When starting a business with a partner, it is important to establish a clear agreement outlining the terms and expectations for both parties. One common way to do this is through a Limited Liability Partnership (LLP) agreement. However, it is not always necessary to have a written document to establish an LLP agreement. A verbal agreement can also be legally binding, but it is important to understand the risks involved.
What is an LLP agreement?
An LLP agreement is a legal document that outlines the rights and responsibilities of each partner in a Limited Liability Partnership. It covers a wide range of topics including profit and loss distribution, management of the business, decision-making processes, and dispute resolution.
LLPs are popular among professionals such as lawyers, accountants, and architects, as they offer the liability protection of a corporation while maintaining the flexibility of a partnership.
Verbal LLP agreements
While it is always recommended to have a written LLP agreement, verbal agreements can also be legally binding under certain circumstances. In order for a verbal agreement to be enforceable, there must be clear and mutual assent to the terms of the agreement, followed by performance or partial performance of the terms.
In order to prove the existence of a verbal LLP agreement, it is important to have evidence of the conversations that took place and the terms that were agreed upon. This can include emails, text messages, and witness statements.
Risks of verbal agreements
While verbal LLP agreements are legally binding under certain circumstances, they come with a higher risk of misunderstandings and disputes. Without a written agreement, it can be difficult to determine the exact terms and expectations of each partner.
In addition, without a written agreement, it can be difficult to prove the existence of an agreement in court. This can lead to lengthy and costly legal battles.
It is always recommended to have a written LLP agreement in place, even if a verbal agreement has been reached. This can help to avoid misunderstandings and disputes, and provide a clear framework for the partnership.
Conclusion
While verbal LLP agreements can be legally binding, they come with a higher risk of misunderstandings and disputes. It is always recommended to have a written agreement in place to provide a clear framework for the partnership. If a verbal agreement has been reached, it is important to have evidence of the conversations and terms agreed upon.
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