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Law > Chapter 6 - Types of trade > Flashcards

Chapter 6 - Types of trade Flashcards

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1
Q

What are the advantages of being a sole trader?

A

No formal procedures
Independence
Self-accountability
Personal supervision
All profits accrue to owner

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2
Q

What are the disadvantages of being a sole trader?

A

Personal wealth may be lost if debts called in

Expansion requires ploughing back of profits

High reliance on individual

Problems raising finance

No economies of scale

Lack of diversification

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3
Q

What’s an advantage of a written partnership agreement?

A

Sets out details which are not otherwise implied by law

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4
Q

What does the partnership act 1890 set out?

A

Basic rights and duties of partners

e.g. share profits
veto new partners
take business decisions

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5
Q

Do partners owe a fiduciary duty to the partnership?

A

Yes

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6
Q

How are partners liable?

A

Joint and severally liable for the acts of their fellow partners in so far as they bind the firm

Therefore necessary to consider authority of partners to bind the firm, based on principles of agency

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7
Q

What does the Partnership Act 1890 provide of each partner?

A

Each partner is the agent of the partnership and their fellow partners for the purpose of the partnership

Authority of partner my be actual/apparent

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8
Q

What does the Partnership Act 1890 provide that all firms and partners are bound by?

A

Bound by all acts of the partners for carrying on in the usual way business is carried out

Applies unless partner has no authority to act for the firm in a particular manner and that the person who they are dealing with knows this

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9
Q

How have the courts interpreted the binding act?

A

Should be done in the name of the firm, for the purpose of the business of the firm and by a person who purports to act as partner

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10
Q

What instances does the Partnership Act 1890 provide a partnership is dissolved?

A

Death/bankruptcy of a partner

expiry of a fixed term partnership

Completion /termination of a single joint venture

Subsequent illegality

Notice given by a partner

Order of the court

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11
Q

What happens if a partnership is in default on any secured loan?

A

Creditors may take action against the partners individually or sue the partnership

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12
Q

What are LLPs governed by?

A

LLP act 2000

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13
Q

What is an LLP?

A

Incorporated partnership that has a legal personality separate from its members whose liability is limited

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14
Q

How is an LLP created?

A

Created by the registration with the Registrar of Companies of a lawful business carried on by 2+ people with the view of making profits

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15
Q

What must be in incorporation docs?

A

Signatures of min 2 subscribers

Name of LLP

Location and address of registered office

Names and addresses of all members

Names of 2 designated members responsible for signings notices

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16
Q

Is there a max limit on number of members of an LLP?

A

No, new members admitted by agreement of existing members

17
Q

How does a person cease being a member?

A

Giving reasonable notice to the other members

18
Q

Do changes of membership affect the existence of an LLP?

A

No, but must be notified to Registrar within 14 days

19
Q

Is an LLP required to have a formal partnership agreement?

A

No but usually will

Doesn’t have to be filed with Registrar

20
Q

Can every member of an LLP take part in management and take on duties/responsibilities of directors?

A

Yes, subject to partnership agreement

21
Q

How do LLPs keep records?

A

Same as a company

No requirement to provide equivalent of a director’s report

Must maintain register of charges

Register new charges with Registrar

22
Q

What is an LLP primarily liable for?

A

Debts and obligations of firm’s business

23
Q

Do members of an LLP face personal liability?

A

No

24
Q

What are the responsibilities of designated members?

A

Filing notices with Registrar

Filing notices regarding Register of People with significant interest

Signing and filing partnership accounts

Appointing auditors

25
Q

What happens if a partnership becomes insolvent?

A

Bankruptcy brought on individual partners

26
Q

Under the LLP Act 2000, what is every member an agent of?

A

LLP only

27
Q

Do partners have a statutory right to remuneration?

A

No

28
Q

How are partnership profits shared?

A

Equally in absence of excess provision

29
Q

When does a partnership begin?

A

When the party has agreed to conduct business together

30
Q

When can the partnership agreement be varied?

A

With consent of all parties

31
Q

Can any partner (whatever their share of profits) insist on the partnership assets being realised and any surplus being distributed (after payment of debts) to the partners?

A

Yes

32
Q

In the event of there being a capital deficiency, will the remaining partners of the firm bear the loss equally?

A

No

Law (13 decks)

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