Many LLP members might think that the whole point of an LLP is to isolate them from potential claims. But, the limitation on liability only applies in regard to partnership debts and liabilities. There remain many other potential liabilities to (i) the partnership itself, and (ii) third parties. Plus, it should not be forgotten that the vast bulk of CA 1985 obligations (over 100 offences) also apply to LLPs and personal liability could arise under many of those provisions.

Whilst members do not owe a fiduciary duty to the other members, there are some situations in which members can sue each other (an important example is a claim against the majority based on a fraud on the minority). In addition, individual members can be sued by the LLP for breaches of fiduciary duty, or for breach of the duty of skill and care (or even for breach of contract). For instance, what if a member negligently supervises the work of a junior fee-earner who, in turn, gives negligent advice to a third party – in that situation the member might well have breached his duty to the LLP and caused the LLP’s loss. Another area of risk is discrimination claims (which can be against an individual – not just against the LLP), whilst there is also a potential risk from liquidators (who may seek to blame former directors/members for losses associated with the company).

The key point to appreciate is that entering into an LLP does not absolve you of all personal liability. There remains an exposure to many potential claims. Accordingly, an LLP member should consider taking out management liability insurance. For an introductory article see [2006] LSG 5 October 36. © Practical Lawyer