Report: Structure and Functioning of Limited Liability Partnerships

This report provides an in-depth analysis of Limited Liability Partnerships (LLPs), exploring their structure, functioning, and significance within corporate law. It examines the concept of limited liability, the roles of partners, and the advantages of LLPs, particularly for startups. The report also outlines the corporate structure, including shareholders, the board of directors, and corporate officers such as the CEO, COO, and CFO. Furthermore, it discusses the legal aspects of LLP incorporation, the role of the Companies House, and the impact of legislation like the Civil Liability Act in Australia. The report highlights the differences between LLPs and traditional partnerships, emphasizing the reduced financial liability for partners, and the growing popularity of LLPs in various professional service firms. Finally, it touches upon relevant case laws and the benefits of LLPs for modern businesses.

COMPANY LAW

Table of Contents
INTRODUCTION................................................................................................................................3
TASK....................................................................................................................................................3
CONCLUSION....................................................................................................................................7
REFERENCES.....................................................................................................................................8

INTRODUCTION
Corporate structure is that part which states all the functional, legal and regulatory pattern of
a particular corporation. Limited Liability Partnerships are a part of this corporate structures. As
LLPs are incorporated under the law and have separate identity from its members (Hannigan, 2012).
In the report role of limited liability partnerships, their structure and functioning methods are
described. Along with this the structure of a company and its functional departments are also
described in this study. The aim of the report is to analyses all the features of LLP and their
significance in carrying the business and operations.
TASK
Limited liability is a concept in which the liability of the partners is limited up to the ratio in
which they have invested the capital. In it the liability of the members is limited by their shares or
limited by guarantee. Thus it is that corporate entity in which the partners of the business
contributes their capital and then start the business. In it they make a partnership agreements and
ready to contribute the capital for the business (Ottley, 2013). In the agreement they enter all the
relevant clauses and terms and conditions of doing the business. Thus all the works of the business
are completed as per mentioned in the partnership deed. LLP is a separate legal entity and it denotes
that when the company is incorporated then it has the separate legal identity from its owners. By
this feature the entity can own, sell, purchase the property in its own name and have the authority to
work in its name. The basic feature of the LLP is that shareholders of the firm are liable only up to
the limit of the capital they have invested. It clearly means that when the company is in the situation
of unsustainable debt and ends up in the hands of their administrators then the personal assets of the
partners is not at risk, as they are not liable to pay the debts from their personal property. Only their
contribution can be used to pay the debts and all outside liabilities.
Thus it can be said that the liability minimize the risk of its partners as they invest their
money in it and are just liable up to their monetary contribution (Roach, 2014). Generally most of
the start ups are advised to incorporate the LLP to give their business a corporate form, as it is not
much expensive and is easy as per the perspective of carrying the business operations. Along with
it, Limited liability Partnerships are also not liable to consider the major legal and litigations, to
comply with the provisions of corporate law. As far as the incorporation of the LLP is considered it
is to be registered form Companies House. It is advisable for it to take the advise of the corporate
professionals for incorporating it, as they can better provide the assistance on this matters. Thus
LLP is beneficial for carrying the small businesses.
Generally the corporate structure consist of basically three major concerns shareholders,

