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A quick reference guide on which template to use in relation to Limited Liability, Limited and General Partnership Agreements and other related documents. Also, include a checklist of partnership issues to consider.
General partnership – liability is unlimited and each JV party is liable for the whole of the liabilities of the venture (although JV parties can themselves be corporate entities). Any change to the identity of the partners will entail a new partnership arrangement which can be an expensive and time-consuming process. The advantage is that sensitive details of the venture can remain completely private between the JV parties.
Limited partnership – general partner manages the JV and has unlimited liability. Limited partners have limited liability but must be passive and play no part in the day to day management of the company – otherwise, the benefits of limited liability are lost. This is popular as investment vehicles (where the majority of participants are passive investors) but not suitable for commercial joint ventures as limited partners must not be involved in the management of the venture. The advantage is that sensitive details of the venture can remain completely private between the JV parties.
LLP - Limited liability for LLP members. Increasingly common vehicle for commercial ventures (no longer used solely for professional partnerships).
When the members agree that the LLP is to be bound under a contract, they will bind the LLP, like directors of a company, and not one another, like partners. Unlike partnerships, there is no joint liability for contractual obligations or "joint and several" liability for wrongs. While members may incur liability to third parties dealing with the LLP for negligence, unlike partners and like directors, they shall only do so if they have assumed a personal duty of care and the third party has reasonably relied on that assumption.
LLPs have the advantage that there is no requirement for a "general partner" who is liable without limit for the obligations of the partnership. Neither do the members of an LLP lose their limited liability status if they take part in management? An LLP is a body corporate with its own separate legal personality, like a company.