What are Limited Liability Partnerships?June 10, 2016 | Legal
Limited Liability Partnerships (LLPs) were introduced by the Limited Liability Partnerships Act 2000 (LLPA 2000), with the aim of providing partners with more protection from liability. Many partnerships and LLPs are professional firms such as Solicitors and Accountants.
The LLP is a corporate body, which means that, like a Company, it has a separate legal personality from its partners. The partners are known as Members, and have full limited liability. The result is that the LLP itself will contract in its own name, is liable for its own debts, and can sue and be sued. The Members are agents of the LLP, who have certain rights and duties, and are protected from liability up to the amount of the financial contribution which they may make to the LLP.
An advantage of the LLP is that there is great flexibility in terms of the internal business and management structure. Members may agree this structure in an LLP Agreement, which governs how an LLP is run and the relationship between the LLP and its Members, and between the Members themselves.
It is very important to have an LLP Agreement in place as, in the absence of an Agreement, there are statutes and regulations which govern LLPs and provide default rules, which may not suit everyone’s circumstances. According to the default rules, each Member has the right to take part in the management of the LLP, and the right to an equal share in the capital and profits. Members also have a fiduciary duty (a duty of good faith) to the LLP, although there is no fiduciary duty owed by the LLP to the Members, or between Members, unless otherwise agreed in the LLP Agreement.
An LLP must have at least two Members, who must subscribe to an incorporation document, and deliver it to Companies House. The LLP has been incorporated once Companies House has registered the incorporation document and issued a certificate to evidence compliance with the LLPA 2000.Back to news >