You could be sued personally if there is a serious accident in one of your properties. If that lawsuit succeeds, you could lose everything you own if you hold that property personally – your home, the value of your savings, and all your investments. Even if you are insured, you risk losing everything because insurance companies always have additional stipulations in the small print.  

To avoid the risks posed to your personal assets, you can set up a Limited Liability Partnership. If you do get sued, the liability, in this case, is limited to the value of the properties held in the partnership. Even if you have 20 properties, and it’s a significant risk, it’s still limited to the properties held only in the partnership as opposed to everything you own – your home, your investments, your savings.  

The cost of setting up a Limited Liability Partnership is relatively cheap. You could seek the services of a local accountant, and they can set it up for a few hundred pounds. You may need to convey the properties to the partnership, or you can do it via a declaration of trust. When we set up Limited Liability Partnerships for our clients, we set up the partnership and do the legal work surrounding the declaration of trust.

You have to do an annual tax review for a Limited Liability Partnership, which will also cost you a few hundred pounds annually. Considering the risk you are avoiding, the benefits outweigh the cost.

You could also place your properties into a limited liability company which would provide the same protection as an LLP, but a company has more complications around running it than a partnership.  

One of the other significant benefits of a Limited Liability Partnership is that you don’t have to split the income equally between husband and wife. This is explained in some of our articles.