Limited Liability Partnership Agreement

What is a Standard LLP Agreement?

A limited liability partnership agreement is a legal contract between two or more individuals or entities who wish to run a business together in the form of a limited liability partnership (LLP). A limited liability partnership is a business structure that has at least two limited partners who manage their business together and whose liability for a partnership’s losses and debts is limited to each partner’s capital contribution.

A standard limited liability partnership agreement includes the following provisions:

• details of all limited partners;
• full information about the partnership;
• partners’ duties and responsibilities;
• rules for daily management of a partnership;
• distribution of profit and losses between partners;
• withdrawal from the partnership; and
• partnership’s dissolution.

LLP as a business structure is widely used for businesses related to the provision of professional services, for instance, accounting, law firms, and dentist clinics.

While the law does not define the exact format a limited liability partnership agreement should have, partners may also add other additional provisions. For instance, it is common to include a non-compete obligation for each partner who is leaving the business. Or, the partners may wish to appoint a few separate managers who will be managing the daily affairs of a partnership.

The parties involved in an LLP agreement are limited partners. Each LLP should have at least two limited partners. The state laws do not impose any limitations regarding the maximum number of limited partners an LLP could have. Partners to the LLP could be either individuals or entities.

LLP, Limited Partnership and General Partnership – what is the difference?

The present limited liability partnership agreement cannot be used for limited or general partnerships.

A limited partnership has two groups of partners—limited and general. While limited partners cannot participate in daily management, their liability remains limited to the amount of a contribution made. However, this is not the case for general partners who shall manage daily operations of a partnership and who are personally liable for all the partnership’s debts and losses.

Contrary to that, a general partnership has only general partners who are fully responsible for a partnership’s management and all partnership losses and debts.

How to Draft a Simple LLP Agreement Template?

Creating a legally sound LLP agreement requires two simple things. First, unambiguous and clear provisions. And, second, the inclusion of a number of mandatory clauses a sound limited liability partnership agreement should have.

Details of the Partners and Partnership

Every simple LLP agreement template shall include:

• full names and residential or business addresses of all limited partners;
• signatures of limited partners on the last page of a document;
• contact information;
• full name, purpose, and address of the LLP;
• state in which the LLP will be or is registered; and
• date of signing the agreement or effective date.

Capital Contributions and Partnership Interest

A solid limited liability partnership agreement should also include the list of all financial contributions made by each partner. The contribution may have various forms, including property, services, goods, cash, or both.

Besides that, a template of the LLP agreement should also define the percentage interest that belongs to each limited partner.

Transfer of Partnership Interests

Even a simple LLP agreement template shall define terms and conditions for transferring partnership interest. Each partner may transfer their interest either voluntarily or involuntarily.

A voluntary transfer includes the sale, donation, or other disposal of interest from a partner to another third party. If partners wish to do so, they may include an additional right of first refusal in the LLP agreement template. A right of first refusal obliges a leaving partner to offer their interest first to remaining partners. Only if the remaining partners refuse to purchase it, a leaving partner may proceed with the transfer to a third party.

Involuntary transfer is a list of events in which a partner’s interest should be mandatorily transferred to other partners. Usually, such a list may include death or mental disability of a partner, criminal conviction, etc. The parties to a limited liability partnership agreement template may include any other triggering events for mandatory transfer.

Withdrawal of a Partner from the LLP

Doing business together is a long road. Therefore, a limited liability partnership agreement template shall envisage how each partner could exit the LLP.

The first thing that should be considered is a notice period. A notice period could be 30, 60, or more days. It means that a partner who is willing to exit the LLP shall first submit a prior written notice to other partners informing them about the same.

Secondly, upon a partner’s withdrawal, their partnership interest shall be allocated between the remaining partners. Therefore, the text of the LLP agreement template should also define how exactly such an allocation could take place. For instance:

• in equal shares between all partners;
• in proportion to each partner’s contribution; or
• any other arrangement.

Dissolution of the LLP

Dissolution of a limited liability partnership may happen voluntarily and involuntarily. A solid limited liability partnership agreement template shall address both scenarios.

A voluntary dissolution of the LLP could take place only upon the partners’ decision. Partners may decide which exact quorum is required to make such a decision. Usually, the parties have to adopt such a decision unanimously. It is also possible to establish a qualified majority—e.g., 3/4 or 2/3 of all partners’ votes.

A forced winding up of the LLP takes place in a limited number of events, including bankruptcy, the remaining of only one limited partner, etc. The forced dissolution takes place by virtue of law or the court order.

The text of the LLP agreement template shall define:

• Procedures for liquidating assets;
• Payment of outstanding debts; and
• Distribution of remaining assets among partners (e.g., in equal shares or in proportion to each partner’s contribution).

How to customize a legal document template at Faster Draft?

To personalize a simple LLP agreement template, follow a few easy steps below:

1. Click the button “Create Document.”
2. Answer simple questions in the form.
3. Select a document’s format—LLP agreement template Word or PDF.
4. Make a payment.
5. Download, print, and sign a customized template in minutes.