LLP agreements: Back to basics

A limited liability partnership (LLP) is a legal business structure that acts as a hybrid between a traditional partnership and a limited company.

It offers owners the operational flexibility of a partnership while protecting their personal assets from business debts and liabilities.

What is the structure of an LLP?

An LLP is a separate legal entity from its members who are only liable for the amount of money they invest on top of any personal guarantees.

The partnership is incorporated at Companies House and can only be used by profit making businesses.

Members are required to provide a registered address for the business and maintain a complete register of all its members.

There are no restrictions on the maximum number of partners allowed, however, there does need to be at least two members on incorporation, this can be either individuals or limited companies.

Why you may need an LLP

An LLP can be a good choice if you want to run a business with others, while limiting your personal financial risk.

It offers flexibility in how profits are shared and how the business is managed, without the formality of a company structure.

An LLP is particularly useful where multiple partners are contributing to and involved in the business and you want clear protections and responsibilities in place.

It can also provide credibility with clients and stakeholders, as well as potential tax planning benefits depending on your circumstances.

What does an LLP agreement include?

An LLP agreement sets out how the business will be run and how members will work together.

While not legally required, it is strongly recommended as it helps avoid misunderstandings and disputes.

Typically, an LLP agreement covers:

Members’ roles, rights and responsibilities
Profit-sharing arrangements
Decision-making processes and voting rights
Admission and exit of members
Dispute resolution procedures
Confidentiality and restrictive covenants
Capital contributions and drawings

Having a well-drafted agreement ensures clarity and protects the long-term stability of the business.

How we can help

Setting up an LLP can be an excellent way of reducing liability from business decisions, however, it is important that an LLP is set up correctly to ensure that it is complaint to LLP rules.

Our talented solicitors are here to help you set up an LLP with ease.

Get in touch today if you are considering setting up an LLP.