Board of Directors and officers (Dignam and Lowry, 2014). Thus it is a legal entity which is
registered under the specific corporate law. It has s separate legal entity and has its own signatory
power. The company rely upon the shoulders of its board of directors as they are the prime person
which are liable to carry and manage all the operational activities and functions of the company.
The primary duty of the BOD is to take of the interest of the shareholders. The main owners are the
shareholders as they contribute their funds in the company and form the entity. Equity owners are
the real masters of the company. The corporate structure is made by some most prime authorities
these are mentioned as under:
Corporate officers: They are usually oversee the business daily operations. They are given
legal authority so that they can perform their roles and responsibilities. These officers are appointed
by Board of directors of the entity, typically these corporate officers include:
 Chief Executive Officers: CEO has a ultimate responsibility for the activities of the
company. He is liable to sign on the various contracts and agreements (Abugu,
2012).
 Chief Operating Officer: He is liable to manage day to day affairs which are directed
by CEO. Thus he just manage all operations and functions so that the entity can work
properly in a regular manner.
 Chief Financial Officer: He is responsible for all operations which are related with
the financial positions of the company (Abugu, 2013).
 Secretary: In the corporation the role of CS is very wide and large. As he is the only
person who is liable to manage all the corporate actions. Along with this he gives the
advise on various issues and legal matters. Thus he is liable to file various return and
forms to the Companies house so that all the functions can be carried in a more
smoother way.
Corporations are required to hold the meetings of the shareholders in the company once in a
year. Apart from this all the other proceedings and functions are carried with the approval of board
of Directors as they are the prime person for the entities (Arora, 2012). There are three kinds of
board of directors. Inside Directors are the prime part of the organisation and manage the all
operational activities. Outside Directors are those who just attend the meetings and give their fair
and true opinion on some important issues of the company. Chairman is also a director he is liable
to arrange all the relevant documents for carrying the meetings and signing of the minutes. In
Bottom line all the other departments are considered such as finance, HR and operational
department. Thus the corporate structure of a company is divided in three parts the top line in it

CEO, CEO and COO are considered and in Bottom line Board of Directors are considered along
with this in third line all the operational and functional departments work for the company.
Companies are registered under a Act and then can start their business (Athanassiou, 2010). The
prime authority of the corporates are its shareholders as they are the main equity holders of the
company. Board of directors have to work in their interest so that their interest can not be violated.
While looking at the present scenario, economy of any country or region is governed by two
main sectors of the society (Arsalidou, 2011). One is the all industry which comes under the
government rule that is all the companies which are being run by the government of Australia.
Other than that the second growing sector of the society is corporate structure where all the
companies has been set up by the people and none of them is being taken care by government.
To run this corporate world people have choosen a particular process to form the partnership
between the companies of which one of the important is LLP that is limited liability partnership llp
is a partnership in which some or all the partner, depending upon the jurisdiction have limited
liability. That is they are restricted to certain cautions while doing a partnership with any other
company. It exhibits elements of partnership and corporation to establish business relation between
the corporates. LLP works in a very different manner (Roach, 2014). When a company agrees for
limited liability partnership then in such condition one partner is not liable for the negligence or
misconduct of the other. As word “partnership” justify itself that what ever comes in LLP between
the company shall not be taken by one individual that is whenever a corporate structure enters into
the limited liability partnership then all the share whether it is a profit or hike shall be shared in
between the partners of the corporate. Suppose if there is legal llp and they have 5 important
partners. By handling one case suit they incurred double profit of what they are making previously
then that shall be shared between all the partners of the llp. It shall not be accounted to one
individual. But when it comes to the liability part the partners working for the LLP have different
process. In a LLP it is very clear that one is not liable for the act done b y the other that is if one
partner does an act which shall amount to any kind of misconduct, negligence, fraud etc. then being
a partner in the firm the other person is not liable for the illegal act of another the liability get
restricted to the person who has done the misconduct and there shall be no co-accuse even on being
partner in the firm. The person who has done a wrong shall only be held liable and no other person
will come under any kind of liability (Abugu, 2013). In a LLP some partners have a form of limited
liability similar to that of the shareholder of the corporation an LLP also contains different level of
tax liability from that of a corporation. Limited liability partnership are distinct from limited
partnership in some of countries, which may allow all the LLP partners to have limited liability,
while a limited partnership may require at least one unlimited partner and allow other to assume the

