Brainscape's Knowledge GenomeTM

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


See full index

SQE1 - Business > General Partnerships > Flashcards

General Partnerships Flashcards

1
Q

What are the three requirements for a general partnership under the Partnerships Act 1890?

A
  1. Two or more persons
  2. Carrying on a business in common
  3. With the intention to make a profit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Does persons include corporate bodies as well as people?

A

Yes

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

What is business?

A

Buying or selling goods, or providing services, for a fee

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

Is it material if a business never actually realises a profit?

A

No, as long as they intend to

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

What does a party receiving a share of the profits of a business raise the presumption of?

A

That a partnership exists

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

In what three situations will receiving a share of the profits of a business not raise the presumption that a partnership exists?

A

Money is:

  1. Repayment of a debt
  2. Remuneration to employee/agent
  3. Annuity to a survivor of a partner on account of their share or to a person who has sold the goodwill in the business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Is an agreement to share losses prima facie evidence of a partnership, and can lack of one prevent the formation of a partnership?

A

No to both

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

Does a party need to contribute capital to be considered a partner?

A

No

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

What is the limit on the number of partners that can be in a general partnership?

A

There is no limit

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

Does a general partnership have a legal personality separate from its owners?

A

No

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

Can the partners use a partnership agreement to override most rules in the Partnership Act, and what is the effect of this?

A

Yes.

Most of the rules in this deck will not apply if the question provides that the partnership agreement overrides them.

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

What is the general rule for a partner’s ability to bind the partnership and other partners?

A

A partner in a partnership is an agent of the partnership and the other partners, and can bind both as long as he has authority

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

What are the two ways an act can bind the firm through actual authority?

A

Act:

  1. Done in a way showing intention to bind the firm, or
  2. By any person actually authorised by the firm to undertake the act
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is implied actual authority?

A

Where there is no express actual authority, but the partners have allowed a partner to regularly do something

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

What type of act must a partner make to bind the firm through apparent/ostensible authority?

A

An act carrying on the business of the firm in the usual way

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

What two things must be true for apparent authority to not bind the firm?

A
  1. Partner had no authority to act, and
  2. The person with whom the partner was dealing either knew the partner had no authority to act, or did not think the person with whom they were dealing was a partner
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the two questions to ask in determining whether business of the firm was being carried on in the usual way?

A
  1. Would a reasonable person think a business of this kind would usually do this act?
  2. What authority would a reasonable person expect a partner in such a business to have?
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What four things have case law shown partners will have the authority to do?

A
  1. Buy and sell firm goods
  2. Receive debt payments due to the firm
  3. Hire employees
  4. Employ a solicitor to act for the firm
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

When will notice given to a single partner be deemed given to the firm?

A

When it is given to a partner who habitually acts in the business

(except where the notice-giver and the partner are engaged in fraud against the firm)

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

If it turns out that there was neither actual nor apparent authority, who is bound?

A

Only the partner who entered into the dealing, in their personal capacity

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

What is a general partner’s liability for debts of the partnership?

A

Unlimited

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

What does it mean that partnership liability is joint and several?

A

A creditor can pursue one or all of the partners

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

When will the partners be jointly and severally liable for torts committed by another partner?

A

When the tort is committed in the course of business, or with authority of the partners

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

Is an incoming partner liable to the creditors of a partnership for anything done before becoming a partner?

A

Not unless they agree

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

What is needed to add a new partner?

A

The consent of all partners

26
Q

Is a retiring partner liable for debts incurred before they leave?

A

Yes

27
Q

What is a holdover agreement and against whom is it not effective?

A

An agreement between a retiring partner and the firm that the retiring partner will not be liable for debts incurred before leaving.

It does not apply to a retiring partner’s direct liabilities to third parties unless the third party agrees.

28
Q

What is the general rule regarding a person dealing with a firm after a change in its membership?

A

The person is entitled to treat all apparent partners of the old firm as still being partners until they receive notice of the change

29
Q

In the case of (1) existing creditors and (2) world at large, what must a retiring partner do to give notice of their retirement and therefore not be liable for obligations arising after they leave?

A
  1. Existing creditors: Provide actual notice
  2. World at large: Place advertisement in London Gazette
30
Q

In what situation will a third party not be able to enforce an obligation on a retiring partner which arose after they left, even in the absence of notice?

A

Where the third party did not know the person was a partner

31
Q

What is the holding out rule?

A

If a person holds themselves out to be a partner even if they are not, they may be held liable as a partner if any third party extends credit on the strength of the holding out.

The same is true if a person knowingly allows another to hold them out as a partner.

32
Q

How can holding out apply to retiring partners?

A

If they fail to give proper notice, or do not ensure their name is removed from partnership notices, websites, or stationery, they may inadvertently hold themselves out to still be a partner

33
Q

What is the statutory definition of partnership property?

