Posted by: the3rdi | March 12, 2010

Limited liability is popular choice for business owners

Partners in businesses looking to future-proof their
organisations are swapping traditional partnership
agreements for reduced personal responsibility, as the
UK’s recession subsides.

Firms wishing to protect their assets against future
claims are opting for limited liability partnerships
(LLPs) – which have risen by almost 50 per cent in the
past four years, now standing at 37,301* – in response to
increased disputes within partnerships during the
economic downturn.

Traditional Partnerships now represent 13.5 per cent of
the total enterprises of UK business activity, a decrease
from 14.1 per cent in 2008.**

Mark Briegal, head of partnership law at Manchester-based
law firm Ralli, is urging business owners to seek proper
advice to prevent disputes among partners.

He said: “In a downturn, financial pressures can mean
claims against businesses increase. Tight cash-flow
tends to increase disputes between partners. If a
partnership agreement is not water-tight, it could mean
dire consequences for the partners involved.

“Becoming an LLP offers members a reduced personal
responsibility and increased protection, should the
business run into trouble, which explains the rise in
this type of partnership.

“We’re seeing a rise in the number of clients coming to
us for advice on a range of partnership issues, not only
on disputes and dissolutions, but also at the outset of a
business partnership.

“It is clear firms have learnt their lesson from the
recession and are now choosing LLPs as a preferred
option, rather than traditional partnerships, proving
they are keen to protect themselves against future
disputes.

LLPs have members rather than partners and the members of
the LLP need a good membership agreement to regulate
their conduct and have in place a framework to resolve
disputes among themselves.”

An LLP is a partnership formed under the Limited
Liability Partnership Act 2000. It is a half way house
between a traditional partnership and a limited company.
The members are self employed but the LLP is a legal
entity, like a company, and the members have limited
liability for business debts.

Ralli Partnership Law, a specialist division of Ralli was
set up in 2009 in response to an increase in registered
LLPs and a demand for specialist partnership law advice.

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