New rules allow Limited Liability Partnership Structure for law firm partners

Law Firm Partners Benefit from Limited Liability Partnership

Caitlyn Buchanan, 14th January 2020 (Updated 14 October 2021)

Irish law firms are now able to use an LLP corporate structure allowing the partners to avail of limited liability. By converting to a Limited Liability Partnership (LLP) the legal partners would not be personally liable for the firm’s debts, liabilities or obligations, meaning their personal assets cannot be seized. This form of ownership has been available to law firms in the UK and other countries for some time and more than half of Ireland’s law partnerships are expected to take advantage of the new LLP Partnership status.

The Minister for Justice, Charlie Flanagan moved for the change on 30th September 2019. In November 2019, once the new regulations were finalised the Legal Services Regulatory Authority (LSRA) began accepting applications to allow lawyers to trade under a LLP structure. Since then, a total of 330 law firms have been authorised to operate as LLPs. Under the provisions of the Partnership Act 1890 & 2015, the change to an LLP structure effectively amends the ‘joint-and-several’ rule of partnership law. This allows legal partnerships to become LLP structures, ensuring the partners are no longer personally exposed to claims made against the firm

Limited Liability for Legal LLP Structures

Under the provisions of the Legal Services Regulation Act 2015, Irish law firms can now reduce the financial liability of LLP partners. Although a partners responsibility to the firm’s liabilities is limited, they could still be held liable for fraud, misconduct or criminality.

Obligations of Legal LLPs

A Legal LLP must use the suffix ‘limited liability partnership’ or the abbreviated ‘LLP’ in the partnership name. The practice must use the LLP partnership company name on all contracts, invoices, negotiable instruments, website(s), advertisements or other publications. As per the regulations, the firm must notify creditors and clients, setting out specific information that is operating as an LLP law firm. Information to be provided includes:

  • The date the practice commenced operations an LLP
  • The members have no personal liability for any debts, liabilities or obligations
  • The personal liability of partners does not prevent enforcement against the property of the LLP of any debt, liability or obligation
  • The Partnership Act 1890 still applies to the LLP provided that it is not in conflict with the 2015 act

Please note: The LSRA register must be updated when partners join or resign, or if registration details change, or if the firm is to cease operating as an LLP Partnership.

Is Limited Liability available for Sole Practitioners?

While sole practitioners do not face the same risks as other partners, they are personally exposed to their own practice’s liabilities. The Law Society of Ireland is a strong advocate that sole practitioners should also be able to avail of protections through limited liability and will continue to campaign for further reforms for sole practitioners. However, in the meantime there are steps that sole practitioners can take to limit their exposure:

  • Ensure they hold adequate Professional Indemnity (PI) insurance – Cover should be obtained above and beyond the mandatory minimum for the size, the type of work, nature of the practice, etc.
  • To avoid any ambiguity, every letter of engagement should clearly state the solicitor’s scope of work and also indicate work that is excluded from that scope.
  • A sole practitioner can improve their protection by clarifying limiting liability in the letter of engagement. Under section 48 of the Civil Law Act 2015 ‘liability may not be limited to an amount less than the minimum PI requirement (currently €1,500,000).’

Legal Partnerships with Barristers

Provisions for Legal Partnerships (LPs) between solicitors and barristers, or between barristers themselves have yet to be instated. It is expected that once provisions are instated it will be possible for a firm to be both a LP and an LLP.

How to Proceed

’The Company Bureau team can refer you to an expert who can assist in converting your practice to an LLP partnership as per the LSRA requirements. A reference number will be issued upon application, and a decision will be received within 60 days of submission. Please contact us at +3531 646 1625 or email formations@companybureau.ie.