ACCA F4 - Corp and Business Law (ENG)

Part D The formation and constitution of business organisations  11: Partnerships 173

5.2 Property

Partnerships can grant a mortgage or fixed charge over property, but cannot grant floating changes.

6 Limited liability partnerships

A limited liability partnership combines the features of a traditional partnership with the limited liability

and creation of legal personality more usually associated with limited companies.

6.1 Definition of limited liability partnership

Another form of partnership commonly used in England, particularly for professional partnerships, is the

limited liability partnership (LLP). This type of business association was created by the Limited Liability

Partnership Act 2000.

LLPs are similar to limited companies in that they have separate legal identity and unlimited liability for

debts, but the liability of the individual partners (or members) is limited to the amount of their capital

contribution.

LLPs have similar requirements for governance and accountability as limited companies. They are

generally set up by firms of professionals such as accountants and lawyers, who are required by the rules

of their professions to operate as partnerships but who seek to have the protection of limited liability.

A limited liability partnership (LLP) is a corporate body which has separate legal personality from its

members and therefore some of the advantages and disadvantages of a company.

The main advantage of an LLP over a traditional partnership is that the LLP will be liable for its own debts

rather than the partners. All contracts with third parties will be with the LLP.

6.2 Formation

A limited liability partnership may be formed by persons associating to carry on lawful business with a

view to profit, but it must be incorporated to be recognised. LLPs can have an unlimited number of

partners. To be incorporated, the subscribers must send an incorporation document and a statement of

compliance to the Registrar of Companies.

The document must be signed and state the following:

 The name of the LLP

 The location of its registered office (England and Wales/Wales/Scotland)

 The address of the registered office

 The name and address of all the members of the LLP

 Which of the members are to be designated members

A registration fee is also payable to Companies House.

6.3 Internal regulation

LLPs are more flexible than companies as they provide similar protection for the owners, but with less

statutory rules on areas such as meetings and management. No board of directors is needed. As can be

seen in the incorporation procedures, LLPs come under the supervision of the Registrar of Companies

(the Registrar). The members of the LLP are those who subscribe to the original incorporation document,

and those admitted afterwards in accordance with the terms of the partnership agreement.

The rights and duties of the partners will usually be set out in a partnership agreement. In the absence of

a partnership agreement, the rights and duties are set out in regulations under the Act. LLPs must have

two designated members, who take responsibility for the publicity requirements of the LLP.

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