BLP - 2 - Partnerships

Question 1

Partnership?

Answer 1

S1 PA 1890 - two or more persons carrying on a business in common with a view of profit
-Decision making?
-Names on deeds?
-How are profits shared?

Question 2

Act

Answer 2

Applies as default.
-Agreements can be oral or implied by conduct.

Question 3

Terms

Answer 3

If partners carry on after expiration presumed to be on same terms as before (s27 PA 1890).

PA 1890 - not required to take part in management.
Common clause to devote whole of time and attention.

PA - anti-competition clause.

Question 4

Decision making

Answer 4

With three exceptions must be taken my majority (S24 PA 1890)
-changing nature of business
-introducing a new partner
-changing the terms of the partnership agreement.
These must be made unanimously/

Question 5

Profits and loss

Answer 5

PA 1890 share in profit and loss equally.
Capital may be divded by implied conduct.

Question 6

Expulsion

Answer 6

• PA 1890 - no majority of partners may expel another unless partners have expressly agreed.

Question 7

Dissolution

Answer 7

-Contractual relationship between partners comes to an end.

PA 1890 - may end by giving notice of their intention.
-when retires
-on expiry of a fixed term
-by death or bankruptcy
-notice of dissolution to partner (who has by order of court) granted a charge over their share of partnership property for debt owed by them alone and not the partnership as a whole.

• Something unlawful (e.g. loss of license)

Or court order under s35 PA 1890
-incapable of performing
-partner prejudicial to bisiness
-wilfully or peristently breaches agreement
-only carried on at a loss
-just and equitable.

Effect-
assets sold, outgoing partner receives their share. S39 PA outgoing partner can insist on this

5% interest on their share per annum until they receive share from other partners/

Question 8

Goodwill

Answer 8

• Business reputation and value
  When sold part of value
  Commonly two year profits.

Question 9

Dissolution on sales

Answer 9

Creditors (partners must pay shortfall
Partners who have lent money
Share of capital they are entitled to
Surplus is shared in accordance with agreemet.

Question 10

Duties under PA 1890

Answer 10

Utmost fairness and good faith towards each other.
-completely open with relevant inofrmation
-account to firm for private profits
-must not compete with firm.

Indemnify partners who have borne more than thier share of liability or expense with the partnership.

Question 11

Liability to third parties

Answer 11

Contracts
Actual authority - express
Implied - in one particular type of transaction (specialised partner) or through course of dealing.

Apparent authority -
Relates to business of kind for the firm
Would be usually expected to act
Other party did not know they did not have authority to act
The other party deal with a person whom they know or believe to be a partner

That partner makes the firm liable and is liable to indemnify fellow partners.

Firm also liable for any wrongful act or omission (tort) in ordinary course of business by their partners

Question 12

Liability for debt

Answer 12

-Liable jointly when incurred while they were a partner. Severally and jointly.

Novation agreement - retiring partner released from debt by entering into contract with creditor and other partner. Creditor can now only pursue firm.

Not liable when left
Must follow s36.
- actual notice.
-London Gazzette.

Holding out -
Creditor pursues personally.
-Writing, oral, conduct presented as a partner.
The partner must have knowledge themsleves.

Question 13

LLPs

Answer 13

At least two members on incorporation.
Form LLINO1 no need for agreement.

Must have registered office.

Designated members must
-sign and file annual accounts
-appoint remove and renumeerate auditors
file annual confirmation statement
send notices to the registrar of companies.
winding up LLP.

Must register charges with Registrar.

New member - 14 days to registrar. - service address, name, DOB.
When leaves LLTM01 (individual) or LLTM02 (corpoate) to companies house within 14 days.

Question 14

LLP Agreement

Answer 14

LLP Regulations 2001-
share equally in capital and profits

• every member may take part in management, not entitled to renumeration.

Ordinary matters by majority. Changing nature of business and terms of contract unanimous.

Members leave by giving reasonable notice.
Members cannot be expelled.

Question 15

Trading profits

Answer 15

Chargeable receipts LESS deductible expenditure = trading profit/loss

-Deductible expenditure - not client entertainment and leasing cars over certain emission levels
‘Wholly and exclusively for the purposes of trade’

Question 16

WDA

Answer 16

18%
Valued at start of financial year.

Question 17

AIA

Answer 17

£1,000,000
Second hand or refurbished.
Shared between groups of companies

Question 18

Full expensing

Answer 18

100% in that period
Brand new
Uncapped

Question 19

Reliefs

Answer 19

Start-up loss relief - first four tax years of new business. Carried back and set against income in three tax years prior.

Carry-accross/ one year carry back for losses-
-set against total income from the same year
-set against total income for year preceeding
-set against total income form same year until reduced to zero with balance being set against preceeding tax year
-set against total income from tax year preceding tax year of that loss until income is reduced to zero with balance of loss being set against current.

Set-off against capital gains -
Set trading losses against chargeable gains in same year. Before anniversay of 31 January.

Carry-foward -
Carry forward taking earlier years first. Indefinitely. must notify HMRC in that year.

Carry-back of terminal trading losses;
-final 12 months carried across and set against trading profits in final year and then three years preceeding.

Carry-forward on incorporation;
carry forward against income.
80% or more of consideration for business transferred must be in shares.
Notify HMRC

Cap-on reliefs;
Start-up and carry-accross/back;
subject to ca of £50,000 or 25% of taxpayers income.

Question 20

VAT

Answer 20

20%.
Exempt - residential land, postal services, education and health services.
£85,000 (value of taxable supplies) in 12 months must register
Must pay within one month from end of each quarter.

Zero-rated - person may reclaim VAT.

Must provide tax invoice, showing VAT number.

Question 21

Partners taxed on income tax and CGT.

Question 22

Income tax relief

Answer 22

• Deduct from income tax liabilty 30% of amount invested into ordinary shares of qualifying quoted companies.
  2million cap.

Non-cash beneifts, bonuses are taxable. Personal gift not.