Creating a Limited Liability Partnership Agreement

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Creating a legally binding Limited Liability Partnership (LLP) agreement is an essential part of running a successful business - it serves to protect the owners from any losses incurred by the business and ensures that all parties are aware of their respective roles and responsibilities. It also sets out the parameters for how taxes are managed, as well as outlining who is responsible for taking care of each asset possessed by the business.

The Genie AI team - an open-source template library with millions of datapoints teaching its AI what a market-standard LLP agreement should look like - knows just how important these agreements are. With our community template library at your disposal, you can draft and customise high quality legal documents quickly and easily, without having to pay hefty lawyer fees.

To assist readers in understanding the complexities around creating an LLP agreement, we’ve put together some guidance that will help explain why such agreements are necessary, what they consist of and how they can ensure your business is managed properly.

At Genie AI, we want to provide readers with all the information necessary to create their own compliant LLP agreement without needing an account or paying any fees. In essence, our aim is to ensure that businesses have access to reliable protection without having to worry about cost or whether they’re getting up-to-date advice from a professional lawyer.

By using our comprehensive step-by-step guide – as well as accessing our free templates – those creating LLP agreements have nothing to fear when it comes to ensuring their businesses’ interests remain secure into the future. To read on below and find out more information on how you can access our template library today…

Definitions

Limited Liability Partnership (LLP): A type of business structure that combines aspects of a partnership and a corporation, where the partners are not personally liable for the company’s debts and liabilities.

Jurisdiction: The geographical area or authority over which a legal system has power and authority.

Dissolution: The process of ending the existence of a business entity or partnership.

Ownership Structure: The way in which the ownership of a business is divided between the partners or shareholders.

Voting Rights: The legal right of a shareholder or partner to cast a ballot when voting on matters of the business.

Management: The process of supervising and controlling the operations of a business or organization.

Capital: The money or other property that a person or business puts into a business, usually for the purpose of making a profit.

Contributions: The money, goods, or services that each partner provides to the business.

Distribution: The process of giving out money, goods, or services.

Financial Reporting Requirements: The legal requirements for businesses to prepare and submit financial reports and documents.

Resolution: A formal statement of a decision or expression of opinion put forward for adoption by an organization or assembly.

Contents

1. Understanding the Basics of a Limited Liability Partnership Agreement
2. Researching the Different Types of Limited Liability Partnerships
3. Understanding the General Principles Behind Limited Liability Partnerships
4. Establishing the Partnership Entity
5. Choosing the Business Name
6. Deciding on the Structure of the Partnership
7. Appointing Partners
8. Establishing the Rights and Responsibilities of the Partners
9. Deciding on the Contributions of the Partners
10. Detailing the Rights and Responsibilities of Each Partner
11. Deciding on the Partnership’s Management
12. Creating a Management Plan
13. Appointing Management Personnel
14. Setting Financial Provisions
15. Agreeing on Capital Contributions
16. Deciding on the Distribution of Profits and Losses
17. Outlining Financial Reporting Requirements
18. Drafting the Agreement
19. Gathering Required Information
20. Drafting the Agreement
21. Finalizing the Agreement
22. Obtaining Legal Advice
23. Finalizing the Agreement with All Partners
24. Understanding the Law and Potential Liability
25. Researching Legal Requirements
26. Understanding Potential Liability for Partners
27. Registering the Agreement
28. Filing the Agreement with the Appropriate Authorities
29. Paying Any Required Filing Fees
30. Reviewing the Agreement Periodically
31. Scheduling Periodic Reviews of the Agreement
32. Making Necessary Changes or Updates to the Agreement

Get started

Understanding the Basics of a Limited Liability Partnership Agreement

• Understand the differences between a general partnership and a limited liability partnership
• Determine the purpose of the partnership and the scope of the agreement
• Understand the responsibilities of each partner and the liabilities each partner will face
• Gather contact information for each partner, including contact information and addresses
• Research applicable laws and regulations
• When you have a working understanding of the basics of a limited liability partnership agreement, you can check this step off your list and move on to the next step.

Researching the Different Types of Limited Liability Partnerships

• Gather information about different types of limited liability partnerships, such as a general partnership, limited partnership, and limited liability company.
• Learn about the advantages and disadvantages of each type of partnership.
• Read up on the laws and regulations associated with each type of partnership.
• Make sure to understand the differences between each type of partnership and how they can affect your business.
• Research the different tax implications of each type of partnership.
• Once you’ve thoroughly researched each type of partnership, you can check this step off your list and move on to understanding the general principles behind limited liability partnerships.

Understanding the General Principles Behind Limited Liability Partnerships

• Become familiar with the legal structure of a limited liability partnership (LLP)
• Understand the legal implications of the LLP structure, including the roles and responsibilities of the partners, the rights of creditors, and the tax considerations
• Learn more about the different requirements for a limited liability partnership in your jurisdiction, such as the filing and registration fees
• Review the LLP’s formation documents, such as the partnership agreement and the certificate of formation
• Make sure you understand the terms of the agreement and the liabilities of each partner
• When you are confident that you understand the general principles of an LLP and the legal requirements in your jurisdiction, you can check this off your list and move on to the next step.

Establishing the Partnership Entity

• Choose a legal entity for the LLC. Options usually include a general partnership, limited partnership, limited liability partnership, or limited liability company.
• Decide the name of the business and ensure that it complies with the standards required by the state where the business is registered.
• File the appropriate legal paperwork with the state.
• Pay the required filing fees.
• Obtain an employer identification number (EIN) from the IRS.
• Draft and sign a partnership agreement that outlines the roles, responsibilities, and rights of the partners.
• Obtain any necessary licenses or permits required by the state.

You can check this off your list and move on to the next step when the partnership has been officially established and all of the required paperwork has been filed with the state.

Choosing the Business Name

• Brainstorm potential names for the business
• Research availability of the business name to ensure it’s not already in use by another business entity
• Research the availability of the domain name for the business
• Consider trademark and copyright implications of your chosen business name
• Run a search on the name through the Secretary of State’s website
• Check the state’s database to see if the name is available for use and to make sure it meets the state’s requirements
• Once you’ve decided on a name, reserve it with the Secretary of State
• You can check this off your list once you’ve received confirmation from the Secretary of State that the business name has been reserved.

Deciding on the Structure of the Partnership

• Determine the scope of the partnership and decide whether it will be a general, limited, or special partnership
• Consider the liability and tax implications for each type of partnership
• Research applicable state laws to ensure the partnership is operating within the legal requirements
• Draft the partnership agreement to outline the structure of the partnership and the rights and responsibilities of the partners
• Have the partnership agreement reviewed by an attorney to check for any legal issues

Once you have determined the type of partnership, drafted the agreement, and had it reviewed by an attorney, you can move on to the next step of appointing partners.

Appointing Partners

• Choose who will be partners in the Limited Liability Partnership agreement
• Document the name and contact details of each partner
• Allocate the percentage of shares each partner holds in the agreement
• Have each partner sign the agreement
• You will be able to check this off your list once each partner has signed the agreement.

Establishing the Rights and Responsibilities of the Partners

• Research the state laws governing limited liability partnerships (LLPs)
• Draft a document outlining the rights, responsibilities, and obligations of each partner
• Include provisions for the resolution of disputes between partners
• Include provisions for the withdrawal of a partner
• Include provisions for the addition of a new partner
• Include provisions for the dissolution of the LLP
• Have each partner review the agreement and sign it
• Get the agreement notarized
• File the agreement with the state

When you can check this off your list:

• When all partners have signed the agreement
• When the agreement has been notarized
• When the agreement has been filed with the state

Deciding on the Contributions of the Partners

• Determine the contributions each partner will make to the LLC
• Decide on a method of raising additional capital if needed
• Define the roles and responsibilities of each partner
• Decide how profits and losses will be distributed among the partners
• Detail how disputes between partners will be resolved
• When all contributions have been determined and agreed upon, the partners should sign the LLC agreement.

How you’ll know when you can check this off your list and move on to the next step:

• When all partners have agreed upon and signed the LLC agreement, this step is complete and you can move on to detailing the rights and responsibilities of each partner.

Detailing the Rights and Responsibilities of Each Partner

• Outline the roles, responsibilities, and liabilities of each partner.
• Specify the percentage of profits, losses, and distributions each partner will be entitled to.
• Establish how the partnership will be governed, including how major decisions will be made.
• Determine how the partnership will be dissolved, such as whether the partnership can be dissolved by a single partner or requires a majority vote.
• Establish the rights and responsibilities of each partner in the event of the death, disability, or withdrawal of a partner.

You will know that you can check this off your list and move on to the next step once you have finalized the rights and responsibilities of each partner and they have been agreed upon by all partners.

Deciding on the Partnership’s Management

• Decide who will be responsible for managing the daily operations of the partnership, such as making decisions, handling finances and hiring and firing.
• Outline the roles and responsibilities of each partner in the partnership’s management.
• Agree on the decision-making process and how disputes will be resolved.
• Confirm that any changes to the agreement must be agreed upon by all partners.

Once you’ve decided on the partnership’s management, you can move on to the next step of creating a management plan.

Creating a Management Plan

• Agree on how the LLC will be managed (i.e. who will be the managing partners, how decisions are made, etc.)
• Draft a written management plan that outlines the roles and responsibilities of the partners, how decisions will be made, and how profits and losses will be distributed
• Sign the management plan and have it notarized
• Have each partner sign a copy of the management plan to show their agreement
• File the management plan with the state

You’ll know you can check this step off your list and move on to the next step when you have all of the partners sign their copy of the management plan and you have filed it with the state.

Appointing Management Personnel

• Review the management plan created in the previous step and create a list of all the management personnel who will be involved in the LLC
• Determine who will be the managing partners, and which partners will participate in the business decisions
• Make sure that all management personnel are legally allowed to work in the United States
• Create a list of job descriptions for each management personnel and make sure that the responsibilities are clear to all members
• Draft an agreement that outlines the roles, compensation, and responsibilities of each management personnel
• Make sure that all management personnel sign the agreement
• Once all management personnel have signed the agreement, you’ll be able to check this step off your list and move on to the next step.

Setting Financial Provisions

• Decide how much capital each partner should contribute towards the business as a whole.
• Establish how profits and losses will be divided amongst the partners.
• Decide if there are any restrictions in terms of the partners’ ability to transfer their interests in the LLP.
• Decide if there is to be a minimum or maximum amount of capital that each partner must contribute to the LLP.
• Create a plan for how the partners can make additional capital contributions to the LLP.

Once all of these points have been discussed and agreed upon, the step of setting financial provisions can be checked off the list and the next step of agreeing on capital contributions can be started.

Agreeing on Capital Contributions

• Determine the initial and any additional capital contributions that each partner will make to the LLP
• Discuss the terms of any future capital contributions that partners may make
• Set forth whether or not a partner may be required to make additional capital contributions in certain circumstances
• Specify the type of contributions and the amount of contributions the partners will make
• Decide whether partners will receive any interest on their contributions
• Agree on a timeline for each partner to make their capital contributions
• Decide what will happen if a partner fails to make their capital contribution

You’ll know you can check this off your list and move on to the next step when you have a written agreement specifying all of the points above.

Deciding on the Distribution of Profits and Losses

• Determine how profits and losses should be allocated among the partners
• Create a document outlining the agreed upon distribution of profits and losses
• Have each partner sign the agreement
• When all partners have signed the agreement, it should be filed with the relevant state agency
• You can check this step off your list when the agreement has been signed and filed.

Outlining Financial Reporting Requirements

• Decide on how often financial reports will be provided (e.g. quarterly, annually)
• Establish who will be responsible for providing the financial reports (e.g. the managing partner or a professional accountant)
• Discuss whether the financial reports should be verified by an independent party
• Set up deadlines for when the financial reports must be provided
• Specify what information must be included in the financial reports (e.g. balance sheet, income statement, cash flow statement, etc.)

Once the financial reporting requirements have been outlined and agreed upon, you can move on to drafting the agreement.

Drafting the Agreement

• Gather the names of all partners and list them in the document
• Draft language that outlines the roles and responsibilities of each partner
• Include details of the initial financial contributions each partner is making to the partnership
• Specify the percentage of ownership each partner will have
• Describe how profits, losses, and assets will be distributed among the partners
• List the name of the partnership and its address
• Outline the dispute resolution process
• Include any additional clauses that may be applicable
• Have the agreement reviewed and signed by all partners

Once you have drafted the agreement and all parties have reviewed and signed it, you can move on to the next step of gathering the required information.

Gathering Required Information

• Gather the names, addresses, and contact information of all partners involved in the LLP
• Collect the date of commencement of the LLP, the date of agreement, and any other relevant dates
• Compile the financial data for the LLP, including capital contributions, salaries, and profits
• Identify the role and responsibilities of each partner in the LLP
• Draft the objectives and goals of the LLP
• Make a list of any other relevant information related to the LLP
• Once all the required information has been gathered, move on to drafting the agreement.

Drafting the Agreement

• Create an outline of the agreement, detailing all the terms and conditions of the partnership
• Identify the roles of each partner and the rights and obligations associated with each role
• Include provisions covering the division of profits and losses, the dissolution of the partnership, and the transfer of ownership
• Outline the process of managing the partnership and the responsibilities of each partner
• Describe the duration of the partnership and any events that might cause its dissolution
• Draft the agreement in accordance with the applicable state and local laws
• Make sure that all partners’ names, addresses, and signatures are included in the agreement

You will know you can move on to the next step once the agreement is drafted and all partners have signed it.

Finalizing the Agreement

• Review the completed limited liability partnership agreement thoroughly to ensure all information is accurate.
• Have all parties involved sign the agreement.
• Make sure that all signatures are witnessed and dated.
• Have each party keep a copy of the agreement for their records.
• When all parties have signed and dated the agreement, it is considered finalized.

Obtaining Legal Advice

• Consult a lawyer experienced in business law to review the agreement before signing
• Ask the lawyer to review the partnership agreement and make sure it meets all the legal requirements
• Have the lawyer review any other documents related to the partnership such as the Articles of Association or Memorandum of Association
• Take into account the lawyer’s advice and make any necessary changes to the agreement
• Once the lawyer has reviewed and approved the agreement, it is ready for all partners to sign
• Once all partners have signed the agreement, it is legally binding and can be registered with the appropriate authorities, if necessary

Finalizing the Agreement with All Partners

• Have each partner review the agreement and sign it.
• Make sure to have a witness and a notary present when signing.
• File the agreement with the state agency that regulates limited liability partnerships.
• Check with the agency to confirm that the agreement has been accepted.
• Once the agreement has been signed by all parties and accepted by the state agency, you can move on to understanding the law and potential liability.

Understanding the Law and Potential Liability

• Research the law governing limited liability partnerships in your jurisdiction.
• Understand the potential liability associated with the partnership.
• Identify any potential risks and discuss with the other partners.
• Once you have a good understanding of the law and potential liability, you can check this off your list and move on to the next step.

Researching Legal Requirements

• Search your state’s business laws to identify the steps to establish a limited liability partnership (LLP)
• Look for any specific forms or documents required to complete the registration process
• Research the legal requirements for setting up an LLP in your state, such as filing fees, minimum capital requirements, and restrictions on partners
• Read up on the tax implications of forming an LLP in your state
• Contact your state’s business division for more information if needed
• Once you’ve researched the legal requirements and understand the process, you can move on to the next step.

Understanding Potential Liability for Partners

• Research the laws and regulations in your state regarding liability for partners in an LLC
• Understand that each partner may be held personally liable for any debts or liabilities incurred by the partnership
• Consult a legal professional to ensure that you are aware of every potential liability that may be created by the LLC
• Make sure all partners involved in the LLC understand their potential personal liability
• When all partners involved in the LLC are aware of their potential personal liability, you have completed this step and can move on to the next step.

Registering the Agreement

• Gather all the necessary documents for the partnership agreement, including all the legal documents, financial documents, and any other relevant documents.
• Research the regulations and legal requirements for forming an LLP in your state.
• File the necessary paperwork with the state business filing office.
• Obtain any required licenses and permits.
• Submit the required fees.

Once all the necessary paperwork has been filled out, filed, and the required fees have been paid, you can check this step off your list and move on to filing the agreement with the appropriate authorities.

Filing the Agreement with the Appropriate Authorities

• Contact the relevant state/territory government agency to find out the filing fees, and any other requirements for registering the agreement.
• Submit a signed copy of the agreement, along with any required filing fees, to the relevant government agency.
• Once the relevant government agency has accepted the agreement and the filing fees, you will receive confirmation that the agreement has been approved and filed.

Paying Any Required Filing Fees

• Contact the local or state authorities to determine what filing fees are required for your Limited Liability Partnership Agreement
• Gather all necessary documents that must be submitted along with the filing fees
• Pay the filing fees according to the instructions provided by the relevant authorities
• Once you have paid the filing fees, you should receive a confirmation from the authorities that your agreement has been filed and accepted
• Check off this step from your list, and proceed to the next step, which is to review the agreement periodically.

Reviewing the Agreement Periodically

• Review the agreement at least once a year to make sure that all partners are still in agreement with the terms and conditions.
• Have all partners sign off on any changes that need to be made to the agreement.
• Keep a record of all changes made to the agreement.
• Once you’ve completed the review, you can check this step off your list and move on to the next step.

Scheduling Periodic Reviews of the Agreement

• Set a timeline for when the agreement should be reviewed and updated (e.g. annually, bi-annually)
• Create a checklist of items to review at each review (e.g. changes in the business operations, personnel changes, any new laws that may affect the agreement)
• Ask all partners to review the agreement and make any necessary changes
• Notify all partners of the schedule and items to be reviewed
• Schedule a meeting or conference call to review the agreement
• Finalize any changes to the agreement and sign off on the new version

You’ll know you can check this off your list and move on to the next step when all partners have reviewed the agreement and any changes have been finalized and signed off on.

Making Necessary Changes or Updates to the Agreement

• Review the agreement at least annually and make any changes or updates that may be necessary to ensure that it is still current and applicable to the business
• Make sure to update any information that may need to change, such as the name of the business, address or contact information, or the roles and responsibilities of each partner
• Ensure that the agreement is in compliance with any relevant laws and regulations
• Have the agreement reviewed by a lawyer or other legal professional to ensure that it is valid and legally binding
• Once the agreement has been updated, have it signed by all partners to make it official
• Once the agreement is signed, make sure the original copy is stored in a safe place and make copies of it for each partner
• After the agreement is updated, it’s time to move on to the next step, which is scheduling periodic reviews of the agreement.

FAQ

Q: What is a Limited Liability Partnership Agreement?

Asked by Marlene on 16th April 2022.
A: A Limited Liability Partnership (LLP) Agreement is a legal document that outlines the rights and responsibilities of each partner in a partnership. It defines the terms of the partnership, such as the management structure, decision-making process, and financial arrangements. It also outlines how the partnership will be dissolved and any other matters related to the business. The agreement should be signed by all partners in order to be legally binding.

Q: Are there different types of Limited Liability Partnership Agreements?

Asked by Jacob on 22nd June 2022.
A: Yes, there are different types of LLP Agreements depending on the type of business and the jurisdiction where it operates. For example, in the UK, there are two types of LLP Agreements: the Limited Liability Partnership Agreement (LLPA) and the Limited Liability Partnership Deed (LLPD). The LLPA is more suitable for businesses that operate in multiple jurisdictions while the LLPD is more suitable for businesses that operate in one jurisdiction only.

Q: What are the key elements of a Limited Liability Partnership Agreement?

Asked by Mary on 4th August 2022.
A: Key elements of a LLP Agreement include the name and address of each partner, the purpose of the partnership, details regarding management and decision-making, division of profits and losses, dispute resolution mechanisms, indemnification provisions, confidentiality clauses, provisions regarding intellectual property rights, registration requirements and dissolution procedures.

Q: What should I consider when creating a Limited Liability Partnership Agreement?

Asked by John on 21st November 2022.
A: When creating a LLP Agreement it is important to consider all relevant legal and tax regulations applicable to your business in its jurisdiction. It is also important to consider any specific needs you may have for your business such as how decisions will be made and how profits will be divided. You should also consider any special rules or regulations that may apply to your industry or sector.

Q: How does a Limited Liability Partnership Agreement differ from other types of agreements?

