Lecture notes Business Law and Practice (LW1704) LLPs notes

Limited Liability Partnerships (LLPs)

 Reintroduced in April 2001 by the Limited Liability Partnership Act 2000 
statutory creation offering limited liability
 Well received by professional firms but also available to any type of business
 Came in the wake of a number of scandals  Enron  many accountancy firms
fixing books of Enron to make it look like it was doing better than it was 
sent shockwaves to professional firms  prior to 2001 Act they were acting
as partnerships with unlimited liability and potentially bankruptcy  Lobbied the
government to limit their lability → a lot of solicitors operate as LLPs
 S.1(5) LLP Act states that the law of partnerships does not apply to LLP
o LLP Act provides for the creation of LLPs and is supplemented by
Limited Liability Partnership Regulations 2001 and Limited Liability
Partnerships (no.2) Regulations 2002
 LLPs have a ‘legal personality’  separate legal entity  no distinction with
partnerships
 incorporated association  Companies House forms
 LLPS own the assets of the business and are liable for its debts.
 Change in membership does not affect its continued existence  if it was a
partnership and there was no provision to say otherwise, a change in membership
would dissolve it.
 An LLP can do anything that a natural person can do, enter contracts, sue and be -
sued and hold property.
 Like a general partnership, if the agreement is silent the default position is statutory
 Limited Liability Partnership Act 2000

What is limited liability?
 3rd parties who deal with an LLP are contracting with a distinct legal entity, not with
the partners as common law partners
 If the LLP defaults on a debt then the 3rd parties recourse is with/against the LLP not
the individual partners
 In a general partnership the partners and the partnership are one and the same.
 Members of an LLP  liability is limited to what is stated in LLP agreement 
could be as little as £1

Creation
 Register with the Registrar of Companies House using a form LL IN01 with the
relevant fee
 Requirements:
o 2 or more persons associated with the business
o Name ends in LLP / limited liability Partnership
o Location of registered office
o Name and address (home and service) of the persons who are members of
the LLP
 Registrar will issue a ‘certificate of incorporation’  certificate brings the LLP into
existence  shouldn't enter into contracts or lease agreements until you have the