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ICAEW Law: QB2020 > 09. Sole traders and partnerships. > Flashcards

09. Sole traders and partnerships. Flashcards

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1
Q

T/F: when a partnership is dissolved, any partner (whatever their share of profits) can insist on the partnership assets being realised and any surplus being distributed (after payment of debts) to the partners.

A

TRUE

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2
Q

T/F: In the event of a capital deficiency, the remaining partners of the firm will bear the loss equally in the absence of an express agreement to the contrary.

A

FALSE

Remaining partners share a capital deficiency in proportion to their original capital contribution.

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3
Q

Money which a partner owes to the firm but cannot pay back.

A

Capital deficiency.

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4
Q

Capital deficiency.

A

Money which a partner owes to the firm but cannot pay back.

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5
Q

Remaining partners share a capital deficiency …

A

in proportion to their original capital contribution.

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6
Q

T/F: The Partnership Act (1890) provides that all partners are entitled to remuneration for carrying out their firm’s business.

A

FALSE

s.24 states the contrary

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7
Q

T/F: The Partnership Act (1890) provides that no partner is entitled to remuneration for carrying out their firm’s business.

A

TRUE

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8
Q

T/F: The Partnership Act (1890) provides that all partners are entitled to 5% interest per annum on ALL capital that they have contributed to the firm.

A

FALSE

only advances beyond the amount originally agreed are eligible.

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9
Q

T/F: The Partnership Act (1890) provides that the admittance of new partners requires the unanimous consent of all existing partners.

A

TRUE

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10
Q

The Partnership Act (1890) provides that the admittance of new partners requires …

A

the unanimous consent of all existing partners.

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11
Q

T/F: The Partnership Act (1890) provides that a majority of partners must consent to any decision to change the nature of the partnership’s business.

A

FALSE

s. 24 provides that unanimous consent is required.

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12
Q

The Partnership Act (1890) provides that any change in the nature of the partnership business requires …

A

the unanimous consent of all existing partners.

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13
Q

T/F: The Limited Partnership Act (1907) applies to ordinary partnerships.

A

FALSE

these are governed by the Partnership Act (1890).

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14
Q

T/F: A partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership.

A

TRUE

although the ‘without the consent’ bit is important.

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15
Q

A partner must account to the firm for any benefit derived by him … of the other partners from any transaction concerning the partnership.

A

without the consent

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16
Q

A partner receiving commission from a supplier …

A

must make account to the firm.

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17
Q

T/F: A firm, and the other partners, are bound by the acts of a partner acting within the usual authority of a partner.

A

TRUE

only if a third party knew that the partner did not have authority will the firm not be bound.

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18
Q

T/F: the actions of a partner in the ordinary course of business of the firm bind the firm and the other partners.

A

TRUE

unless they have no authority AND the person with whom they are dealing either knows this OR does not know or believe them to be a partner.

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19
Q

The actions of a partner in the ordinary course of business of the firm …

A

bind the firm and the other partners.

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20
Q

The only situation in which the acts of a ‘partner’ do NOT bind the firm and the other partners despite them being in the ordinary course of business of the firm is …

A

-the partner had no authority

-the third party knew this OR did not know or believe them to be a partner

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21
Q

T/F: A partner is liable on a contract entered into by the firm before he became a partner.

A

FALSE

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22
Q

T/F: An ordinary partnership may only be dissolved by the unanimous consent of all of its partners.

A

FALSE

-partnerships at will

-dissoloution on death, bankruptcy, e.t.c.

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23
Q

T/F: If a partnership becomes insolvent bankruptcy proceedings can be brought against the firm and individual partners.

A

TRUE

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24
Q

If a partnerhsip becomes insolvent bankruptcy proceedings can be brought against …

A

the firm and individual partners.

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25
Q

T/F: A partnership can not be ‘wound up.’

A

FALSE

Part V of the Insolvency Act (1986) provides that a partnership may be wound up in the same way as an unregistered company.

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26
Q

T/F: A partnership may grant security by way of floating charge over its assets and undertaking.

A

FALSE

like an individual, a partnership may only grant fixed charge security.

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27
Q

A sole trader or partnership may only grant security by way of … charge.

A

fixed

28
Q

T/F: A partner may assign their partnership interest to another.

A

TRUE

29
Q

T/F: An assignee of a partner has the right to inspect books of account or become involved in management decisions.

A

FALSE

30
Q

The liability of a partner in an ordinary partnership is …

A

unlimited.

31
Q

T/F: An LLP has a separate legal personality distinct from its members.

A

TRUE

32
Q

The members of an LLP are taxed …

A

as individuals on their partnership profits.

33
Q

T/F: An LLP is chargeable to Corporation Tax.

