Chapter 11 Business Organisations

Question 1

What are the types of business organisations?

Answer 1

1. Sole proprietorship
2. Limited Liability Partnership
3. Limited Partners
4. General Partnership
5. Company

Question 2

In a general partnership, what are the contractual liabilities to third parties?

Answer 2

1) If the partner of the firm acts with actual authority, the entire firm will be bound.
2) If a partner of the firm acts within usual course of business, the entire firm will be bound
- EXCEPTION

1) If third party knew that the partner had no actual authority
2) If third party did not know that he was a partner

Question 3

In a general partnership, if the partners restrict authority of a certain member. What is the limitation of that restriction?

Answer 3

It is restricted to whether or not the third party knew that the partner had restricted authority

Question 4

In a general partnership, what are the tortious liabilities of the partners to third party?

Answer 4

1) If a partner commits torts on a third party with actual authority, entire partnership liable
2) If a partner commits torts on a third party within usual course of business. Entire partnership liable
3) If partner commits a tort without actual authority and outside usual course of business, partnership not liable

Question 5

In a general partnership, what is the liability of retired partners and new partners?

Answer 5

New partners:
- New partner will not be liable for debts before time of joining unless agreeing otherwise

• New partner will be liable for debts after he joins

Retired partners:
-Retired partner will still be liable for debts even after he leaves

EXCEPTION:

1) Third party had notice of his retirement
2) Third party did not know he was a partner

• Retired partners are still liable for debts even before he leaves

Exception:
1) He enters into an agreement with the third party and remaining partners to discharge him from liability