Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

SQE general > BLP WK 1 > Flashcards

BLP WK 1 Flashcards

1
Q

What is the definition of a traditional partnership?

A

A relationship where two or more persons carry on a business together with a view to profit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the legislation that governs traditional partnerships?

A

The Partnership Act 1890 (PA 1890).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Is there a formal process for establishing a partnership?

A

No, a partnership can arise even without the partners being aware if the criteria in s 1(1) of the PA 1890 are met.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Is a partnership a separate legal entity?

A

No, partners are collectively referred to as a “firm.”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the minimum number of persons required to form a partnership?

A

At least two persons, which may include companies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What factors can indicate the existence of a partnership?

A

Evidence of profit-sharing and decision-making by all individuals.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Does a loan or a situation where someone is not held out as a partner constitute a partnership?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Why are partnerships favoured?

A

Lack of formality, confidentiality, and minimal regulatory requirements compared to companies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Do partnerships require public filings or disclosures?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Why might clients avoid forming a partnership?

A

Concerns about unlimited liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What type of duties do partners owe each other?

A

Fiduciary duties, similar to trustees and beneficiaries.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are some examples of fiduciary duties owed by partners?

A

Honest and full disclosure, prohibition of unauthorized personal profit, and avoidance of conflicts of interest.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the nature of partners’ liability for the firm’s obligations?

A

Partners are personally liable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is joint liability in the context of a partnership?

A

All partners are equally responsible for contractual debts incurred while being a partner.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is joint and several liability in the context of a partnership?

A

Each partner can be held liable for the full amount of a tortious act.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Is a new partner liable for the firm’s prior debts?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Can retired partners still be liable for the firm’s debts?

A

Yes, unless novation occurs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is holding out liability?

A

When a person who is not a partner is held liable for partnership debts because they allowed themselves to be represented as a partner.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the three elements for holding out liability?

A

(1) Representation as a partner,
(2) a third party acts in response, and
(3) the third party believes in the representation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

When can a partner bind the firm in contracts?

A

If the act is related to the business type and carried out in the usual way.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What are the exceptions to a partner’s ability to bind the firm in contracts?

A

If the third party knew the partner was not authorised or did not believe they were a partner.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How can a non-partner bind the firm in contracts?

A

Through apparent authority, such as being represented as a partner (holding out).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How are partnerships taxed?

A

They are tax transparent.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Does the partnership itself pay taxes?

A

No, individual partners are taxed on their share of the profits.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

How is income tax handled in a partnership?

A

Each partner is responsible for their own share of the partnership’s income.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

How is capital gains tax handled in a partnership?

A

Partners are taxed on their fractional share of any gains from the disposal of partnership assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

When does a partnership agreement override the PA 1890?

A

When the agreement addresses a topic covered in the PA 1890.

28
Q

What is the purpose of a partnership agreement?

A

To outline the terms on which partners will run the business, overriding the default provisions of the PA 1890.

29
Q

What should a partnership agreement state regarding the partnership’s commencement?

A

A formal commencement date.

30
Q

If partners start working together before the partnership agreement’s date, what applies until the agreement begins?

A

The PA 1890.

31
Q

Can partnerships have a fixed term?

A

Yes, or they can continue until terminated as per the agreement.

32
Q

If a partnership term expires and the partners continue without a new agreement, on what terms are they presumed to be working?

A

On the same terms as the expired agreement.

33
Q

Are there any restrictions on the partnership name?

A

Yes, it must comply with restrictions (e.g., no “limited”, “LLP”, or offensive terms).

34
Q

Does a partnership have a separate legal personality?

A

No, partners own a share in the property.

35
Q

What determines whether an asset is partnership property?

A

The intention at the time of acquisition.

36
Q

According to s 20 of the PA 1890, what is the status of property brought into the firm?

A

It is considered partnership property.

37
Q

According to s 21 of the PA 1890, what is the status of property bought with partnership funds?

A

It is deemed to belong to the partnership unless otherwise agreed.

38
Q

What is the default rule regarding the sharing of capital, profits, and losses?

A

Partners share equally.

