Watford Solicitors

FAQS ON PARTNERSHIP LAW – WATFORD SOLICITORS

Partnership FAQs

What is the purpose of drafting a partnership agreement ?

Without a partnership agreement, your partnership will be subject to the terms of the Partnership Act 1890, which stipulates, amongst other things, that:

• All the partners have an equal say in how the partnership is run.
• All the partners will be entitled to an equal share of any profits made.
• All the partners are jointly liable for any obligations the partnership undertakes and any losses that are made.
• Partners can enter into obligations on behalf of the partnership, irrespective of their riskiness.
• The partnership will come to an end if one of the partners gives notice to the other partners or dies.

Naturally, a partnership agreement allows you to specify how you want the partnership to be run, including how profits are to be shared, how disputes are to be resolved, who exercises control of the partnership and to what degree, the extent of personal liabilities, ways in which the partnership will come to an end, amongst other considerations.

What is a Limited Liability Partnership ?

A Limited Liability Partnership (commonly abbreviated to “LLP”) is a type of partnership which incorporates certain features of limited companies, including limited liability for members of the partnership.  An LLP, much in the same way as a company, can be thought of a distinct legal entity in its own right, which creates a distinction in liability between the partnership itself and the partners.

Why bother creating an LLP ?

Whilst creating a partnership is very simple legally, creating an LLP requires certain channels and procedures to be followed, which can prove to be more burdensome.  However, if the correct procedures are followed, an LLP has a distinct advantage of limiting the liability of partners, such that the partners will not be personally liable for the losses and obligations of the partnership unless it can be shown that the partners acted recklessly.

What obligations will I have if I create an LLP ?

By virtue of their limited liability status, if you create an LLP you will be required to fulfil many of the obligations applicable to a company, including providing financial information, filing annual returns, notifying Companies House of any changes to the membership of the LLP and addresses of the members.

Does an LLP have to be registered ?

Yes, creating an LLP is, in many ways, similar to a company and you therefore have to make an application to Companies House to have an LLP registered.