Firms shun protection of LLP status

It may be four years since legislation allowing accounting firms to become
limited liability partnerships was passed, but most are choosing to stick with
the traditional partnership model.

The 2005 Accountancy Age Top 50 shows that only 20 of the UK’s
leading 50 firms have adopted an LLP structure, despite the protection it
offers. The survey showed that while the Big Four and larger mid-tier firms were
LLPs, smaller firms have chosen to maintain the partnership structure.

John Davies, head of business law at ACCA, said this was not surprising,
given the differences in scale between the top 10 firms and smaller partnerships
in the UK.

‘The ethos of partnership is that its members can trust each other, are
liable for each others’ debts and have a substantial level of expertise in all
facets of the business,’ Davies said.

‘The giant firms have a kaleidoscope of technical areas and 150 to 200
partners. There is serious pressure on this ethos and an LLP is more
appropriate.’

Davies said smaller firms with only 10 to 20 partners could still efficiently
maintain the traditional partnership structure and that it was ‘quite
understandable’ that they had done so.

‘When the Big Four changed to LLP they would have done a cost-benefit
analysis and calculated that the benefits outweighed the drawbacks of having to
produce publicly-reported accounts,’ Davies said.

‘For small firms that don’t have the same size and exposure, it is not always
as beneficial.’