Limited liability partnerships

Question 1

Formation of an LLPs 2(1)(a) LLPA

Answer 1

2 or more persons associated for carrying on a lawful business with a view to profit can incorporate an LLP.

Registration at Companies House:
The subscribing members fill out a Form LL IN01, which is sent to Companies House with the relevant fee. The form must state name of the LLP, its registered office’s address, and which members, if not all of them, are to be designated members.

Certificate of Incorporation:
Once registered, the Registrar of Companies issues a certificate of incorporation as conclusive evidence that all legal requirements have been complied with. The name of the LLP will be entered on the index of company names and given a number

1) electronically through electronic software filing (faster and cheaper)

2) paper filing

Question 2

Continued registration

Answer 2

• change of name
• change of registered office
• changes in membership
• creation of a charge
• annual confirmation statements
• annual accounts

Question 3

What internal record needs to be kept?

Answer 3

An LLP must maintain some in-house records, including registers of its members and of its ‘people with significant control’ (those with at least a 25% interest in the LLP).

Question 4

who are the member of an LLP, who can be a member

Answer 4

Members of an LLP are those who subscribed to the incorporation document and;
those who became members at a later date by agreement with the existing members.

Both individuals and corporate bodies can be members of an LLP

Question 5

what are the minimum requirements for members

Answer 5

• at least 2 formally appointed members at all times
• at least 2 members pf the LLP should be desiganted members

Question 6

Continuing LLP filing

Answer 6

• change of name
• change of registered office
• changes in membership
• creation of a charge
• annual confirmation statement
• annual account

Question 7

Corporate characteristics of an LLP

Answer 7

• separate legal personality
• limited liability
• LLPs file accounts at CH- loss of privacy
• LLPs can create a floating charge over the assets, unlike a partnership
• • Some provisions of company law (CA 2006) and corporate insolvency law (as in Insolvency Act 1986 and Company Directors Disqualification Act 1986) apply to LLPs in modified form. For instance, fraudulent trading, wrongful trading, and disqualification of director provisions, insolvency and winding up procedures apply to LLPs and their members.

Question 8

Partnership characteristics LLP

Answer 8

• No charge capital or capital maintenance requirements
• No distinction between members and the management board.
• members can decide how to share profits, management duties, how decision are made- FLEXIBILITY
• The members agreement, if there is one, is like a private partnership agreement
• LLPs are tax transparent
• The corporate insolvency regime applies to LLPs but there is an important disadvantage for members of an LLP compared to company  LLPs are subject to the ‘clawback’ rule, which means that money taken out of the LLP by members up to 2 years before winding up starts can be clawed back into the pool of assets available to repay LLP’s creditors

Question 8

2001 regulations 11 default rules

Answer 8

1. Members share equal in capital and profits
2. An LLP must indemnify its members for payments made and personal liabilities incurred by them in the ordinary and proper conduct of the business of the LLP
3. Every member may take part in management
4. No member is entitled to renumeration for managing the LLP
5. No person can become a member or assign their membership without the consent of all existing members
6. Ordinary decision making may be by the majority of the members. Any proposed change to the nature of the business requires the consent of all the members.
7. The books and records of the LLP must be available for inspection by the members at the registered office
8. Each member must give true accounts and full information of all things affecting the LLP to any member or his legal representative
9. If a member (without consent) carries on any business of the same nature as, and competing with, the LLP then they must account for and pay over to the LLP all profits made by them in the business.
10. Every member has a duty to account for benefits derived from transactions with the LLP business or property.
11. There is no implied power of expulsion of a member by the majority unless the members have expressly provided for such a power in a Members’ Agreement