What is the difference between a Partnership and a Limited Liability Partnership?
A partnership – usually referred to as a general partnership – is an arrangement between two or more people who work together in business with a view to making a profit. A general partnership is not a separate legal entity and the partners will share in the profits and the losses of the business. The liability of the partners is unlimited. The profits of each partner is taxed as personal income.
However, a limited liability partnership (LLP) is a separate legal entity which means that the partners (referred to as members in an LLP) do not, as a general rule, carry unlimited liability for the liabilities of the business. The profits of each partner is taxed as personal income in the same way as in a general partnership.
A general partnership is governed by a partnership agreement and an LLP is governed by an LLP agreement. Each type of agreement has separate considerations and legal advice should be sought before entering into such an arrangement.
Why (or when) would someone need this service?
A Partnership or LLP Agreement is suitable for the partners of a new business or partners who are already in business together but without a written agreement in place. Your agreement will cover a range of matters in connection with your business, such as:
- The responsibilities of each partner or member;
- The distribution of profits and allocation of losses;
- Provisions concerning the exit of a partner or member;
- The death, retirement or expulsion of a partner or member;
- The voting requirements and rights of each partner or member.
How does the process work and what are the steps?
If we are instructed to prepare the Partnership or LLP Agreement, we provide a questionnaire to get the parties thinking about how they wish to regulate their relationship. We will then provide the draft agreement for you to review.
Alternatively, if we are instructed to review a Partnership or LLP Agreement which is prepared by another party, we would discuss this with you before providing our advice on the draft. You will then be best placed to decide whether the draft meets your requirements and understanding or if any amendments should be made.
Why are Grant Saw the best people for the job?
Our lawyers are highly experienced in advising on partnership and LLP matters. We understand the problems that arise in practice frequently and will discuss these with you at an early stage, so that you can be confident that your business is set up on the right footing. We also understand the most common ways that disputes between partners arise and we will draft the agreement with the aim of reducing the potential for disputes to arise in your business.
Our lawyers would be pleased to discuss your requirements with you and provide you with a costs estimate. Please get in touch with us here.
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