Company and LLP Formations

A general partnership is formed when two or more persons carry on a business in common with a view to making a profit.    Often it is prudent that the relationship is governed by a Partnership Agreement, although no formal agreement is strictly necessary as the terms of the Partnership Act 1890 will apply in the absence of a partnership agreement.

A limited partnership is similar to a general partnership under the Partnership Act 1890, save that it will have two types of partner. General partner(s) who have responsibility for managing the business and have unlimited liability for the firm’s debts and obligations) and limited partner(s) who whilst they have invested capital into the partnership do not take an active role in its operation and have limited liability up to the amount of capital that they have contributed.     The relation is often governed by a limited partnership agreement.

A limited liability partnership (an LLP) is a separate legal entity to its members and its members have limited liability but the flexibility of a partnership. The relationship is governed by a members’ agreement (LLP agreement) which is confidential to the members.  There must be at least wo designated members who will have the administrative responsibilities for the LLP.

A company which once formed is registered at Companies House. It is governed by the company’s memorandum and articles of association which are public documents.   However, it is common to put in place a shareholders’ agreement if there is more than one member / shareholder as this agreement and its terms can be confidential to the members / shareholders.     It could include giving rights to shareholders that they would not ordinarily have by virtue of the Companies Act 2006 and which would protect the business during its operation and in the event of an exit or one or all of the shareholders.

This structure is similar to a company limited by shares, but there is no share capital. The members liability is limited to such amount as the members have undertaken to contribute to the assets of the company in the event of its being wound up.

A community interest company(CIC) is a limited liability company used by social enterprises who use their profits and assets for the public good and the main purpose is to benefit the community and not its members / shareholders, directors or employees.

A CIO is a new corporate structure designed specifically for charities and an alternative to the current forms of charitable structures such as charitable companies, charitable trusts, companieslimited by guarantee and unincorporated associations.