Historically, partners in GP practices in England have not been allowed to operate using a Limited Liability Partnership. This means the majority of partners are currently in a traditional equity share partnership structure, however, this may be set to change. In their report of recommendations, the HSCC has advised that the government reconsider its previous stance and instead allow GP partners to use the Limited Liability Partnership model (or other similar models). Their recent report stated, ‘The Government should accelerate plans to allow GP partners to operate as Limited Liability Partnerships or other similar models which limit the amount of risk to which GP partners are exposed’.
This suggestion has been made in order to help with the current nationwide problem of fewer GPs wanting to become partners due to the risk involved. This risk is there for several reasons, but one of the more pressing causes is that GPs are reluctant to be held personally responsible for the financial obligations of the practice premises. ‘Despite the risk associated with GP premises continuing to be a significant burden on existing GP partners and a barrier to entry for potential new partners, little progress appears to have been made on this issue. Until the Government grips this issue properly it will continue to seriously undermine GP retention as well as patient care.’ HSCC Fourth Report of Session The future of general practice, 2022-23.
The UK Government has maintained that it still feels that the GP partnership model is the right way to manage our primary care system, and therefore it needs to encourage more salaried GPs to want to become partners.
So, what is a Limited Liability Partnership?
The key difference between a traditional partnership model and a limited liability partnership is that in an LLP the partners do not have personal liability for the business’s (or other partners) debts. This means that the partners cannot lose more money than they invest in the business.
This means that if something were to happen (i.e., the practice building being declared not fit for purpose or another partner being sued for malpractice) then the rest of the partners would not be personally liable for the loss (although it is important to note that the business assets would be still liable). This keeps the business assets and the partner’s personal assets separate and thereby reduces the risk that the partners take when buying into the business. Legally, the practice is considered a separate body with a legal existence that is independent of the members.
In the UK, the tax structure for an LLP is similar to a normal partnership – the partners are classed as self-employed rather than PAYE employees. This means that practices that move to the LLP model could retain their tax structure whilst providing protection for personal assets.
One thing to note is that an LLP must have at least two ‘designated members’ whose job it is to ensure all ongoing legal admin is completed. They are legally bound to complete their assigned tasks and this information must be submitted to Companies House by specific deadlines.
What would be the advantages/disadvantages to GP partners if this model were to be introduced?
The most obvious advantage would be that this model would protect the GP partners’ personal assets. This would limit the amount of risk that the partners take when they invest in the business as they would not be liable for debts incurred by the practice premises, or by the other partners.
There is also the advantage of increased flexibility on how you would like the agreement to be set out. This means you could create an agreement that is more suited to individual business needs. This flexibility is particularly useful for larger practices that are looking to expand and increase profits. As the company is legally known as a separate entity it can employ staff, own business premises, and secure investments. This would make it easier to secure investment with other healthcare providers, which gives practices the opportunity to provide extra services in a more cost-effective way.
This model could also reduce the risk of ‘last partner standing’. This is currently a risk that all partners must consider (particularly in smaller practices). If they become the last partner in the practice, then they are liable for the entire business. An LLP model would provide them with some protection as they would not be personally liable for any business debts.
A disadvantage of switching to an LLP model would be the costs – there are upfront and ongoing administrative costs involved with an LLP. These include:
- Legal fees to draw up new agreements/ensure tax is being completed correctly
- Initial incorporation fees
- Business name registration (this cannot be the same or too similar to an existing LLP)
The other consideration is that all LLPs must publish their accounts at Companies House. This means having to publicly declare income that would previously have been private to the individual. (The LLP agreement can remain confidential to the members).
Due to the above reasons, an LLP model may not be suited to smaller practices. There may be alternative models suggested for these practices which may be more beneficial. It is also worth noting that an LLP will still require a detailed and clear partnership agreement in order to avoid any disputes further down the line.
If Limited Liability Partnerships do become an option for practices, it is worth taking the time as a partner to review the pros and cons with a legal advisor.
If you are a new GP partner in practice then make sure to have a look at our New to Partnership Programme. This programme offers training for GP partners in non-clinical skills such as Leadership, Business Strategy, Finance, and Legal. Funding is available for this programme via the NHS (make sure you look at the NHS website for more details and to check if you qualify). Send us an email at N2P@xytal.com to find out more.