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Limited Liability Partnerships (LLPs) and Other Partnerships
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.
JMW’s corporate team regularly advise in relation to partnership and LLP agreements.
Find out more about how the corporate team at JMW can assist in putting 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
Our services include:
- LLP members agreements
- Partnership agreements
- Forming the LLP
- Converting your existing partnership into an LLP or limited company
- Resolving disputes
- Alternative business structures
- Admission of new LLP members or partners
- Members or partners leaving the LLP or partnership
- Dissolution of LLPs or partnerships and liabilities of members on termination of an LLP or partnership
- Status of members/partners and employment law rights
- Enforceability of restrictive covenants
- Cross-option insurance agreements
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 will ensure they are legal and accurate, and that partnerships are compliant with tax, VAT and PAYE.
In the Chambers Guide, clients praised the corporate team’s success in giving bespoke advice and a professional, sensible and unbiased service.
How Do I Set Up an LLP?
Since the Limited Liability Partnerships Act 2000 came into force, the creation of LLPs has offered traditional unincorporated partnerships a new way to organise their business structure with reduced personal responsibility for its debts.
Unlike regular partnerships and sole traders, the LLP itself, and not the individual people involved, is responsible for any debts it accrues. Any two or more people who want to set up a profit-making business together can form an LLP. Companies and other LLPs can also be members of an LLP.
When first established, HM Revenue and Customs (HMRC) will need to be informed of the status of the business and an annual Partnership Tax Return and Statement will need to be completed by a nominated member. Although that person will have official responsibility for the return, all of the members will be jointly liable for any penalties that result from it being submitted late or incorrectly.
Profits from the business are shared among the members of the LLP and, as individual members will be self-employed, they need to be registered with that status and will be responsible for paying their own income tax. However, unlike limited companies, the LLP does not have to pay corporation tax. Companies that are LLP members will have to pay corporation tax on their profits from the LLP.
Do I Need a Members Agreement?
A members agreement is not obligatory; however, once it has been agreed and signed by the members, it becomes a legally binding agreement on all the parties.
If an agreement is not drawn up, the LLP will be governed by the measures set out in the Limited Liability Partnerships Act 2000 and these measures are unlikely to cover all the aspects of how the members wish to run the business. For example, where an LLP operates without a members agreement, each member is automatically entitled to an equal share of the profits (and losses). This principle applies regardless of the LLP's individual situation.
A formal agreement allows the members to agree to split the profits in accordance with specific profit-sharing arrangements, and can, therefore, reflect circumstances such as part-time working, years of service or amount of investment. When a corporate solicitor is asked to prepare a members agreement, he will consult the members about their exact requirements and incorporate these as bespoke terms of the agreement.
A formal members agreement would also cover many issues that arise in the life of an LLP, such as retirement, death, holidays, admission of new members and expulsion. Other provisions are likely to include the amount of any capital contributed by each member to the business and the division of work and management responsibilities between the members.
Talk to Us
Find out more about how our expert solicitors can assist with your LLP or partnership by getting in touch and discussing your plans and options in more detail. Call us on 0345 872 6666 or complete our online enquiry form and we will call you back as soon as we can.