A

FALSE

its members are taxed as individuals on their partnership profits.

34
Q

T/F: An LLP must have a member whose liabliity is unlimited.

A

FALSE

35
Q

T/F: The names and addresses of the members of an LLP must be disclosed upon registration.

A

TRUE

36
Q

T/F: An LLP may choose any name it wishes.

A

FALSE
its name must end with the words ‘Limited Liability Partnership’ or the letters LLP.

37
Q

T/F: An LLP must have a formal partnership agreement akin to the articles of association of a limited company.

A

FALSE

38
Q

If a partner pledges the credit of the firm for a purpose apparently not connected with the firm’s ordinary course of buisiness …

A

the firm is not bound, unless he was specifically authorised to do so. The individual partner is however liable.

39
Q

The exception to the authority of a partner to bind their firm under S7 of the PA (1890).

A

Where one partner pledges the credit of the firm for a purpose apparently not connected with the firm’s ordinary course of buisiness, the firm is not bound unless he is specifically authorised by the other partners.

40
Q

T/F: An LLP’s partnership agrement may be used as its ‘incorporation document’ provided that it contains all the necessary information.

A

FALSE

an LLP must be registered using either form LL IN01 or its electronic equivalent.

41
Q

T/F: An LLP must file confirmation statements.

A

TRUE

42
Q

T/F: Notwithstanding any partnership agreement, members of an LLP have the right to take part in the management of the partnership business.

A

TRUE

43
Q

T/F: Notwithstanding any partnership agreement, members of an LLP have the right to reasonable remuneration in respect of work done for the partnership business.

A

FALSE

as with an ordinary partnership, there is no automatic right to remuneration.

44
Q

T/F: Notwithstanding any partnership agreement, a member can leave an LLP by giving reasonable notice to the other partners.

A

TRUE

45
Q

A change of membership of an LLP must be reported to the registrar within …

A

14 days

46
Q

A member of an LLP is an agent of …

A

the LLP only (not the other members as with an ordinary partnership)

47
Q

T/F: A member of an LLP is the agent of the LLP as well as its members.

A

FALSE

a member is only the agent of the LLP, NOT the other members

48
Q

T/F: A member of an LLP can not bind the LLP without having actual express or implied authority.

A

FALSE

a member may have ostensible authority

49
Q

The options available to an insolvent LLP are (broadly the same / significantly different) to those available to an insolvent Limited Company.

A

broadly the same

50
Q

The options available to an insolvent LLP are broadly the same to those available to an insolvent …

A

Limited Company

51
Q

T/F: An insolvent LLP may enter a voluntary arrangement with creditors.

A

TRUE

52
Q

T/F: An insolvent LLP may enter administration.

A

TRUE

53
Q

T/F: An insolvent LLP may enter voluntary liquidation.

A

TRUE

54
Q

T/F: An insolvent LLP may enter compulsory liquidation.

A

TRUE

55
Q

Withdrawals from an LLP by members within … may be clawed back if at the time they knew or had reasonable grounds to believe that the LLP was or would become insolvent.

A

2 years

56
Q

Withdrawals from an LLP by members within 2 years may be clawed back if at the time they knew or had reasonable grounds to believe that the LLP was or would become …

A

insolvent

57
Q

T/F: A partner has a statutory right to share in the profits or losses of a firm in proportion to their original capital contribution.

A

FALSE

the law provides that a partner ‘shares equally’ irrespective of capital contribution or the amount of work done.

58
Q

T/F: A partner has a statutory right of access to the partnership’s books of account.

A

TRUE

59
Q

The Limited Liability Partnerships Act (2000) provides that … or more persons that are associated for the purposes of carrying on a lawful business with a view to profit must have subscribed their names to an incorporation document.

A

two

60
Q

A Limited Liability Partnership’s name must end with those words or the letters …

A

LLP

[or the Welsh Equivalent - NOT IN THE SAMPLE EXAM]

61
Q

T/F: A sole trader must obtain a license and register for VAT.

A

FALSE

62
Q

In a sole tradership all business profits accrue to …

A

the sole trader.

63
Q

The only state organisation to which a sole trader must account is …

A

HMRC

64
Q

The only legal reason a sole trader need prepare accounts is …

A

to calculate their tax liability under Self Assessment.

65
Q

T/F: A sole trader’s business is legally distinct from their personal wealth.

A

FALSE

66
Q

T/F: A partnership of four or more partners must have a designated secretary.

A

FALSE

67
Q

T/F: A single partner can, in the absence of any partnership agreement, block the admission of a new partner.

A

TRUE

s.24 of the PA (1890) provides that ‘no person may be introduced as a partner without the consent of all existing partners.’

ICAEW Law: QB2020 (11 decks)

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