346 Chapter 12Partnership, limited liability partnership and choice of legal status
If a limited partner does take part in management, he or she will lose his or her limited
liability. In practice, the Limited Partnerships Act is of very little significance.Limited liability partnerships
Since April 2000, two or more persons have been able to trade together as a limited liability
partnership (LLP). An LLP is quite different from an ordinary partnership, being a separate
legal entity in its own right.
An LLP can carry on trade in any kind of business. Those who participate in an LLP are
known as members of the LLP and not as partners. LLPs have some of the features of an
ordinary partnership but are closer to limited companies. The main similarity with a limited
company is that an LLP is a corporate body and so, in general, only the LLP itself will be
liable for the debts of the LLP. Other similarities with limited companies are that LLPs have
perpetual succession, can own property and can make contracts. However, LLPs do not pay
corporation tax, as companies do, but rather the members are taxed individually on their
share of the profits.Formation of LLPs
LLPs are incorporated by registration with the Registrar of Companies. The process of
incorporation is very similar to the process of incorporating a limited company. There is,
however, one main difference in that there must be at least two members of an LLP. It is
not possible to have a single person LLP. Once registration is completed a certificate of
incorporation is issued.
The rules relating to prohibited names, the places in which a name must be displayed
and the way in which the LLP name can be changed are identical to the rules which apply
to limited companies.Members and designated members
LLPs do not have directors and shareholders. Instead they have members and designated
members. Being a member of an LLP is similar to being a partner in an ordinary partnership.
However, every LLP must always have at least two designated members. The designated
members have duties similar to those imposed on the officers (the directors and the secret-
ary) of a limited company. So, for example, they must sign the accounts and the annual
return and inform the Registrar of Companies of the names of the designated members.
A register of members and designated members is kept at Companies House. Each year
an LLP must submit an annual return, giving basic details about the LLP, and a £30 fee.Members as agents
Section 6 of the Limited Liability Partnerships Act 2000 is very similar to s. 5 of the
Partnership Act 1890 (see pp. 331–2). Every member is an agent of the LLP and can there-
fore make contracts on behalf of it. However, the LLP is not bound if the member in fact had
no authority to make the particular contract and the third party either knew this or did not
believe that the member was a member of the LLP. There are, however, two differences.
First, it is the LLP which will be bound by the contract, not each of the members. Second,
there is no requirement that the contract should have been the type of contract which the
LLP would usually make.