LLPs

Question 1

What governs LLPs?

Answer 1

Limited Liability Partnerships Act 2000

Question 2

What are the formalities of the creation of an LLP?

Answer 2

Registration with the registrar of companies

Cannot trade until it receives a certificate of incorporation

Question 3

What information is required for the creation of an LLP?

Answer 3

Name
Registered office
Names of members
Details of PSCs

Question 4

What is significant about an LLP compared to a general partnership?

Answer 4

Formalities

Distinct legal personality from members

Question 5

What is required for the admission of a new member?

Answer 5

Unanimous consent of members

Question 6

What happens if there is no designated member?

Answer 6

All members are responsible

Question 7

What is the role of a designated member?

Answer 7

appoint auditors, submit annual confirmation statement, sign and file accounts, and comply with statutory filing requirements.

Question 8

What is required when there are changes to membership / identity of designated member?

Answer 8

Registrar of companies must be notified within 14 days

Question 9

Actual authority - when is a firm bound?

Answer 9

Done in a way showing an intention to bind the firm,
By any person actually authorised by the firm to undertake the act
Courts also recognise implied actual authority if the partners have allowed a partner without express actual authority to regularly do an act.

Question 10

What is apparent / ostensible authority?

Answer 10

The act of a partner carrying on in the usual way of business of the kind carried out by the firm will bind the firm and the other partners unless:

The partner had no authority to act; and
The person with whom the partner was dealing either: (1) knew the partner had no authority to act, or (2) did not know or believe the person they were dealing with was a partner

Question 11

What is the procedure for outgoing members?

Answer 11

Give notification to companies house within 14 days

Give reasonable notice to other members

Question 12

What is a PSC?

Answer 12

Directly or indirectly holds rights over more than 25% of the assets on winding up

Directly or indirectly holds more than 25% of the rights to vote on those matters which are to be decided upon by a vote of the members of the LLP

Directly or indirectly holds the right to appoint or remove the majority of those entitled to take part in management

Otherwise has the right to exercise, or actually exercises, significant influence or control over a trust, or the members of a firm that is not a legal person but meets any of the other specified conditions in relation to the LLP

Question 13

How is profit distributed?

Answer 13

Equally unless partnership agreement states otherwise

No right to be remunerated for acting in the business management of the LLP

Question 14

How does indemnity operate?

Answer 14

LLP must indemnify each member in respect of payments made and personal liabilities incurred by the member in the conduct of the business of the LLP

Question 15

How is it managed?

Answer 15

in absence of agreement, every member decides ordinary matters. No change to nature of business without consent of all members.

Question 16

What does the duty to account mean?

Answer 16

Must account for competitor profits

Must account for anything conferring a personal benefit

Question 17

What is the LLP required to file at Companies House?

Answer 17

The LLPs annual accounts;

An annual confirmations statement (a statement confirming or updating information on a file with Companies House);

Details of the appointment and removal of members;

Details of any changes to the details of the members; and

Details of any changes to the registered name or registered office of the LLP

Question 18

What is the liability of members for debts of the LLP?

Answer 18

Limited to their capital contribution

Question 19

Is there personal liability for LLP debts?

Answer 19

No save for the rules regarding wrongful and fraudulent trading under Insolvency Act 1986

Question 20

How does voluntary striking off operate?

Answer 20

If the members of an LLP decide that it is no longer needed, or if the LLP is dormant and not trading, a majority of members may apply to the Registrar of Companies for the LLP to be struck of the register and dissolved

Question 21

Can an LLP be involuntarily struck off the register?

Answer 21

Yes, if the registrar believes that the LLP is no longer carrying on business

Question 22

When is it not possible for an LLP to be struck off?

Answer 22

The LLP has traded or otherwise carried on business in the last three months;

The LLP has changed its name in the last three months; or

The LLP is the subject of any insolvency proceedings

Question 23

What notices are required for voluntary striking off?

Answer 23

Those making the application must notify the other members

Registrar of companies will place a notice in the London Gazette - struck off three months after this

Question 24

How does insolvency operate?

Answer 24

LLP can be liquidated (voluntarily or compulsorily), put into administration or be the subject of a voluntary arrangement (a composition with its creditors)

a fixed charge receiver or an administrative receiver (that is, a receiver or manager of the whole, or substantially the whole, of an LLP’s property) may be appointed by certain secured creditors of the LLP

Question 25

How does taxation operate?

Answer 25

Not a taxable person. Members are taxed individually (income tax)

Question 26

Can an LLP grant a floating charge?

Answer 26

No