Business Law 2: LLPs Flashcards
Formation of an LLP - and required incorporation documents
- 2+ people carrying on business together with view to make profits
- registration at Registrar of Companies
Incorporation Documents
- Name of LLP (must end with LLP)
- Registered office location and address
- Names and addresses of members (must have at least 2)
- details of people with significant control
What happens if an LLP has less than 2 members
If only one member for more than 6 months, the person who carries on business will be jointly and severally liable with LLC for debts incurred after 6 months
- even if more members join after the debt is incurred liability remains
How can LLP add new members
unanimous decision (unless agreed otherwise)
Must notify Registrar of Companies of changes in membership or changes in designated members in 14 days of change (otherwise offence)
What is a designated member in an LLP and what if LLP does not designate them? How can the designated member be changed?
Responsible for administrative and filling duties:
- appoint/remove auditors
- submit annual confirmation statements
- sign and file accounts
- comply with statutory filling requirements (filling registration docs, notifying CH of changes to members etc)
If no-one is designated then all members treated like designated members
If change is made to designated member then must notify Registrar of Companies in 14 days
Outgoing Members of LLP - Notice Requirements
Must give reasonable notice to other members and notice of Registrar of Companies in 14 days
Still regarded as member by 3rd parties unless they have been notified or notice is sent to Registrar of Companies
What are People with Significant Control/ are there any requirement in realtion to them
Required to keen register of PSC
Must either directly or indirectly hold:
- rights over more than 25% of surplus assets at winding up
- rights over more than 25% of rights to vote
- right to appoint or remove the majority of those entitled to manage LLP; or
- Otherwise has right to exercise significant influence or control over trust or member of a firm that is not a legal person but meets any of the other specified conditions in relation to the LLP
Members Rights to profit and renumeration (all types) in LLP?
- right to equal share of profit and capital (unless otherwise agreed)
- no right to renumeration (unless otherwise agreed)
- right to indemnity for payments made and personal liabilities incurred in conduct of business or anything that preserves the business or its property
What obligations does an LLP have to make documents publicly available
Must file following with Registrar of Companies:
- annual accounts
- annual confirmation statement (statement confirming/updating information on file with CH)
- details of appointments/removals of members
- details of changes to detail of members (names, addresses etc.)
- details of changes to registered name, registered office
Liability of members of LLP for debts
only liable for contributions (what they have invested can be lost)
- are liable for unpaid capital contributions
On winding up only required to contribute to assets if/where required by agreement
May have personal liability for wrongful or fraudulent trading or clawback provisions
Termination of an LLP
Striking off
- Voluntary striking off and dissolution by majority members
- sticking off by Registrar if believe it is not carrying on business
Insolvency
When is it not possible to strike off LLP
Not possible to strike off if:
- LLP has traded/carried on business in last 3 months
- LLP has changed name in last 3 months, or
- LLP is the subject of insolvency proceedings
Process for striking off LLP
- must notify other members, creditors, employees and trustee of pension fund of intention to strike off
- on receipt of application Registrar will publish notice of proposed strike off in London Gazette (giving parties opportunity to object)
- Registrar will strike off 3 months after notice
How are LLPs taxed
- individual members pay income tax
- are liable for income tax even if profits not distributed
Stamp Duty Exception
No stamp duty if property is transferred to LLP in 1 year of its incorporation if:
- transferred by person who is/was partner, or holds property as bare trustee for partner , and
- the proportional ownership of property in LLP remains the same as proportional ownership of property in partnership
What happens if a partner in an LLP carries on a business in competition or derives a personal benefit?
If they do not have consent of the LLP they must account for the profit/benefit made
How does management of an LLP work?
Unless otherwise agreed:
- every member has a vote
- simple majority needed to decide on any ordinary matters
- unanimous decision needed for a change in the nature of the business
