A number of firms in the financial services industry are looking to convert to Limited Liability Partnership (LLP) status. But what is driving this desire for conversion and are LLPs the structure of the future?
Prior to the introduction of the LLP Act 2000, which came into force on 6 April 2001, firms trading as partnerships invariably did this under the 1890 Partnership Act. This meant that all partners had joint and several liability for the debts of a firm, with a large-scale claim against a firm potentially resulting in the bankruptcy of all partners.
The new LLP structure removes this burden such that, in most cases, a partner’s liability in such a scenario would be restricted to the loss of his/her interests in both his/her capital and undrawn profits within the firm. In some circumstances the individual partner or partners who provided the defective advice may still retain a degree of unlimited liability.