role of a passive and limited liability investor.
As a result, in these countries, the llp is more suited business which all investors wish to take
active role in management. But in the countries like Australia the limited liability partnership have a
different role to play. In Australia, LLP works as corporate body rather then working just as a
partnership. In Australia when a company tries to form a limited liability partnership one must
register a partnership first before so that it can gain the status of limited liability partnership (Roach,
2014). Whereas in the other countries it is not necessary to register the liability partnership but what
important is for a company to get register first to get all the benefits of corporate statute. While
talking about the LLP there comes the traditional partnership also with it but with the time LLP has
replace the traditional partnership as it is full of burden of business debts upon the partners. LLP
reduce financial liability upon the partners which is more comfortable option for the people. This is
kind of financial protection offered to limited company owners (Abugu, 2012). The existence of
LLP became so popular because it has been especially designed for the business that operated
traditional partnership. And as this kind of partnership increases the burden,LLP came in form. This
tends to be accountancy firms, solicitors, dentists, chartered surveyors or other professional services
firms. A LLP is always owned by the members of the partners there are no directors, boss or the
shareholders which require a minimum of two members. There is no such restriction on being
member of a LLP it could be any individual or a corporate body.
But every coin has two faces, so the government of queensland has taken out a law which
has been espcially came into force for the protection of ones rights who has been working for the
organisation or the company. The establishment of the civil liability act in australia is the statutory
protection to the person who has been voluntrily working for the organisation or the company.it also
contains fundamental changes and protection. Such a act came into existence because as LLP
demands that one should not held liable for the illegal act other and even if the other person held
liable then such act safeguard his interest and civil rights. It can be said that it is an act which
protects the civil as well as the fundamental rights of the peron who has been wrongly accused.and
such liability generally arise from tort, contract or any other form of action which include breach of
duty.
CASE LAWS:-
 In the case of Deputy Commissioner of Taxation v McGuire it was held two defendants
being individual who were limited partner of a limited partnership were personally liable for
certain tax liabilities of the LLP, which was incorporated under the Partnership Activities
unde Australian Law.
 In the case of Resource Capital Fund III LLP v Commissioner of Taxation it was held that

the limited partners of cayman island limited partnership, not the LLP itself are the relevant
taxpayers with respect to gain the Partnersip made on its disposal of an Australian
investment
 In the case of Cantarella Bros Pty Ltd v Modena Trading Pty Ltd, the high court was called
upon to determine the correct test for assessing whether a particular trademark, filed in
Australia is sufficiently distinctive to warrant the registration.
CONCLUSION
In the given report structure of the Limited liability partnership is described. These are
considered as a corporate entity and are having a separate identity from its masters. In the liability
of the partners is limited up to their capital contribution and it indicates that there is no personal
liability of the members of the firm if it is dissolved. Thus the report has concluded that to make a
LLP is not much expensive and it gives a corporate identity to the newly started businesses and
ventures. In it there is no risk to the personal assets of the partners.

REFERENCES
Books and Journals
Abugu, J., 2012. Monitoring directors’ remuneration, fat cat packages and perks of the office.
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Abugu, J., 2013. Primacy of shareholders’ interests and the relevance of stakeholder economic
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Aiyegbayo, O and Villiers, C., 2011. The enhanced business review: has it made corporate
governance more effective?. Journal of Business Law. 7. pp. 699-724, at 720.
Arora, A., 2012. Remuneration practices in banks and other financial institutions: part 1. Company
Law. 33(3). p. 66.
Arsalidou, D., 2011. The regulation of executive pay and economic theory. Journal of Business

Law. 5(1). pp. 431-456, at 442.
Athanassiou, P., 2010. The taxation of bankers’ bonuses as a human rights issue: a tale of two
schemes. Journal of International Banking Law and Regulation. 25(6). p. 284.
Baber, G., 2013. A critical examination of the legislative response in banking and financial
regulation to issues related to misconduct in the context of the crisis of 2007–2009. Java
Foundation Classes. 20(2). pp. 237-252.
Dignam, A and Lowry, J., 2014. Company Law. Oxford University Press.
Hannigan, B., 2012. Company Law. OUP Oxford.
Ottley, M., 2013. Q&A Company Law 2013-2014. Routledge.
Roach, L., 2014. Company Law Concentrate: Law Revision and Study Guide. Oxford University
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