WHAT IS AN LLP AGREEMENT?
A limited liability partnership agreement is a contract made between the members of an LLP to establish a fair relationship between them and to protect their investment. The LLP itself is typically also a party to the agreement.
- The agreement will (amongst other things):
- Set-out the rights and obligations of the members;
- Regulate the members’ investment (capital) in the business;
- Regulate property used and owned by the LLP;
- Set-out how profits or losses will be shared;
- Set-out how the LLP is going to be run; and
- Regulate how important decisions are to be made.
An LLP agreement is a private document. It does not have to be filed with Companies House or on any other public registry (unlike a company’s Articles of Association).
Do I need an LLP agreement?
We strongly recommend that all limited liability partnerships enter into one of these agreements. It will provide clarity and certainty to the relationship between the members.
In the absence of an agreement the applicable legislation will impose certain rights and obligations on the members. For example, the default position is that no member can be expelled from the LLP for any reason whatsoever, and that profits must be shared between the members equally, even if the members have invested significantly different amounts in the LLP. Having a written agreement in place gives members the opportunity to vary or exclude the default position imposed by law, and to establish an agreement in other areas.
Many costly disputes have been resolved and problems avoided as a direct result of entering into one of these agreements.
What is in a Limited Liability Partnership Agreement?
Our Limited Liability Partnership Agreements set-out detailed and practical rules in respect of the LLP and its members, including rules relating to:
Defining the business of the LLP.
- When and how member meetings will be held and how decisions will be made at those meetings. It will also establish whether decisions require unanimity, a majority or a defined number of members to agree?
- Whether there are restrictions on an individual member’s power to bind the LLP.
- The circumstances in which the members may appoint a new member or expel an existing member.
- Whether and what drawings members may make.
- How profits will be distributed.
- How the limited liability partnership is to be financed.
- How limited liability partnership property will be dealt with.
- Which members will be designated members.
- Whether and how members are to be prevented from competing with the LLP.
- Whether and how members are to be prevented from poaching customers and staff.
- How and when the limited liability partnership might be wound up.
LIMITED LIABILITY PARTNERSHIP AGREEMENT SERVICE
Our formation service is only £40 when ordered with an LLP agreement.