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How to Make an LLP Agreement
Use this LLP agreement to enter into a limited liability partnership.
A limited liability partnership (LLP) agreement is a type of business partnership agreement that combines the flexibility of a traditional partnership with the advantages of corporate limited liability.
Put your business partnership onto a secure footing with an LLP agreement that limits your liability and sets clear rules for sharing power and profits.
Use this LLP agreement:
This LLP agreement template covers:
For more information, read Setting up a partnership and Running a business partnership.
This straightforward LLP agreement is ideal for businesses run by several owner-managers. Not only does it limit liability but it also sets clear rules for sharing power and profits. It provides a sound basis for the operation of a partnership and deals with a variety of aspects from incorporation and decision making through to members leaving.
You must register your LLP at Companies House. When you do this, you will get a certificate of incorporation, which will include the registered number of the LLP and the date of registration. When choosing a name, make sure it is not already being used by someone else. For more information, read Setting up a partnership.
The registered address is the LLP's official 'home' on record at Companies House. All official correspondence addressed to the LLP is sent to its registered address. The LLP may operate on a day to day basis from a different address to its registered address.
The date of incorporation is the date when the LLP is registered at Companies House and is on the certificate of incorporation.
An accounting year (or 'financial year') is usually a 12-month period for which the LLP has to prepare accounts. For new LLPs, the year-end date will automatically be set as the last day of the month after the first anniversary of the LLP's incorporation. But you can agree to change this to a more convenient date, using form LL AA01 available from Companies House.
Designated members are responsible for making sure the LLP complies with its legal obligations and they have authority for money transfers. This LLP agreement makes all members 'designated members', meaning that all members are equally responsible. An LLP must have at least 2 designated members by law.
It's common for cheques and money transfers above a certain threshold - which you can set in this LLP Agreement - to be authorised by at least two designated members. Amounts below the threshold can be authorised by one designated member.
Any borrowing, lending, guarantee given or purchase made by the LLP above this amount will also need the consent of all the members. The threshold will depend on the type of business and the sort of amounts typically involved on a day-to-day basis.
On a specified day of each month, members can draw down their profit share during the year, rather than wait until annual accounts have been drawn up after the end of an accounting year. However, members must be careful to ensure that what they draw from the LLP on account of expected profits are realistic amounts based on profits actually made.
When setting up an LLP, you can include a schedule listing the property owned by the LLP at the start of the agreement. This provides a record of what each member has contributed to the LLP (ie cash or non-cash assets) at the beginning. It can also show what the individual members intended will not be owned by the LLP, but instead lent or licensed to the LLP.
If a member contributes assets rather than money, the amount which the members agree makes up the value of those assets must be determined.
Rather than distribute to the members their 'gross' profit share (ie profits including tax), you can make the LLP responsible for holding back the tax the auditors expect will be due from the members. This approach helps ensure that members pay their tax on time and avoids the risk of a member becoming bankrupt and jeopardising the LLP and its assets.
If a member has withdrawn more money than they are actually entitled to in a year they can repay the excess at an interest rate which is a stated percentage above the base rate of the bank where the LLP has its account.
There are many other matters which can be decided when creating this LLP agreement to ensure clarity of entitlements and decision-making. These include:
annual leave entitlements, family leave provisions and repayment of expenses
other entitlements (eg car allowance, private health insurance and pension scheme)
the minimum number of days' notice to hold a member's meeting
whether, when a members' vote is 'tied', the chairman has a casting vote
how many members need to be present at a meeting to ensure it's quorate/valid
if members vote by proxy (ie appoint someone to vote on their behalf)
the minimum number of months notice for a member to retire from LLP
the number of days a member has to remedy a serious breach of the agreement before the other members can expel them from the LLP
Ask a lawyer if:
your business is a general (not limited liability) partnership or another type of organisation
you want to convert an existing partnership into an LLP
the LLP is registered outside England, Wales or Scotland
some of the LLP’s partners are not individuals
This LLP agreement is governed by the law of England and Wales or the law of Scotland.
Last reviewed or updated 07/06/2022
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