A

Property acquired or brought into the partnership for partnership purposes and in the course of partnership business

34
Q

How is property (1) belonging to an individual partner and used in the business and (2) given by a partner to the business treated?

A
  1. Property belonging to an individual partner remains their property
  2. Property given by a partner to the firm becomes partnership property and is treated as a capital contribution
35
Q

Unless a contrary intention is shown, how is property bought with money belonging to the partnership and property titled in the firm name treated?

A

As partnership property

36
Q

What is the determining factor in determining whether property brought into the partnership becomes the partnership’s or remains property of the individual?

A

The intention of the individual

37
Q

What is required for individual property to become partnership property?

A

Express or implied agreement between the partners

38
Q

Unless agreed, how must partnership property be held and applied?

A

Exclusively for the purposes of the partnership

39
Q

Can creditors of an individual partner seek to satisfy their debt from partnership property?

A

No

40
Q

What is the effect of an individual partner’s creditor being granted a court order for a share of that partner’s profits?

A

They become entitled to the profits in satisfaction of their debt, but this does not make the creditor a partner

41
Q

In the absence of a profit-sharing agreement, and irrespective of capital contributions or any other factor, how are partnership profits split?

A

Equally

42
Q

Are partners entitled to a distribution of the firm’s profits and capital as of right?

A

No, not without agreement of the partners

43
Q

What is something to bear in mind when considering a partner’s ability to assign their share of the profits?

A

It does not make the assignee a partner

44
Q

In the absence of a profit-sharing or loss-sharing agreement, and irrespective of capital contributions or any other factor, how are partnership losses split?

A

Equally, same as profits if there is agreement on profits

45
Q

Where there is a profit-sharing agreement leading to an unequal split of profits, how are losses shared upon dissolution?

A

In the proportion of the profit-share

46
Q

Is a partner entitled to interest on (1) their capital contributions and (2) a loan made to the partnership?

A
  • Capital: No
  • Loan: Yes, at 5% per year
47
Q

Is a partner generally entitled to remuneration for acting in the partnership business?

A

Not unless the partnership agreement provides for such

48
Q

How is the right to manage the partnership business shared?

A

Equally. One partner, one vote

49
Q

Whilst most decisions require a simple majority vote, what three decisions require unanimity?

A
  1. Admission of a new partner
  2. Change in the nature of the partnership business
  3. Alteration to the partnership agreement
50
Q

What is a partner’s common law fiduciary duty to other partners?

A

Act in good faith and to exercise their powers for the benefit of the partnership as a whole

51
Q

What is the duty to account for secret profits?

A

Each partner must account to the partnership for any profit/benefit obtained without the consent of the other partners from:

  1. A transaction concerning the partnership, or
  2. Any use by the partner of partnership name/property
52
Q

What is the duty to account for profits of a competing business?

A

If a partner carries on a business in competition with the partnership, without the consent of the partners, they must account for all profits

53
Q

What is a partnership at will, how is it dissolved by notice, and when does this take place?

A

A partnership that was not set up for a fixed term will be dissolved by any partner giving notice to the others of their intention to dissolve.

It will be dissolved on the date provided in the notice, and if none is provided, upon communication of the notice.

54
Q

How is a partnership dissolved by death, bankruptcy or charge?

A

A partnership is dissolved if:

  1. Any partner dies (automatically)
  2. Any partner becomes bankrupt (automatically), or
  3. Any partner charges their share of profits to pay off a personal debt (at the option of the other partners)
55
Q

If partnership assets are insufficient to repay creditors, who is liable for the shortfall?

A

The partners are personally liable, in the proportions discussed previously

56
Q

What is the first use of any partnership assets remaining after creditors are repaid?

A

They are used to repay any advances/loans made by the partners to the partnership

57
Q

If assets remain after advances are repaid, how are they used?

A

To repay capital contributions

58
Q

If assets remain after capital contributions are repaid, how are they used?

A

Divided among partners, in the proportions discussed previously

59
Q

What is the effect of dissolution on partner authority?

A

The authority of each partner to bind the firm will continue:

  1. In order to wind up the partnership, and
  2. To complete transactions which were started but unfinished at the time of dissolution
60
Q

Under the Partnership Act, what is the order by which losses should be paid?

A

Losses should be paid from:

  1. Profits, then
  2. Capital, then if necessary
  3. Further contributions by partners
61
Q

What is a partner’s tax liability?

A

Each partner must include in their income their share of the profit made by the partnership whether or not it was distributed

62
Q

What are the fives reasons a partnership may be dissolved by court order?

A
  1. Permanent incapacity of a partner
  2. Prejudicial conduct
  3. Willful or persistent breach of partnership agreement
  4. Business can only be carried on at a loss
  5. Just and equitable

SQE1 - Business (20 decks)

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