Our client was a partner in a professional services LLP business. The LLP partnership was doing reasonably well, but the partners increasingly argued. Each had his own practice and clients. Our client wanted to terminate the partnership and start his own business. However, his partner was reluctant to terminate the partnership. Partly, this was because winding up the partnership was costly, and not tax-efficient.

LLP partnership break-up strategy

When the partners set-up the partnership, they signed a Limited Liability Partnership Agreement. This LLP agreement, downloaded from the internet, was poorly drafted, and in many respects unsuitable.

Nevertheless, the agreement said that if one partner resigned, then unless another partner was appointed, the limited liability partnership would be wound up.

Our task was to economically dissolve the LLP partnership on terms acceptable to our client. So, our client gave notice to resign. This meant the partnership would be wound up in 6 months unless the partners agreed otherwise.

LLP partnership legal position

The other partner argued that the limited liability partnership agreement did not require winding up. Moreover, he could appoint a new partner which would allow the partnership to continue. Our client replied that a new member could only be appointed with his agreement. He couldn’t be forced to agree to the appointment.

Therefore, he could block the appointment of a new partner and thus force the winding up. We argued these points and successfully established that our position was correct.

Negotiations to resolve the LLP dispute

Having achieved the failsafe position of winding up the partnership if we didn’t reach an acceptable deal, we negotiated. We negotiated the term’s of our client’s departure from the partnership, including the split of cash and assets.

The deal more than satisfied our client. Our client created his own business with his capital and all his clients.

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