09. Sole traders and partnerships. Flashcards
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.
TRUE
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.
FALSE
Remaining partners share a capital deficiency in proportion to their original capital contribution.
Money which a partner owes to the firm but cannot pay back.
Capital deficiency.
Capital deficiency.
Money which a partner owes to the firm but cannot pay back.
Remaining partners share a capital deficiency …
in proportion to their original capital contribution.
T/F: The Partnership Act (1890) provides that all partners are entitled to remuneration for carrying out their firm’s business.
FALSE
s.24 states the contrary
T/F: The Partnership Act (1890) provides that no partner is entitled to remuneration for carrying out their firm’s business.
TRUE
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.
FALSE
only advances beyond the amount originally agreed are eligible.
T/F: The Partnership Act (1890) provides that the admittance of new partners requires the unanimous consent of all existing partners.
TRUE
The Partnership Act (1890) provides that the admittance of new partners requires …
the unanimous consent of all existing partners.
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.
FALSE
s. 24 provides that unanimous consent is required.
The Partnership Act (1890) provides that any change in the nature of the partnership business requires …
the unanimous consent of all existing partners.
T/F: The Limited Partnership Act (1907) applies to ordinary partnerships.
FALSE
these are governed by the Partnership Act (1890).
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.
TRUE
although the ‘without the consent’ bit is important.
A partner must account to the firm for any benefit derived by him … of the other partners from any transaction concerning the partnership.
without the consent
A partner receiving commission from a supplier …
must make account to the firm.
T/F: A firm, and the other partners, are bound by the acts of a partner acting within the usual authority of a partner.
TRUE
only if a third party knew that the partner did not have authority will the firm not be bound.
T/F: the actions of a partner in the ordinary course of business of the firm bind the firm and the other partners.
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.
The actions of a partner in the ordinary course of business of the firm …
bind the firm and the other partners.
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 …
-the partner had no authority
-the third party knew this OR did not know or believe them to be a partner
T/F: A partner is liable on a contract entered into by the firm before he became a partner.
FALSE
T/F: An ordinary partnership may only be dissolved by the unanimous consent of all of its partners.
FALSE
-partnerships at will
-dissoloution on death, bankruptcy, e.t.c.
T/F: If a partnership becomes insolvent bankruptcy proceedings can be brought against the firm and individual partners.
TRUE
If a partnerhsip becomes insolvent bankruptcy proceedings can be brought against …
the firm and individual partners.
T/F: A partnership can not be ‘wound up.’
FALSE
Part V of the Insolvency Act (1986) provides that a partnership may be wound up in the same way as an unregistered company.
T/F: A partnership may grant security by way of floating charge over its assets and undertaking.
FALSE
like an individual, a partnership may only grant fixed charge security.
A sole trader or partnership may only grant security by way of … charge.
fixed
T/F: A partner may assign their partnership interest to another.
TRUE
T/F: An assignee of a partner has the right to inspect books of account or become involved in management decisions.
FALSE
The liability of a partner in an ordinary partnership is …
unlimited.
T/F: An LLP has a separate legal personality distinct from its members.
TRUE
The members of an LLP are taxed …
as individuals on their partnership profits.
T/F: An LLP is chargeable to Corporation Tax.
FALSE
its members are taxed as individuals on their partnership profits.
T/F: An LLP must have a member whose liabliity is unlimited.
FALSE
T/F: The names and addresses of the members of an LLP must be disclosed upon registration.
TRUE
T/F: An LLP may choose any name it wishes.
FALSE
its name must end with the words ‘Limited Liability Partnership’ or the letters LLP.
T/F: An LLP must have a formal partnership agreement akin to the articles of association of a limited company.
FALSE
If a 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 was specifically authorised to do so. The individual partner is however liable.
The exception to the authority of a partner to bind their firm under S7 of the PA (1890).
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.
T/F: An LLP’s partnership agrement may be used as its ‘incorporation document’ provided that it contains all the necessary information.
FALSE
an LLP must be registered using either form LL IN01 or its electronic equivalent.
T/F: An LLP must file confirmation statements.
TRUE
T/F: Notwithstanding any partnership agreement, members of an LLP have the right to take part in the management of the partnership business.
TRUE
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.
FALSE
as with an ordinary partnership, there is no automatic right to remuneration.
T/F: Notwithstanding any partnership agreement, a member can leave an LLP by giving reasonable notice to the other partners.
TRUE
A change of membership of an LLP must be reported to the registrar within …
14 days
A member of an LLP is an agent of …
the LLP only (not the other members as with an ordinary partnership)
T/F: A member of an LLP is the agent of the LLP as well as its members.
FALSE
a member is only the agent of the LLP, NOT the other members
T/F: A member of an LLP can not bind the LLP without having actual express or implied authority.
FALSE
a member may have ostensible authority
The options available to an insolvent LLP are (broadly the same / significantly different) to those available to an insolvent Limited Company.
broadly the same
The options available to an insolvent LLP are broadly the same to those available to an insolvent …
Limited Company
T/F: An insolvent LLP may enter a voluntary arrangement with creditors.
TRUE
T/F: An insolvent LLP may enter administration.
TRUE
T/F: An insolvent LLP may enter voluntary liquidation.
TRUE
T/F: An insolvent LLP may enter compulsory liquidation.
TRUE
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.
2 years
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 …
insolvent
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.
FALSE
the law provides that a partner ‘shares equally’ irrespective of capital contribution or the amount of work done.
T/F: A partner has a statutory right of access to the partnership’s books of account.
TRUE
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.
two
A Limited Liability Partnership’s name must end with those words or the letters …
LLP
[or the Welsh Equivalent - NOT IN THE SAMPLE EXAM]
T/F: A sole trader must obtain a license and register for VAT.
FALSE
In a sole tradership all business profits accrue to …
the sole trader.
The only state organisation to which a sole trader must account is …
HMRC
The only legal reason a sole trader need prepare accounts is …
to calculate their tax liability under Self Assessment.
T/F: A sole trader’s business is legally distinct from their personal wealth.
FALSE
T/F: A partnership of four or more partners must have a designated secretary.
FALSE
T/F: A single partner can, in the absence of any partnership agreement, block the admission of a new partner.
TRUE
s.24 of the PA (1890) provides that ‘no person may be introduced as a partner without the consent of all existing partners.’
