Limited Liability Partnership Agreements - Creating The Perfect Partnership

Auguest 9, 2004
By Richard Smith, LLB

At some point or another, every partnership relationship is going to go through difficult times. Such an occasion could occur when the partnership is going through a rough time.

However, likely as not this problem could occur when the partnership is going through good times - for example, how to distribute the profits from such good times.

Limited liability partnership agreements are, therefore, good business practice if you want your limited liability partnership to survive any length of time.

In addition to having all of the usual provisions of a limited liability partnership agreement, a successful limited liability partnership will also include some additional provisions in its partnership agreement. Chief among these provisions will be a means of clearly identifying the vision and business role of the partnership.

Here, in order for everyone in the partnership to remain happy, all partners need to know that they are rowing in the same direction. Also, it is important than one overall partner, the general partner, knows that they can make decisions on behalf of the partnership without having to run back to ask the partnership's permission each time s/he want to do something. The partnership agreement should also include provisions on how to best manage the limited partnerships.

Limited Liability Partnership Agreements - Best Practice Management Provisions
Most partners in a limited liability partnership would like to have equal shares in the limited partnership. In fact, best practice has shown that having equal shares in a limited partnership does not work out well - it doesn't leave for easy dispute resolution, aside from having a buy-out clause if one partner doesn't agree with the ideas of another.

Aside from unequal shares in the partnership, best practice has also shown that the partnership should try to ensure that they arrange a partnership meeting at least once a month. Anything more often than this tends to lead to management disputes. Anything less than this can lead to complacency among the limited partnership. Strong limited partnerships, on the other hand, have good communication among the limited partners without such becoming too burdensome on the general partner and limited partners.

So, provide the limited partnership have provisions in their partnership agreement that account for these issues, it is likely that the limited partnership is going to be a successful partnership going forward!