Home > Contracts & Business > Limited Liability Company Agreements Explained

Limited Liability Company Agreements Explained

By: Garry Crystal - Updated: 30 Aug 2012 | comments*Discuss
 
Limited Liability Companies Agreements

Limited liability companies have similar aspects to most businesses but they have been set up in a way that the member’s personal finances are protected. Personal responsibility for any debts incurred by the business is reduced or eliminated. As such there are certain rules and requirements that make up limited liability company agreements and contracts.

Types of Limited Liability Companies

In general there are three different versions of a limited liability company. These are public limited companies that must have at least two shareholders, with shares offered to the public. Private unlimited companies, which are usually created for certain purposes, and the more common private limited companies that can have one or more shareholders but cannot sell or offer shares to the public.

The Formation of Limited Liability Companies

The formation of a limited liability company is often performed by solicitors or company registration associates. However the shareholders who wish to form a limited company can apply directly to the Registrar of Companies and advice can be given from Companies House.

Memorandum of Association

This is the first document that must be dealt with when forming a limited liability company. There are a number of points that must be submitted in this document and they will include:

  • Company objectives.
  • The actual name of the company.
  • Where the company will be located.
  • The amount of capital that exists.
  • A stipulation that the member’s liability is limited.
  • That members will contribute to the company assets if the business fails or is terminated.
  • Whether or not the company will be a public company.

Articles of Association

The Articles of Association is the second limited liability company document that must be submitted to the Registrar of Companies. In this document information will be submitted on the rights of the shareholders, general meeting details, information on the payment of dividends, and the authorities granted to directors. There is also a section on whether or not shareholder can transfer any of the shares, and rules and regulations regarding the issue of any new shares.

Other Forms and Agreements

As well as the Articles of Association and the Memorandum of Association there will be other documents that must be filled in and approved by the Registrar of Companies. These documents may include an Incorporation document if a limited liability partnership is to be formed.

All of the documents that are sent to the Registrar of Companies will be thoroughly checked. Checks on the prospective company members will be made with the register of disqualified members and directors. Any discrepancies found may lead to a refusal of the formation of the limited liability company.

Returns and Accounts

Under company law all limited liability companies are required to file certain documents to the Registrar of Companies. These will include annual returns and annual accounts and these documents will be made available by the registrar for inspection by the public. Accounts must include profit and loss details, a company balance document, and an auditor and director’s report. The information included on annual returns will be the company’s registered office address and the names and addresses of the directors.

All of the above documentation is legally required for the formation and running of a limited liability company. There may be other limited liability company agreements set out between members that designate the roles each member will play within the business. These agreements and contracts will state the actual terms and conditions of the business in case any disputes arise regarding the day to day running of the business. As with any business contract, legal expertise should be used when drafting and submitting any limited liability company agreements and contracts.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Emgem
    Re: How a Landlord Agreement Works
    Would this be classed as a breach of tenancy agreement on the landlords part. In the agreement it says pets are not allowed in…
    30 March 2020
  • stone
    Re: Breach of Contract
    I employed a maid to clean and take care of my house to be paid at the end of the month;she worked for two weeks and abandoned the job and…
    17 March 2020
  • Itsme
    Re: Child Maintenance Contracts
    My ex is trying to say that if he is going to see his son then I have to do one drop or pay for one of his lifts? And I have to pay…
    14 March 2020
  • Elaine Yates
    Re: Store Agreements Explained
    Can you pay some money off a Promissory note and then borrow again against the original note For example sign a promissory note for…
    11 March 2020
  • Salpal29
    Re: What If I Don't Have a Written Contract With My Employer?
    My partner now, has a self employed oral agreement with his employer. He has worked there…
    2 February 2020
  • Rose
    Re: The Law & Verbal Agreements
    My daughter and husband bought a house with a small building plot within the boundary that was retained by the seller to build…
    28 January 2020
  • Art
    Re: Legally Binding Contracts
    I took admission for one of the beauty course in private beauty salon in London and paid half fees at the beaning and after a month…
    28 January 2020
  • Ghibli
    Re: How a Landlord Agreement Works
    Landlord changing locks and not supplying a key or emergency or temporary accomadation. This after a fire and after the fire…
    26 January 2020
  • alfie
    Re: Title Deeds: Who Keeps Them?
    no point posting questions here nobody answers!
    24 January 2020
  • Husein
    Re: Contracts and Self Employment
    I am a self employed and working in Amazon last 6 month as delivery driver through RAM distribution Company.Unexpected called me…
    10 January 2020