c6 Flashcards
sole trader - types of charges
fixed - not floating
co - types of charges
fixed and floating
sole trader - liability
unlimited liability. business is not a separate legal entity
min number of partners in a p’ship
2
what must a p’ship be doing?
carrying out a business NOT holding co
what is the aim of a p’ship? what can the aim not be
aim: profit making
cannot be the aim: business experience
how do partners split profits?
equally - unless stated otherwise in a p’ship agreement
can partners have salaries?
no
partnership agreement/deed - is this requierd?
no - if there is not one in place, follow p’ship act
what is the nature of the relationship of a partner to a p’ship?
fiduciary
-act in good faith
-not to exercise a legal right over an improper motive
-not to keep profits from other partners (unless consent given)
-avoid conflicts of interest without full disclosure
what happens if a partner breaches their fiduciary duties?
may render the partner liable
partnership: profots/losses
shared equally
p’ship deed stats profit share but not loss share = share same as profit ratio
partnership: capital deficiency
shared amongst partners not in loss ratio but in ratio to amounts of capital they originally contributed
partnership: mgmt
every partner entitled to take part in mgmt decisions
ordinary mgmt decisions: majority of partners
partnership: change in business
any decision in changing the nature of the business = unanimous
partnership: new partners
unanimous
partnership: variation to p’ship agreement/deed
can be varied with unanimous consent of all partners
partnership: imdenify
all partners must be compensated for liabilities incurred in the ordinary and proper conduct of the business (ie expenses paid back)
partnership: renumeration
no partner is entitled to salary (they get split of profits)
partnership: interest on capital
per p’ship law: no interest on capital (allowed if in p’ship agreement)
BUT extra capital = 5% interest
partnership: records and accoutns
all partners have access
must be kept at main place of business
partnership: expulsiojn
expulsion = majority of partners BUT good faith + good reason
partnership: dissolution
authority of partners after dissolution continues so far is necessary to wind up the p’ship affairs/complete transactions
on dissolution - any partners can insist on realization of assets/payment debts/distribution of surplus
partnership: liabilty
joint + severly liable for acts of fellow partners
someone can sue: partner A, partner B or both
partnership: agent rule
agent unless
-no authority to act for the firm AND third party knows he has no authority/does not believe him to be a partner (perception of 3rd party is key)
-if a partner pledges the credit of a firm for a purpose unrelated to the firms ordinary business: the firm will not be bound unless the partner has express authority to do so
partnership: debts incurred before joining
not liable
partnership: debts incurred whilst partner
liable
partnership: debts incurred after retirement but incurred whilst partner
liable
partnership: debts incurred after retirement
not liable UNLESS:
- 3rd party is unaware they have retired
they need to:
-notify ALL creditors
-change letterhead
partnership: dissolution per p’ship act (if not agreement in place) - in what instances:
-death/retirement of a partner
-expiry of a fixed term partnership
-completion or termination of a single joint venture
-subsequent illegality
-notice given by a partner if it is a p’ship of indefinite duration
-order of the court
partnership: default of partnership - what can creditors do?
can take action against individual partners OR the p’ship
LLP - difference to partnership:
limited liability (separate legal Co) BUT more regulation
LLP - incorporation doc is signed by how many members?
2 members
LLP - what info needs to be submitted to CH?
-name of LLP
-location of registered office
-address of registered office
-names + addresses of all members of LLP
-names of 2 designated members who are responsible for signing nptices aand accounts and delivering to registra
-registration fee
does an LLP need an agreement?
no - if there dont have one they follow LLP Reg 2001
do LLP agreements need to be filed with registrar?
no
LLP - dissolution - how
voluntary arrangement
appoint a liquidator: voluntary or compulsory
-go into administration
LLP dissolution - difference to companies:
withdrawals made by members < 3 yrs prior can be clawed back if can be shown they knew about insolvency
past and present members may be required to contribute to the assets of the LLP to the extent that they have done so in their LLP agreement
partnership: charges
fixed
LLP charges
fixed + floating (it is a Co)
partnership - conflicts of interest
fidiciary duty to the partnership - avoid conflicts of interest without full disclosure
partner - usual acts for the normal course of the business BUT no authority
p’ship is still bound UNLESS: TP knew they had no authority OR does not know/believe them to be a partner
partnerships - did they get dissolved?
yes - can be wound up in the same way as an unregistered company
partnerships - why would they get dissolved?
-death/retirement of partner (usually changed in the agreement)
-order by court
-expiry of a fixed term p’ship
-subsequent illegality
-notice given by a partner if it is a p’ship of indefinite duration
-completion/termination of a JV
do LLPs need formal p’ship agreement?
no
do p’ships need formal formal f’ship agreement?
no
T or F = an LLP must have at least one member whose liability is unlimited
false = liability of every member is limited
do partnerships or LLPs need to submit confirmation statements to the registrar of companies?
partnerships - no
LLPs - yes
(1) Voluntary arrangement
(2) Administration
(3) Voluntary liquidation
(4) Compulsory liquidation
which are applicable to LLPs?
all of them!!
are partnerships required to have a secretary?
no - only public Co are required to have secretaries
when does a p’ship begin?
when the partners agree to conduct their business activity together - this may be before trade begins!
minimum number of partners subscribed onto an incorporation document
min = 2 designated members - responsible for signing notices and accounts and delivering them to the registrar
