Does an LLP Need a Partnership Agreement? 2026/27 Guide

Updated for 2026/27. A written LLP agreement is not normally filed at Companies House and an LLP can legally exist without one. However, operating without tailored terms leaves important issues to statutory default rules, which may not reflect what the members intended.

What happens without an LLP agreement?

The Limited Liability Partnerships Regulations 2001 provide default rules. Broadly, members may share capital and profits equally, take part in management, have equal voting rights for ordinary matters and receive indemnity for proper LLP liabilities. New members generally require consent, and there is no automatic power to expel a member.

Equal treatment can be unsuitable where members contribute different capital, work different hours, bring different clients or expect different rewards. A written agreement replaces uncertainty with agreed commercial rules.

Core clauses to include

Members and capital

Record initial members, capital contributions, loans and any obligation to contribute more. Explain whether capital can be withdrawn and how accounts are maintained.

Profit, loss and drawings

Specify how profits and losses are allocated, when drawings may be taken, whether performance affects allocations and what happens if drawings exceed entitlement. Tax is generally based on allocated profit, not simply cash withdrawn.

Management and voting

Define day-to-day authority, reserved decisions, voting thresholds, quorum, conflicts and who can bind the LLP. Major decisions—borrowing, property, new members, disposals or changes to the agreement—often require enhanced consent.

Duties and time commitment

Set expectations for work, outside interests, confidentiality, intellectual property, holidays, sickness and compliance. Regulated firms may need additional professional obligations.

Joining and leaving

Cover admission, retirement, notice, death, incapacity and, if desired, carefully drafted expulsion powers. Include valuation and payment terms for capital, current accounts, goodwill and work in progress.

Disputes and deadlock

Provide escalation, mediation, expert determination or arbitration where suitable. A two-member LLP particularly needs a deadlock mechanism because equal votes can stop the business functioning.

Restrictive covenants

Confidentiality, non-solicitation and limited non-compete terms may protect legitimate interests, but restrictions must be reasonable to be enforceable. Obtain legal drafting rather than copying broad clauses.

Dissolution and insolvency

Explain voluntary winding-up decisions, asset distribution, record custody and responsibilities if the LLP cannot pay its debts.

Tax points the agreement should support

Profit-sharing provisions should match the commercial reality and accounting records. Mixed individual and corporate membership, changing allocations, losses and payments to connected parties can trigger anti-avoidance rules. The salaried member rules may treat an individual as an employee where the statutory conditions involving disguised salary, influence and capital contribution are met.

The agreement cannot override tax law, but clear terms and consistent behaviour provide evidence of the members’ true rights. Review the document when profit shares or working arrangements change.

Designated members

The agreement should identify designated members and allocate responsibility for accounts, confirmation statements, Companies House changes and insolvency duties. Internal allocation does not remove statutory responsibility, but it reduces the risk of tasks being missed.

When to sign the agreement

Ideally, agree terms before or immediately after incorporation and before significant money, clients or assets enter the LLP. Delaying until a dispute arises makes agreement harder and may leave earlier periods governed by defaults.

How to amend it

Use the amendment procedure in the agreement—often unanimous or enhanced-majority approval for fundamental changes. Document amendments in writing, update schedules and ensure accounting, tax, bank and operational practices follow the new terms. Member changes must also be notified to Companies House separately.

Common drafting mistakes

• Calling profit drawings “salary” without considering the tax treatment
• Omitting a deadlock process for two-member LLPs
• Giving an expulsion power without a fair procedure or valuation method
• Failing to address goodwill, work in progress and overdrawn accounts
• Using company-shareholder wording that does not fit an LLP
• Ignoring death, incapacity, parental leave or long-term absence
• Leaving the signed version inconsistent with actual practice

Annual review checklist

1. Confirm the member and designated-member list.
2. Reconcile capital, current accounts, drawings and allocated profit.
3. Check voting and authority limits against banking arrangements.
4. Review salaried member and corporate-member tax risks.
5. Update succession, insurance and regulatory provisions.
6. Record every approved amendment and circulate the current signed copy.

Review the official LLP Regulations 2001 and Companies House guidance on setting up and running an LLP. Our guide on adding a new LLP member covers the related filing steps.

Frequently asked questions

Must the agreement be public?

No. It is normally a private contract, although accounts and filings may reveal some consequences of its terms.

Can members write the agreement themselves?

They can, but tax, enforceability and succession issues make professional drafting sensible for most trading LLPs.

Does every member need to sign?

The intended parties should execute it in a legally effective way. The agreement should also explain how future members become bound.

This guide is general information and does not replace legal or tax advice.