Limited Liability Partnership
LLPs are a relatively new form of business structure, having only been made possible by the enactment of the Limited Liability Partnership Act 2000 on 6 April 2001.
An LLP combines the features of a partnership along with the limited liability and creation of a legal person normally associated with limited companies.
It differs from a partnership in that:
An LLP can be incorporated wherever "two or more persons associated with the carrying on a lawful business with a view to profit... have subscribed their names to an incorporation document..." (LLP Act 2000).
LLPs are incorporated by registration at Companies House. An incorporation document (Form LLP2) to which the initial members have subscribed must be submitted to the Registrar of Companies along with a registration fee. The incorporation document will set out the name of the LLP along with its registered office, as well as the names, full addresses and dates of birth of each member.
An LLP does not have a memorandum or articles of association or a specified management structure. Consequently, in order to avoid potential disputes over the management of the company and the conduct of the members it is important that the members enter into a valid and effective agreement between themselves before the LLP is incorporated.
The members agreement should cover the sort of issues dealt with in a normal partnership agreement. Partnership law is expressly disapplied from LLPs and as such it is important that the members agreement is extremely comprehensive. If the members agreement is silent on certain issues there is a provision under the LLP regulations for certain default provisions to apply, but those default provisions would almost certainly be unsuitable.
For more information please contact Simon Morris.
An LLP combines the features of a partnership along with the limited liability and creation of a legal person normally associated with limited companies.
It differs from a partnership in that:
- it is a body corporate and therefore a fictional legal person with its own property and liabilities, separate from its members;
- because it is a separate legal entity the members are not jointly liable for contracts entered into by the LLP nor liable for any wrong-doings committed by the LLP (however, members will be liable for their own acts of negligence or wrong-doing much in the same way as company directors);
- an LLP is capable of creating floating charges over its assets, thus enabling the raising of finance on book debts for instance;
- LLPs are required to file accounts at Companies House showing a true and fair view according to UK general accepted accounting principles; and
- the rules on fraudulent and wrongful trading apply to an LLP in much the same way as they do to a limited company, as do the Companies Act provisions regarding the disqualification of directors, insolvency and winding up procedures.
Formation of an LLP
An LLP can be incorporated wherever "two or more persons associated with the carrying on a lawful business with a view to profit... have subscribed their names to an incorporation document..." (LLP Act 2000).
LLPs are incorporated by registration at Companies House. An incorporation document (Form LLP2) to which the initial members have subscribed must be submitted to the Registrar of Companies along with a registration fee. The incorporation document will set out the name of the LLP along with its registered office, as well as the names, full addresses and dates of birth of each member.
Structure
An LLP does not have a memorandum or articles of association or a specified management structure. Consequently, in order to avoid potential disputes over the management of the company and the conduct of the members it is important that the members enter into a valid and effective agreement between themselves before the LLP is incorporated.
The members agreement should cover the sort of issues dealt with in a normal partnership agreement. Partnership law is expressly disapplied from LLPs and as such it is important that the members agreement is extremely comprehensive. If the members agreement is silent on certain issues there is a provision under the LLP regulations for certain default provisions to apply, but those default provisions would almost certainly be unsuitable.
For more information please contact Simon Morris.
