Talking Business: LLP offers welcome prospects for Welcom Software
NIGEL Welch is getting the best out of his business and staff after relaunching Welcom Software as a limited liability partnership (LLP).
The entrepreneur spoke to Ian Briggs and Baker Tilly’s Paul Byrne and Tim Parr about why he took the major decision to make the change and how it is empowering his staff to take control of their own destinies.
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SETTING up as a limited liability partnership (LLP) is easier than most company owners think, explains Baker Tilly’s Tim Parr – A limited liability partnership (LLP) is similar to a normal partnership, but it also offers reduced personal responsibility for business debts. – The members of an LLP normally share in both the responsibilities of running the business and the profits that it makes. – Exactly how the members’ rights and responsibilities are defined and divided depends on the LLP’s members agreement. – Any group of two or more people who want to set up a profit-making business together can form an LLP – An LLP must have at least two members, and at least two must be Designated Members. – An LLP must be registered with Companies House and each member in the LLP must also register separately with HMRC to get their own tax records set up. – The members – not the LLP – pay tax on income or gains. Unlike limited companies, LLPs are not generally liable for Corporation Tax. |
CHANGE, as Nigel Welch readily admits, is often a force for good. And for the chief executive of Welcom Software, change has been the catalyst not only for continued growth but an entirely new way of operating his business. The Harrogate-based company, which is a developer and supplier of retail, finance and consumer and commercial lending software, is somewhat of a rarity as it has made the transformation from being run as a limited company to a limited liability partnership (LLP). An LLP is similar to a normal business partnership structure, but one of its main advantages is that its members (normally the organisation’s staff) share in both the responsibilities of running the business and the profits that it makes. One of its other key attributes is that it offers reduced personal responsibility for business debts. Mr Welch believes the LLP structure at Welcom Software, advised on by the company’s accountants Baker Tilly, has given employees added incentives to work hard, foster a sense of teamwork, and reap the monetary rewards, which in turn has boosted the bottom line. Speaking to TheBusinessDesk.com in the first of a series of ‘Talking Business’ articles analysing business practices and entrepreneurialism, supported by Baker Tilly, Mr Welch said the company had orginally been established in 1978. “It was a business owned and run by my father with myself and several other people as shareholders,” he explained over lunch at La Grillade in Leeds. Mr Welch subsequently completed a management buyout of the business in 2005 from his father and other minority shareholders at that time. The business has a workforce of around 90 staff today and has an annual turnover of £5m. “Having done that we decided that we needed to change the culture of the business so people felt more inclusive, that there was a feeling of ownership within the company and to create a business where there were opportunities for growth. After all, we are a people business. “I then implemented a programme of management and cultural change and I used the services of Dale Carnegie in that programme of empowering people to take responsibility and allow them to see the opportunities. “It was time for change and it was about moving with the times. We looked at how we would do that and carry on with the change programme we’d created. “Tim Parr (tax and advisory partner at Baker Tilly) brought the LLP idea to us and we decided to go down the LLP route. That’s quite a big change and it’s a different structure to a limited company. “The idea was to create a new business and the transition meant employees would have to elect to resign as employees and become self-employed LLP members. I’m delighted to say the majority chose to do that. “Also important for the change was the prospect of opportunity so we also had to look at the financial incentives for members. They now share in the profits of the business and it gives a great sense of participation.”
He said: “For many, many years, accountancy firms and law firms have operated as LLPs. Many of the mainstream businesses have great opportunities functioning as LLPs. However, it’s still fairly unusual.” What Mr Welch forsaw as one of the major challenges of the change – essentially persuading staff to become ‘self-employed’ members of the LLP – was not as problematic as he predicted. More than 80% of staff became members following the transition with the remainder continuing as directly employed staff. Further explaining his thinking, Mr Welch said: “We also wanted to share some of the ‘thrill’ with our members and as they’re not now directly employed it means they have more responsibility for their work and the consequences of that work and that has worked very well. “We want people to be challenged and want to strive forwards for the long term good.” Therefore, when the bonus pot is shared around the company, which is staffed by consultants, developers, administrators and accountants, direct employees miss out. However, Mr Welch claims there is no bitterness as those that didn’t sign up to the LLP know the parameters. He also said the LLP model is becoming increasingly attractive to those applying for jobs. “The business has grown hugely since the transition,” he says. “What it has enabled us to do is empower management to take the responsibility away from directors and ‘designated members desks’ and allow our people to make their own decisions. “We have a dozen members of staff who’ve not made the transition. The people who chose not to become members made their choice and that’s their right. “The people who have joined since know that that’s what we offer. In the early days we found some resistance to the LLP idea. Today people are more familiar with the process.”
“The book stops with every member. It’s a well worn phrase but it rings true: ‘we’re all in it together’.” Mr Parr added: “The LLP structure is strong for the knowledge-based economy because at the end of the day a knowledge based economy is based on knowledge based businesses and they have the people that contribute to the intellectual value of the business.” “As a manager at the top you can concentrate on innovation and development,” concludes Mr Welch. “I have zero staff issues coming to my desk. I also have no project issues coming to my desk as they are being dealt with by other people.” At the same time as the move to LLP status, Welcom Software acquired a company which has allowed the business to increase its foothold in the digital marketing space in areas including search engine optimisation and paid search. However, much of its work is based around creating software in areas including e-commerce, store cards, accounting tools and lending products. Looking to the future Mr Welch said: “In simple terms it’s growth. We’ve got a strong product pipeline. We’re on with some really exciting R&D that affects all areas of the business. We’re also looking at a strategic acquisition.” More articles in
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Mr Parr (pictured right) said the LLP model was one traditionally used by professional practices such as law firms because of their historic partnership structures, but that there were opportunities to be had within all industries which might more normally operate through limited companies. 
Paul Byrne (pictured left), office managing partner at Baker Tilly in Leeds, said: “The LLP model keeps all members on the straight and narrow. It engenders great commitment to the company from members. That in turn helps with staff retention. They also more closely recognise the reward they get for their efforts. It makes the business a meritocracy.