39
Q

What is a profit-sharing ratio (PSR)?

A

A ratio set out in the partnership agreement to dictate how profits are shared, particularly if contributions vary.

40
Q

Can partners draw income from profits?

A

Yes

41
Q

If there is no partnership agreement, how are income profits shared?

A

Equally

42
Q

If a salary is intended in addition to a profit share, must it be explicitly stated in the partnership agreement?

A

Yes

43
Q

Can every partner participate in the partnership’s management?

A

Yes, but they are not required to.

44
Q

What should the partnership agreement define regarding work input?

A

The work input and roles of each partner, and any authority limits.

45
Q

What is the typical decision-making process in a partnership?

A

Majority rule.

46
Q

Which partnership decisions require unanimous consent?

A

Changes to the partnership business, introducing a new partner, and varying partner rights and duties.

47
Q

Can partners be expelled by majority vote?

A

No, unless previously agreed upon.

48
Q

Without provisions for partner departure, what happens to the partnership when a partner leaves?

A

It is dissolved.

49
Q

Can non-compete clauses be applied to outgoing partners?

A

Yes, subject to reasonableness in duration, area, and scope.

50
Q

What happens to surplus assets upon the dissolution of a partnership?

A

They are distributed based on an agreed asset surplus ratio (ASR). If none, the profit share ratio (PSR) applies.

51
Q

What are the two types of liability partners share?

A

○ Contractual Liability: Joint liability (s 9 PA 1890).

○ Tortious Liability: Joint and several liability (ss 10 and 12 PA 1890).

52
Q

When is a retired partner no longer liable for partnership debts?

A

When novation occurs, releasing them from past obligations.

53
Q

How can a non-partner be bound by a partnership contract?

A

If they act with apparent authority, like being held out as a partner, creating a reasonable belief in the third party.

54
Q

What are the tax implications for individual partners?

A

Partners are personally taxed on their share of the partnership’s income and capital gains, based on the profit-sharing ratio.

55
Q

When does the PA 1890 act as a default?

A

When there is no partnership agreement, or when the agreement is silent on specific matters.

56
Q

What is the significance of section 19 of the PA 1890?

A

It allows partners to change their rights and obligations by unanimous consent, even if initially defined in the agreement.

57
Q

What happens if the partnership continues after the agreed term ends?

A

It is presumed to continue under the same terms as the original agreement (s 27 PA 1890), unless a new agreement is made.

58
Q

How is ownership of partnership property typically determined?

A

○ Intention at the time of acquisition.

○ Assets brought into the firm (s 20 PA 1890).

○ Assets bought with partnership funds (s 21 PA 1890).

59
Q

What are the options for distributing profits and losses?

A

Partners can:

○ Share equally by default (s 24(1) PA 1890).

○ Define a specific profit-sharing ratio (PSR) in the agreement.

60
Q

Do partners have a right to a salary?

A

No, not unless explicitly stated in the partnership agreement (s 24(6) PA 1890).

61
Q

What are the exceptions to majority rule in decision-making?

A

Unanimous consent is needed for:

○ Changing the partnership business (s 24(8) PA 1890).

○ Introducing a new partner (s 24(7) PA 1890).

○ Varying partner rights and duties (s 19 PA 1890).

62
Q

Why is it important to include expulsion provisions in the partnership agreement?

A

Without them, it is nearly impossible to remove a partner without dissolving the partnership (s 25 PA 1890).

63
Q

What should the partnership agreement address regarding a partner leaving?

A

It should outline provisions for the continuation of the partnership and the buyout process for departing partners.

64
Q

What are some triggers for the dissolution of a partnership?

A

○ Expiry of the fixed term (s 32(a) PA 1890).

○ Completion of a specific venture (s 32(b) PA 1890).

○ Death or bankruptcy of a partner (s 33 PA 1890).

○ Illegality of the partnership business (s 34 PA 1890).

65
Q

If there is no asset surplus ratio (ASR) defined, how are surplus assets distributed upon dissolution?

A

According to the profit-sharing ratio (PSR) (s 44(b)(3) & (4) PA 1890).

SQE general (24 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions