A limited liability partnership, or LLP, is a legal structure that combines the benefits of a partnership with the limited liability protection of a corporation. LLPs are commonly used by professionals such as lawyers, accountants, and architects.
A crucial aspect of operating an LLP is having a members` agreement in place. This document outlines the rights and responsibilities of each member, how profits and losses will be distributed, and how decisions will be made within the partnership. It serves as a framework for the LLP to operate within.
Here are some key elements that should be included in a members` agreement for an LLP:
1. Partnership structure: The agreement should define the structure of the partnership, including the number of members, how new members can be admitted, and how members can withdraw or retire from the partnership.
2. Contributions: Each member`s contributions should be clearly defined in terms of money, property, or services. This section should also outline how these contributions will be valued and how they will affect the distribution of profits or losses.
3. Profit and loss distribution: The agreement should specify how profits and losses will be allocated among members. This can be done based on the percentage of ownership or by other criteria agreed upon by the partners.
4. Management and decision-making: The members` agreement should outline how decisions will be made within the partnership, including who has the authority to make decisions and how to handle disputes.
5. Duties and obligations of members: This section should outline the responsibilities of each member, including their obligations to contribute to the partnership, maintain confidentiality, and act in the best interest of the partnership.
6. Termination and dissolution: The agreement should specify how the partnership can be terminated or dissolved, including the process for winding up the partnership`s affairs and distributing remaining assets.
Having a comprehensive members` agreement in place can help avoid disputes among partners and provide a clear roadmap for the LLP to operate within. It`s important to have this document reviewed by a legal professional to ensure it`s legally binding and covers all necessary aspects of the partnership. By establishing clear expectations and guidelines, the members` agreement can help the LLP operate smoothly and successfully.