Chapter 6: Summary Flashcards
What are the two types of trade?
Sole Traders
Partnerships
What is a sole trader?
Single person owns and runs the business.
All profits and losses belong to him/her.
Fully liable for the debts of the business.
What is a general partnership?
Two or more persons.
Carrying on a business.
View to a profit.
When does a partnership have to have a partnership agreement?
It is the choice of the business.
When will the partnership agreement follow the rules of the Partnership Act 1890?
If have agreement, this acts as a contract between partners.
If not then they follow the rule of the Partnership Act 1890.
What are five rules included in the Partnership Act 1890?
Profits shared equally.
All partners are involved in the management of the business.
Any changes to the business must be unanimous.
New partners must be agreed by unanimous decision.
Partners are expelled by majority decision.
What is the authority of a partner?
All partners are agents of the firm and can bind all the partners in contract if they are acting with their authority.
What is the liability of general partners?
All partners are jointly and severally liable for debts.
What is the liability of new partners?
Liable for debts incurred since they became partner.
What is the liability of retiring partners?
Liable for debts incurred until retired.
Must give notice of retirement.
Can enter into indemnity agreement with remaining partners.
What is a limited liability partnership?
A separate legal entity and must be registered with the Registrar.
What are the requirements of a limited liability partnership?
All partners can be involved in the running of the business.
All partners have limited liability.
All partners can be agents of the firm (unless right is excluded).
If want to dissolve must pass agreement to do so.
Must publish accounts and file confirmation statement.
