The Limited Liability Partnerships Act 2000 created a new form of legal entity known as a limited liability partnership. A limited liability partnership has unlimited legal capacity and can be used to carry on any form of lawful business including dealing with, development of and investment in UK real estate. Its most attractive feature as a vehicle for the holding of UK real estate is its ability to combine the flexibility and tax transparency of a partnership with limited liability for its members.
A limited liability partnership (LLP) is a new form of legal entity. It is a special sort of body corporate. It is neither a partnership nor a limited partnership (even though its name includes those words). Generally, partnership law (including the Partnership Act 1890) does not apply to it.
An LLP is a body corporate and is formed by incorporation. It exists as a legal person distinct from its members.
It has the legal capacity to do anything that a natural person can do. It can own UK real estate in its own right; enter into contracts; trade, develop and invest; enter into deeds; sue and be sued; enter into funding and financing agreements and grant security over its assets in its own name. It has rights, liabilities and obligations separate to and independent of its members.
An LLP exists wholly independently of its members and of changes to its membership. It has an open ended and indefinite existence, and will continue until its winding up.
Two or more persons, associated for carrying on a lawful business with a view to profit, are able to form an LLP. In law a "person" includes individuals and companies. The members of an LLP can therefore be companies, individuals or a mixture of the two. Non-profit making organisations (such as charities and members' clubs) are however, excluded from setting up LLPs.
Members of an LLP are free to agree between themselves their relationship with each other. This makes the LLP very flexible. The internal affairs of an LLP (the rights and duties between the LLP and its members) are ordinarily set out in an LLP agreement. The members are free to write their own rules. The agreement remains confidential between the members and the LLP. Neither disclosure nor registration requirements apply.
In default of an LLP agreement, there are a number of statutory rules to determine the relationship between members. These "default" provisions (dealing, for example, with profits shares and capital contributions; a complete bar on assignment of LLP interests without consent) are unlikely to be appropriate except in the most basic and straightforward arrangements.
The liability of individual members is limited. This is to be contrasted with the liability of partners in general partnership, who are jointly and severally liable for the debts and obligations of the firm and the acts of other partners.
The personal assets of a member of an LLP will not be at risk for acts of the LLP or other members. The separate legal personality of the LLP, in law, enables the liability of its members to be limited. The LLP (and not its members) will be liable to third parties.
There is no requirement for a minimum capital commitment from members (which capital would...