354 Chapter 12Partnership, limited liability partnership and choice of legal status
n Limited liability partnerships (LLPs) are not the same as ordinary partnerships.
n LLPs are corporate bodies with a legal personality of their own. They are formed by
registration with the Registrar of Companies.
n Every LLP must have at least two designated members. Designated members have
duties similar to those of company directors and the company secretary.
n LLPs are wound up in the same way as companies.Practice questions
1 Alan, Bernie and Charles are in partnership as landscape gardeners. They do not have a
formal partnership agreement and have not fixed a definite period for which they should be
in partnership. Alan frequently disagrees with Bernie and Charles as to how the firm should
be run. In particular, Alan is concerned that Bernie and Charles want to expand the business
to start acting as interior designers. Advise Alan of the following matters:
(a) Whether Bernie and Charles can outvote him as to the ordinary way in which the business
is run.
(b) Whether he could prevent the firm from working as interior designers.
(c) Whether he could terminate the partnership.2 Alice, Belinda and Cherry run a shop as partners. The partnership deed states that only Alice
can buy goods on behalf of the firm. Yesterday, in contradiction of this, Belinda bought a
large quantity of new stock from Duncan. Alice and Cherry think that Belinda paid far too
much for the stock and that it will be very difficult to sell. Two days ago, Alice negligently spilt
some oil on the shop floor and failed to clean it up. A customer slipped on the oil and badly
injured herself. The partnership had failed to renew its insurance policy and so there was no
insurance in place at the time of the accident. It seems likely that the firm has not got enough
money to pay the likely damages to the injured customer and to pay Duncan’s bill. Advise the
three partners of their legal position in respect of the above facts.3 Andy and Brendan are intending to go into partnership as market traders. Andy is to work
full-time in the business, actually standing behind the market stall, and take 75 per cent of
the profits. Brendan, who has a full-time job as a sales representative, is to work ten hours a
week and receive 25 per cent of the profits. Brendan is also to act as the firm’s buyer and
look after the paperwork. Andy’s father, an accountant, is prepared to check the books free
of charge on a regular basis.
If Brendan spots a bargain he often has to buy it immediately. Andy is happy to let Brendan
write cheques for up to £100 on the firm’s behalf. Brendan has an ambition to work in
Australia but would not travel there without a definite job offer. Occasionally, he writes to
Australian firms, asking for jobs. He realises that he has very little chance of getting a job in
this way, but if he was offered one he would want to leave for Australia immediately.
Andy and Brendan want a partnership deed. They think that the model partnership deed
on p. 337 is a suitable model but realise that changes would have to be made if the deed was
to suit their needs.
(a) List the articles which you think should be changed.
(b) Write alternative articles to replace those which you consider unsuitable.