Limited Liability Partnership Agreement

This solicitor-drafted Limited Liability Partnership Agreement template is a business contract to be used when individuals want to form an LLP.

The Limited Liability Partnership Agreement form outlines exactly the members rights and responsibilities and how they are to be divided.

When to use this limited liability partnership agreement template

This Limited Liability Partnership Agreement form is designed for use by three (or more) individuals who want to form an LLP.

What is a limited liability partnership?

An LLP is very similar to a limited company, but it has the flexibility of a business partnership.

It shares many of the features of a normal partnership, but it also offers reduced personal responsibility for business debts.

Unlike sole traders and partners of normal partnerships, the limited liability partnership itself - not the individual members - is responsible for any debts that the LLP runs up, unless individual members have personally guaranteed a loan to the business.

Contents of this limited liability partnership agreement form

This comprehensive limited liability partnership agreement download, in Word format, contains 25 clauses dealing with:

• The establishment of the LLP
• Business capital
• Drawings and expenses
• Profits and losses
• Management of the business partnership
• Meetings and decision-making
• Business accounts
• Retirement of the business partners
• Restrictions on competition

For further details of the terms included in this Limited Liability Partnership Agreement template, see the ‘Contents’ tab above.

Drafted by solicitors for straightforward completion, this Limited Liability Partnership Agreement download includes guidance on how to fill the contract template in.

Limited liability partnership agreement download note:

This Limited Liability Partnership Agreement form is supplied by ContractStore.com.

Other information

• LLPs: Q&As

External links

• Business Link
• Wikipedia
• Companies House

Clauses in this LLP Agreement

1. Definitions and interpretation

This clause simply sets out the definitions of a number of terms used throughout this limited liability partnership agreement download. 

2. Establishment of the LLP

This clause includes a brief description of the business and the proposed name of the business. The name must be cleared with Companies House and it must also have the letters "LLP" or "Limited Liability Partnership" as part of the name.

The agreement can be effective from the date it is signed by the members, but the LLP can only commence trading once it has been incorporated.

It's necessary for an LLP to have a registered office, i.e. the official address of the LLP to which formal notices must be sent.

This clause refers to "Designated Members". The designated members are the people who are authorised to sign all formal documentation in relation to the LLP. There must be at least two Designated Members and there is nothing to prevent all the members having this role.

3. LLP business

This clause contains some information on the main office of the business, which may be different from the registered office. 

4. Capital

There are no specific legal requirements as to the amount of the initial capital. The capital will be contributed by the members in the proportions in which they are entitled to the capital (e.g. one third each). It's usual for the members to contribute any future capital in the same percentages as their initial capital.

The LLP Agreement makes it clear that no interest will be payable to the members on their capital contributions.

This clause also deals with the possibility of additional capital. The clause provides that this will preferably be obtained by way of borrowing from the LLP's bank, but it goes on to say that if the members agree to make loans, then those loans will be in the same proportions as their contributions of the initial capital. There are also some basic terms with regard to repayment and interest. 

5. Profit & losses

This clause specifies how profits and losses of the LLP will be shared between the members. Usually, this will be in the same proportion as the capital contributions, but this is not always the case.

The clause also briefly explains how profits and losses will be arrived at in the annual accounts.

6. Drawings & expenses

It's common for members to be able to draw what amounts to a salary on account of their share of profits. This clause sets out the initial monthly drawings.

This clause also deals with the possibility of either there being insufficient funds in the bank account or for a situation where drawings over the course of the year exceed the share of profits to which a member is entitled. In each case, any overdrawn amount must be repaid promptly together with interest.

7. Conduct of business

This clause deals with the arrangements for meetings and the decision-making process.

In a small LLP, it's not uncommon for everything to be decided by agreement but that is not always the case – routine day-to-day matters may be entrusted to individual members.

