Partnerships and LLPs solicitors

If you have established a partnership or a limited liability partnership (LLP), or you intend to start a business in this form, it is crucial to enter into an agreement with your business partners to regulate your relationships. Without an agreement, statutory rules will apply and could lead to disputes or an unsuitable structure for your needs.

JMW’s corporate team regularly advises in relation to partnership and LLP agreements, on everything from determining your structure (usually based on taxes and personal liability), to drafting agreements that clarify the rules, rights and legal obligations for each partner. Putting the right legal documents in place can minimise the risk of disputes and give your partnership the best chance at success.

Find out more about how the corporate team at JMW can assist in establishing a partnership or LLP and putting relevant agreements in place by calling us on 0345 872 6666. You can also complete our online enquiry form to request a call back at a convenient time.

How JMW can help

JMW's award-winning corporate team has a wealth of experience in establishing LLPs for businesses, professional services firms and others. We can discuss your needs, advise on how the default provisions of a traditional partnership would affect decisions and structural considerations, and draft a bespoke agreement that protects your legal position.

In the Chambers Guide, clients praised the corporate team’s success in giving bespoke advice and a professional, sensible and unbiased service. Our services include:

Our corporate team works closely with JMW’s specialists in employment law, intellectual property law and commercial property law to handle every element of LLPs and partnerships. We can anticipate potential disputes, offer advice on the treatment of LLP members' personal assets compared with the LLP owning assets, and ensure that regulatory requirements are taken care of on your behalf.

Our corporate law partners

JMW’s experienced corporate team has practical experience in running businesses, and our solicitors can apply their thorough knowledge of LLP and partnership law to create a strong agreement for your purposes.

What should a limited liability partnership agreement contain?

Fundamentally, an LLP agreement should set out how the LLP is owned, managed, funded and taxed, and procedures for members to exit the agreement. Without putting a written agreement in place, statutory default rules may apply under the Partnership Act 1890 or the Limited Liability Partnership Regulations 2001. The provisions imposed by this legislation are often unsuitable, and may include equal profit sharing and broad management rights for all members. As such, it is strongly advisable to have a bespoke agreement drafted.

By implementing a bespoke agreement that meets the legal requirements, but which also clarifies the rights and obligations of all members, you can minimise the risk of disputes and manage the contributions of individual partners or members correctly. As such, an agreement should contain provisions concerning:

The parties and LLP details

The agreement should provide key information about the LLP itself, including its registered office, business purpose and the names of founding members and designated members. For the purposes of financial reporting, it should also provide an accounting reference date and financial year, and confirm that the LLP is a separate legal entity. This is important as it means that members enjoy limited liability for business debts - partners are not generally liable for LLP debts beyond agreed contributions.

Member roles, classes and duties

If there are different classes of members, the agreement should explain them and set out their rights in terms of voting, profits, management and exits, along with their capital obligations and duties. Classes of members include:

• Equity members
• Fixed-share members
• Salaried members
• Corporate members
• Non-voting members

This is especially important where the LLP wants to avoid every member having equal rights to management and profits - under the default rules, voting rights and others are generally assigned equally.

The agreement should specify any confidentiality requirements, provisions for managing conflicts, time commitments, compliance, and any necessary non-compete clauses during membership. If anti-bribery, anti-money laundering, data protection or other regulatory compliance concerns apply, the agreement should include these. Finally, voting thresholds and other matters relevant to decision-making should be explained.

Under the law, every LLP member is an agent of the LLP, but the LLP may not be bound to agreements where the member lacks authority and a third party knows that or does not know/believe the person is a member. Either way, the document should set internal authority limits and require Companies House filings, website updates, client/customer notices, bank mandate updates, and contract notices when a member leaves.

Capital and funding

The agreement should include basic financial information like initial capital contributions, whether they are cash, assets, goodwill, services, or transferred business assets, and whether members must make further contributions. It should clarify whether members can be required to guarantee bank borrowing or leases, and the treatment of loans from members in general. Finally, it must provide terms for the repayment of capital on retirement, expulsion, death, insolvency, or winding up.

Profits, losses and accounts

Members of an LLP are taxed on their share of profits, with each member paying tax on their share. As such, the document should clarify the partnership's position on profit shares, tax reserves, drawings, bonuses, the treatment of losses and overdrawn accounts and the timing of profit distributions.

Default rules allow every member access to books and records, so any practical limits or confidentiality protocols concerning financial matters should be expressly drafted. The agreement should cover:

• Accounting standards
• Accountants and auditors
• Management accounts
• Inspection rights
• Bank mandates
• Budget approval
• Tax filings
• Document retention
• Audit requirements

It should name who is responsible for filing annual accounts and who approves them. Advice on Corporation Tax and the LLP's separate legal entity status when drafting the agreement is key to offering clarity in this section of the document.

Additional provisions

The document should outline the rules for new members joining, including capital contributions, profit share terms and whether incoming members assume past liabilities or are bound by existing restrictive covenants and confidentiality obligations. The default provisions require unanimous consent for introducing a new member, but this is not always the best approach for many businesses.

For members leaving, the agreement should provide a complete exit code, including:

• Notice periods and terms for garden leave
• Retirement age, if any
• Handover duties, including client or customer handovers and treatment of work in progress
• Valuation of outgoing members’ interest
• Repayment schedule
• Deductions for debts, tax, negligence claims, or overdrawn accounts
• Loss of profit entitlement after exit
• Release from guarantees
• Continuing confidentiality and restrictive covenants.

Finally, it should include any necessary restrictive covenants that are proportionate and could serve to protect goodwill, which may include non-solicitation of clients or customers, and provisions against poaching staff. As a law firm with strong experience in drafting partnership agreements across different sectors in the UK, JMW can advise you on the specific terms your agreement should contain, draft the document on your behalf and support you to monitor ongoing compliance or take action where necessary.

Do I need a solicitor to prepare an LLP agreement?

While the default legal position or a pre-written agreement may suffice for your needs, it is always best to consult a solicitor. JMW's corporate solicitors can advise you on potential unanticipated consequences of a default agreement, and prepare a bespoke contract that better suits your needs.

We begin by interviewing founders or existing members and producing a term sheet before drafting. This aims to answer the following questions:

• How much will each member contribute?
• What will each member control?
• How much does each member get paid?
• Who has the power to block decisions?
• Who can leave?
• Can anyone be forced out?
• What happens if a dispute arises?

In response, we will check whether an LLP is appropriate compared with a limited company, general partnership, limited partnership, or contractual joint venture. Then, we can compare the default legal position of an LLP to the proposed bespoke position in your agreement, so you can be sure that no provisions concerning equal profit sharing, universal management rights, or unanimous admission rights are left in place.

Our strength is in drafting agreements that are technically exact, but which nevertheless can be read and understood without any legal knowledge. Our knowledge of the law and businesses across the UK means that we can tailor covenants to your LLP’s actual business, client base, geography, and member role. We know how to implement unique restrictions and ensure that they are enforceable, which is vital to the success of an LLP agreement.