Asked by Jennifer on 2nd February 2023.
A: A LLP Agreement differs from other types of agreements in that it creates a separate legal entity which can sue and be sued independently from its partners. It also provides limited liability protection to each partner against any debts or liabilities incurred by the partnership. In addition, it sets out specific rules regarding decision-making processes and division of profits among partners which are not found in other types of agreements such as sole proprietorship agreements or general partnerships.

Q: Are there any particular laws or regulations I should consider when creating my Limited Liability Partnership Agreement?

Asked by Joseph on 15th April 2023.
A: Yes, depending on your jurisdiction there may be specific laws or regulations that you should consider when creating your LLP Agreement such as tax laws or intellectual property laws. You should also research any industry-specific regulations or rules that may apply to your particular business sector such as those related to software development or technology businesses in certain jurisdictions.

Q: Are there any restrictions on who can be a partner in a Limited Liability Partnership Agreement?

Asked by Elizabeth on 28th June 2023.
A: Generally speaking, anyone who meets certain legal requirements can be a partner in a LLP Agreement; however certain jurisdictions may have restrictions regarding who can be a partner depending on their nationality or residency status. In addition, some jurisdictions may have restrictions based on an individual’s financial history or criminal record so it is important to research any local laws before entering into a LLP Agreement with another individual as a partner.

Q: What happens if one of the partners breaches their obligations under the Limited Liability Partnership Agreement?

Asked by Robert on 10th September 2023.
A: If one of the partners breaches their obligations under the LLP Agreement then they could be liable for damages incurred by another partner as well as for violating any applicable laws or regulations which govern their actions. Depending on the terms of the agreement, they may also be liable for any resulting losses incurred by other partners due to their breach of obligations. In addition, they may face termination from their role as partner if they do not adhere to their obligations under the agreement.

Q: What happens if one partner wants to leave or dissolve the partnership?

Asked by Susan on 23rd November 2023.
A: Generally speaking, dissolution of a LLP can occur either through mutual agreement among all partners or through court action initiated by one partner against another due to breach of obligations under an agreement or applicable law/regulation. If dissolution occurs through mutual agreement then all partners must agree upon how assets will be divided and how liabilities will be settled before dissolving the partnership; however if dissolution occurs through court action then assets will generally be divided according to applicable laws/regulations and liabilities will generally be settled according to court orders issued during proceedings against one or more partners for breach of obligations under an agreement or applicable law/regulation.

Q: What happens if one partner dies during a Limited Liability Partnership?

Asked by Michael on 6th February 2024.

A: In most cases, if one partner dies then their heirs or beneficiaries will become liable for their share of any outstanding debts and liabilities incurred during their time as partner in accordance with applicable laws and regulations governing inheritance rights; however this may vary depending on local laws/regulations governing inheritance rights as well as terms outlined in an LLP Agreement regarding what happens upon death/disqualification/dissolution of one partner during an LLP’s lifetime

Example dispute

Suing a Limited Liability Partnership (LLP)

• A plaintiff may bring a lawsuit against a Limited Liability Partnership (LLP) if they believe that the LLP has breached the terms of the partnership agreement.
• If a plaintiff can prove that the LLP has breached the terms of the agreement, they may be able to recover damages.
• The plaintiff must first establish that the LLP was a party to the partnership agreement and that the LLP did not abide by the terms of the agreement.
• The plaintiff must also show that the breach of the agreement caused harm to their business and that the harm was foreseeable.
• The plaintiff can then seek to prove that the harm caused by the breach of the agreement exceeds the threshold for recovery of damages.
• If the plaintiff is able to prove that the LLP has breached the terms of the partnership agreement and that the breach has caused harm to their business, they may be able to recover damages. These damages may include lost profits, lost business opportunities, and/or costs associated with any corrective measures taken to mitigate the harm caused by the breach.
• The court may also award the plaintiff punitive damages in cases where the LLP acted with gross negligence or recklessness.
• If the court determines that the breach of the agreement was not intentional, the court may order the LLP to pay the plaintiff’s legal fees and costs associated with bringing the lawsuit.

Templates available (free to use)

Deed Of Assignment Of Goodwill And Intellectual Property Rights Transfer Of A General Partnership To An Llp
Llp Agreement Limited Liability Partnerships
Novation Agreement For The Conversion Of A General Partnership To An Llp
Transfer Agreement For The Conversion Of A General Partnership To An Llp

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