This clause deals with the following:

• The frequency of meetings and the right of a member to convene a meeting at any time
• The annual business plan and budget
• The conduct of meetings, including quorum and voting rights of members
• A list of those matters on which all the members must agree before a decision is made
• Minutes of the LLP meetings.

8. Good faith & indemnity

This clause contains certain obligations on each member to devote their whole time and attention to the business and to act in good faith in all dealings, etc. These obligations are owed to the LLP. Where a member is only involved on a part-time basis, this needs to be made clear in the LLP Agreement.

Each member is indemnified by the LLP against any claim arising subject to that member having performed their duties properly. This clause should give the individual members some protection against third party claims which are made against them rather than against the LLP.

9. LLP bank accounts

This clause outlines the name and address of the bank.

It's assumed that two members should sign cheques, except for amounts below an agreed threshold figure when one signature is enough.

10. Accounts

This clause requires proper books to be kept and for annual accounts to be prepared. This is also a statutory requirement. 

11. Holidays

This sets out the holiday entitlement and rights to maternity/paternity leave (details to be agreed by the members) of each member.

12. Insurance

It's usual for a business to maintain insurance of the premises and assets.

13. Termination

A member has the right to retire on six months' notice, unless this becomes necessary for medical reasons. It's usually easier for a voluntary retirement to occur at the end of an accounting year and this is covered in this clause.

A compulsory retirement age is also covered in this clause. Careful thought needs to be given to the selection of a compulsory retirement age as the LLP may face a claim for age discrimination. 

14. Expulsion

This sets out the grounds upon which a member can be expelled from the LLP. Even if a member commits a breach which justifies expulsion, the other members don't have to give notice to expel the member in default. They, nonetheless, have the right to do so.

15. Consequences of retirement on expulsion

This clause sets out the procedure to be adopted on the death, retirement or expulsion of a member. Accounts are to be prepared up to the date of death, retirement or expulsion and this clause provides for the former member (or their estate) to receive any undrawn profits which are due to them, together with any outstanding loans made by the member to the LLP. Profits are payable within six months from the retirement date. These periods may need to be adjusted, depending upon the circumstances.

The outgoing member remains responsible for their share of income tax on profits and for any liability or claim which might arise after their departure and which is due to some fault on their part.

16. Share of former member

The members who remain following the death, retirement or expulsion of a member are given the right to acquire the former member's share in the LLP. This clause provides for the remaining members to buy the share of the former member at an agreed price or failing agreement, the price will be fixed by a firm of accountants.

This clause deals with the outgoing member's liability for tax from their share of profits and any liability which is due to some fault on their part.

17. Dissolution

If a member dies or retires, the others may decide that they would prefer to wind up the LLP rather than exercise the option to take over their share.

18. Restrictions on former members

It's usual for someone who leaves an LLP to be restricted from taking business or soliciting customers of their former firm. Limiting the period of the restriction and confining it to a relevant geographical area can help to ensure its enforceability. It's important to remember that there is no "rule of thumb" as to what will constitute a reasonable and, therefore, enforceable restriction: this will depend (amongst other factors) on the type of business carried on by the LLP, its size and the local market for services/goods of a similar type provided by the LLP.

19. Confidentiality

This clause poses confidentiality obligations on both members and the confidentiality obligations will continue after the LLP ceases to exist. Members may choose to limit this obligation to a fixed term of years after dissolution.

20. Notices

This clause contains fairly standard provisions with regard to the service of notices – they must be in writing and delivered either by hand or by recorded delivery mail.

21. Disputes & governing law

Under this clause, if a dispute arises, the parties must first of all try to resolve it amicably.

22–25. Entire agreement, severability & waiver

These "boiler plate" clauses make it clear that: 

1. this LLP Agreement doesn't give any rights to third parties;
2. it supersedes any other agreement; 
3. if anything in the agreement is invalid or unenforceable, the rest of the agreement is unaffected; and
4. if one of the parties doesn't exercise their rights to do something (e.g. to expel another from membership of the LLP), that will not prevent them from exercising that right on another occasion.