limited liability generally the essence of a limited liability partnership for practical purposes is as a vehicle to contain a partnership of any size where partners may be at risk from the careless or accidental negligence of a colleague. For example, partners in International accountancy firms would be protected from personal liability if a claim was successfully pursued by a major client. Partners in a construction business would be protected if a new building collapsed, causing high level claims against them;
Partners in a limited liability partnership are not obliged to enter into a formal partnership agreement. In practice, however, they will almost certainly get together to decide on the structure and regulation of all aspects of their limited liability partnership, in just the same way as prospective partners in a traditional partnership.
Business coming into the limited liability partnership
The benefits of a limited liability partnership against a limited company may be:
Our view is that the number of limited liability partnerships will increase exponentially for a few years, while we all come to terms with a new legal animal, but then level off when the excitement dies down. In summary, limited liability partnerships will provide an essential function, but one which does not affect the lives of many people.
A limited liability partnership is unlikely to be useful for a small trading company of any sort because a conventional limited company is likely to perform an appropriate role at less cost.
The law of “ostensible authority” applies to partner transactions. Every partner is an agent of the limited liability partnership. The limited liability partnership is bound by every contract made by any partner, unless first, the partner had no authority to make the contract and second, the third party was aware of that fact. The limited liability partnership is bound even by contracts by former partners, unless the other party has been told that the former partner is no longer a member, or the registrar has received a notice to that effect.
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