When it comes to forming a limited liability partnership, you need to create a partnership agreement. Below, you will learn about a limited liability partnership agreement, when you should use one, and what to include in the agreement. You can also download a limited liability partnership agreement template, in PDF or Word format.
What is a Limited Liability Partnership Agreement?
A limited liability partnership (LLP) agreement is a legal document that requires a written partnership agreement. This type of agreement is often accompanied by annual reporting requirements, depending on your current local jurisdiction. Similar to a common partnership, all persons that are identified in an LLP can obtain an administrator role in the partnership.
There are different benefits of forming a limited liability partnership. An LLP can enter into different contracts and employ staff directly because it is a legal entity of its own. Members of the LLP have limited liability, which means they are not held personally responsible for the debts of the business. LLPs do not have restrictions on how they distribute members’ profits.
When Should You Use a Limited Liability Partnership Agreement?
A limited liability partnership agreement should be used when a new business or an existing business seeks to legitimize an LLP and start a profit-making business partnership. This type of partnership agreement guarantees that each member of the partnership has a secured position.
What Should You Include in a Limited Liability Partnership Agreement?
You need to make sure your limited liability partnership agreement includes different essential information, such as:
- The name of your business
- An explanation of what your business does
- All partner names and contact information
- A description of the capital that each partner provided (assets, property, money, tangible items, etc.)
- Ownership interest, which provides the specific percentage of the company each partner owns
- Profit and loss distribution that explains the percentage of profit and loss assigned to each partner and how the company plans to distribute revenue
- An outline of how the partners will manage the company by defining individual responsibilities (you also need to explain the decision-making and voting process between partners)
- The process your business follows to liquidate the business and share all profits if the business dissolves
- Partnership tax elections when you assign a partnership representative to manage the business’ tax communications
- Death and disability by providing detailed instructions regarding how each partner’s ownership of the business should be liquidated or redistributed in the unfortunate event of their disability or death
Limited Liability Partnership Agreement Sample
A limited liability partnership agreement sample contains important information that is an outline of how your business will operate in certain situations. You can find a free template below:
