3. Limited Liability Partnerships

Question 1

What four things must be included in the incorporation documents for an LLP that are submitted to Registrar of Companies?

Answer 1

1. Name of the LLP
2. Registered office address
3. Names/addresses of partners
4. Details of people with significant control

Question 2

If an LLP is not properly set up, what is the result?

Answer 2

A general partnership forms and the partners have unlimited liability

Question 3

What is the minimum number of members?

Answer 3

Two

Question 4

For how long can an LLP operate with one member, and what happens after that period?

Answer 4

Six months, after which the single member is personally liable for debts accrued after the six month period. Limited liability becomes available again as soon as.a new partner joins the LLP.

Question 5

Unless the agreement provides otherwise, what is required to add a new member?

Answer 5

Consent of all members

Question 6

What is the role of the designated member?

Answer 6

Perform administrative and filing duties of the LLP, including:

• Appoint and remove auditors
• Submit annual statements
• Sign and file accounts
• Comply with statutory filing requirements

Question 7

What is the position if the LLP does not designate a member?

Answer 7

All members are treated as designated members

Question 8

Within what time period of a change to the designated members must the Registrar be notified?

Answer 8

14 days

Question 9

What is the position regarding agency and authority in an LLP?

Answer 9

The same as a general partnership.

Every member is an agent of the LLP.

LLP not bound by anything done if a member has no authority and the person with whom they are dealing knows they have no authority or doesn’t think they do

Question 10

Within what time period of a member giving notice of their intent to cease to be member to other members must the Registrar be notified?

Answer 10

14 days

Question 11

Until when is a former member deemed to still be a member for the purposes of dealings with third parties?

Answer 11

Until notice is given to the person or sent to the Registrar

Question 12

What four possible ways could someone’s stake in an LLP make them a person with significant control (PSC)?

Answer 12

1. Directly or indirectly holding more than 25% of the surplus assets upon winding up
2. Directly or indirectly holding more than 25% of the voting rights
3. Directly or indirectly holding the right to appoint or remove the majority of management
4. Otherwise having the right to exercise or actually exercising significant control or influence

Question 13

How are profits shared in the absence of agreement?

Answer 13

Equally

Question 14

How is management and voting dealt with?

Answer 14

Roughly the same as a general partnership, e.g. equal right to manage, ordinary matters require simple majority; change to nature of business requires unanimity.

Question 15

What is the duty to account in an LLP?

Answer 15

Same as general partnership; must account for benefits derived from partnership without consent, and competing profits

Question 16

Are members in an LLP liable for wrongful acts or omissions of other members in the course of business or with the LLP’s authority?

Answer 16

No, but the LLP is liable with the offending member

Question 17

In order to benefit from limited liability, what five things is an LLP obligated to make available to the public?

Answer 17

1. Annual accounts
2. Annual confirmation statement

Details of:
3. Appointment/removal of members
4. Changes to members’ details
5. Changes to LLP name or address

Question 18

What is the extent of the liability for a member of an LLP?

Answer 18

Their capital contribution

Question 19

What proportion of the members may apply to the Registrar for an LLP to be struck off and dissolved?

Answer 19

Majority

Question 20

In what three circumstances is it not permitted to strike off an LLP?

Answer 20

1. LLP has traded or carried on business in the last three months
2. LLP changed name in last three months
3. LLP is the subject of any insolvency proceeding

Question 21

What four parties must the members making the application to strike off notify?

Answer 21

1. Other members
2. Creditors of the LLP
3. Employees
4. Trustee of any pension fund

Question 22

What time period after the notice to strike off will the Registrar strike off the LLP, dissolving it?

Answer 22

Three months

Question 23

How is an LLP taxed?

Answer 23

Members are taxed individually for their share of profits/gains

Question 24

What are the two requirements for property transferred to an LLP within one year of incorporation to be exempt from stamp duty land tax?

Answer 24

1. Property must be transferred from a person who is/was a partner in a partnership comprised of members of the LLP, or holds property as a bare trustee for such a partner and
2. Proportional share of the property in the LLP remains the same as the proportional ownership in the property in that partnership