An LLP agreement is a formal, legally binding agreement between the partners of a limited liability partnership (LLP). It defines the rights and responsibilities of members and the rules for running the business, in line with the Limited Liability Partnerships Act 2000 and other LLP legislation.<\/p>\n
In this article, we look at the LLP agreement in detail, including what it normally includes, why it\u2019s important, and how to create one for your UK limited liability partnership.<\/p>\n
An LLP agreement is sometimes referred to as a limited liability partnership agreement, deed or partnership, members\u2019 agreement, or partnership agreement.<\/p>\n
It is commonplace to draw up such an agreement when you set up a limited liability partnership. This is because, unlike companies, LLPs do not adopt articles of association as their governing document.<\/p>\n
While LLP members (partners) have no legal obligation to draft and enter into a formal agreement, it\u2019s strongly recommended. It is an extremely important document because it outlines the rules of the partnership and its members.<\/p>\n
If you do not draft your own agreement, the default provisions in the LLP Act 2000<\/a> and Limited Liability Partnerships Regulations 2001 will apply instead.<\/p>\n
These can be unnecessarily restrictive for partnerships requiring more tailored rules and greater clarity than the statutory provisions provide.<\/p>\n
Typically, an LLP agreement will cover the following areas:<\/p>\n
Additionally, an agreement will usually cover key basics about the LLP, including:<\/p>\n
Essentially, a good LLP agreement should be tailor-made and address every single area relevant to the successful running of a specific partnership.<\/p>\n
By law, LLP agreements are not compulsory, but it is generally agreed and recommended that every LLP has one. Drafting a bespoke agreement is the best way to protect your business and the interests of each member.<\/p>\n
If you don\u2019t create an LLP agreement for your partnership, the default provisions in the LLP Act 2000 and Limited Liability Partnerships Regulations 2001 will automatically apply.<\/p>\n
The default provisions under parts 7 and 8 of the LLP Regulations 2001<\/a> state that:<\/p>\n
These default rules may be perfectly suitable for some LLPs. However, they can be problematic for many others – particularly with regard to equal profit-sharing and decision-making rights.<\/p>\n
Drafting an LLP agreement provides many benefits, ensuring members have far greater control over the business and the way in which it operates.<\/p>\n
Specifically, a carefully written LLP agreement will:<\/p>\n
Going into business always involves some degree of risk, but this uncertainty is compounded when other people are involved. That\u2019s why it is so important to cover all bases and start your partnership on a secure footing.<\/p>\n
Ideally, you should put an LLP agreement in place as soon as you register your partnership at Companies House. It\u2019s best to set out the rules from the very beginning – and there\u2019s a greater chance of members being in agreement at the start of the business venture.<\/p>\n
There is no \u2018model\u2019 LLP agreement available from Companies House. However, you can obtain a draft one online and alter it accordingly. Or, you can ask your solicitor or accountant to help you create a bespoke LLP agreement.<\/p>\n
Alternatively, you can get a free draft LLP agreement from Quality Company Formations. This is included with our Limited Liability Partnership Package<\/a>.<\/p>\n
Unlike the articles of association used by limited companies, an LLP agreement is private. It is not a matter of public record, so there is no need to send a copy of your agreement to Companies House.<\/p>\n
However, it is important that all members have access to the LLP agreement. Therefore, you should issue a copy to each member and retain a copy at your registered office address.<\/p>\n
LLP agreements are optional but highly recommended. Especially in situations where members will not be sharing profits equally.<\/p>\n
If you decide to set up a limited liability partnership, you should create an LLP agreement as soon as possible. This will clarify the rights and responsibilities of members and the rules for running the business.<\/p>\n
If you have any questions about this topic or any other aspect of setting up a limited liability partnership in the UK, please leave a comment below or contact our company formation specialists<\/a>.<\/p>\n"},"excerpt":{"rendered":"