Like a partnership, an LLP must have at least two self-employed owners, who will be taxed on their respective profit shares. But unlike a partnership, and more akin to a company, an LLP is a legal entity separate from its owners, and so offers limited personal liability for the owners. Because of this, like a company, an LLP must disclose certain ownership and financial information at Companies House.
As in the case of a company, it is usual and generally recommended that the owners of an LLP have in place an agreement between them, to protect them , for example, by placing restrictions on the actions of the business and setting out a process for dealing with disputes and how an owner might exit the business.
With an LLP, if no agreements are put in place, the law provides generally for equality between the owners and deals only with basic issues.
LLP Agreements: Like a partnership agreement, an LLP agreement will set out each partner’s rights and liabilities (for example, each partner’s share of the profits and liabilities, the work expected of them and whether the activities of the business should be subject to any restrictions). It can also govern the manner in which the business is carried on. Without a written agreement the partners will generally have equal rights and liabilities, but the benefit of an agreement is that it can provide for so much more, with measures designed to protect the business if a partner leaves, and to provide a route to retirement of a partner with minimal disruption to the business.
These agreements (be it a partnership agreement, a shareholders agreement or an LLP agreement) are best entered into at the outset, when everyone is on amicable terms and has the same goals and priorities. It is when things change that disputes can sometimes arise, and by then, it may be too late for any agreement to be reached.