account 466 Other payments
Account 470 – 479 First fixed shares of profit. Debit balance expected. The Credit should be posted to Prior shares (see below)
Members' other interests
Account 970-973 Reserve
Account 975-978 Capital Account
Account 983-984 Members' loans
Account 985 Members' current accounts
Account 987 Tax provision accounts
Account 989-990 Other debts of members
Account 998 This should take the total Credit balances for the first fixed profit shares.
For an LLP the balances here must equal the Debits posted to the members' appropriation account above.
For more detailed information relating to the EPST chart for LLPs please refer to Select Help | Help, from the main Help screen select Chart of Accounts, select the chart you wish to view.
These are very similar to those used for a limited company. New screens include the following
Report of the members
Results for the year
Members interests
Notes to the financial statements
Information re members
Loans and other debts due to members
Members interests
The partners details and their profit shares are entered in the same way for both a normal partnership and an LLP. The main difference in this area is that the partners for an LLP are referred to as members and some or all are designated members.
If less than two members are specifically nominated as designated members then all members will be assumed to be designated members. To nominate an individual as a designated member the Designated member tick box must be completed on the partners screen within Edit | Members | View.
It is important to record the history for any changes to a members’ designation.
The reports available for an LLP are similar to the limited company reports except that LLP is run instead of LTD. The non-statutory pages in the LLP report include:
Trading profit and loss account
Capital account schedule
Current account schedule
Loans and other debts schedule
For details regarding the component reports please refer the Product help. Select Help | Help, from the main Help screen select Useful reports, select the relevant topic you wish to view.