Brainscape's Knowledge GenomeTM

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


See full index

Business Law > Partnership > Flashcards

Partnership Flashcards

You may prefer our related Brainscape-certified flashcards:
MPRE flashcards MBE flashcards Civil Procedure 1L flashcards
1
Q

What act controls partnerships?

A

Partnership act 1890

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

When does a partnership come into existence?

A

When 2 or more persons are “carrying on a business in common with a view of profit”

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

What does section 2 of the PA 1980 contain?

A

Rules for determining the existence of a partnership

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

What provides a default judgement for partnerships?

A

The partnership act 1890, it is a default contract.

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

What does the partnership act govern as a contract?

A

The relationship between partners, unless they have agreed any specific terms - which will usually override.

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

How does a partnership agreement need to be formed?

A

Orally or writing - both are equally as Valid.

BUT a written partnership is more desirable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What sections of the PA cannot be overridden?

A

S 1 and 2 which govern when a partnership comes into existence

S 5018, governs eh relationship between the partners and third parties.

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

Why would one operate as a partnership? ?

A

There is no formality, therefore easy.

Partners do not enjoy limited liability for the partnership debts, but do not have to adhere to extensive administrative requirements.

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

How do you start a partnership?

A

There are no formalities. It is always recommended to seek legal advice.

It starts when you start a business for money.

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

What can the name of a partnership be?

A

Can be the name of the partners

Good idea to insert the name into the agreement

CANNOT:
- include Ltd, LLP or Plc
- be offensive
- be the same as an existing trademark
- contain sensitive words or expressions

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

What is the place of business for a partnership?

A

Rent premises, or buy them.

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

When does a partnership commence?

A

When they start doing business, NOT when they say it commences in the partnership agreement.

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

Are the partners required to take management of the business?

A

No. They may take part in the management, but they are not required to do so.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What must the PA insert about work input of the partners?

A

Set out working hours, if they work ful time etc.
if they must devote all their time and attention to the business, or not engage in other business.

Non-compete clauses.

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

What are the roles of each partner?

A

Depends on the agreement. They may only be able to do certain tings - therefore authority on certain areas. breaching this could be a reason for expulsion

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

What are the 3 exceptions of decision makings taken by majority?

A

Changing nature of business
Introducing new partner (s 24)

Changing terms of PA (s 19)

These all must be done unanimously

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How are decisions made in the partnerships?

A

Al decisions must be taken by majority, with 3 exceptions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is capital of a partnership?

A

This is the money the partnership needs to start operating.

The partners contribute a sum of money - this is called capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Under the PA, how are profits and capital shared?

A

EQUALLY

The partners share equally int he capital and profits of the business.

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

What are the capital profits?

A

One-off gains - such as office building increasing in value

It is NOT the amount partners invest - this is just “capital”

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

Can the partnership agreement change the shares in profits to partners?

A

Because equal shares may not reflect what is equa, the parties can decide that they should own the partnership capital in those SAME proportions.

Need to decide whether they should also own any capital profits in the SAME proportions as their original contributions

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

Can interest be paid on capital contributions?

A

Yes, the PA might provide for interest to be paid, to ENCOURAGE investment and to reward partners for their contribution capital to the partnership

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

What does the partnership agreement state about income profit proportions?

A

Often depend on working hours. More time, more income profits.

HOWEVER< under PA, it is EQUALLY

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

Do partners receive salaries?

A

No. They are not employees. They own the business.

The income profits are called “drawings”

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

What are “Drawings”

A

The income profits which partners recieve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

How are assets in the partnership owned?

A

It will belong to different partners. This must be written down so they know and there is no miscommunication.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

How can a partner be expelled?

A

No majority of partners may expel another, unless the partners have expressly agreed to this.

It is IMPOSSIBLE to expel another partner, without express agreement allowing the other partners to do so.

Because the partner in question wont vote against themselves, this basically doesnt happen.

Partnership agreements will often therefore contain an expulsion clause, allowing the partners to expel one a partner, if they have CONDUCTED THEMSELVES IN A CERTAIN WAY

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What is dissolution of a partnership?

A

Partnership ending

Does not mean that the partners stop trading, it just means hat the contractual relationship between those partners comes to an end.

29
Q

Is dissolution in the partnership agreement?

A

It can be, better to provide it in the PA. This gives the partners control.

30
Q

What it the default position int eh PA on dissolution?

A

Any partner may end the partnership at ANY TIME by giving notice if their intention to do so to all of the other partners.

31
Q

What is retirement of a partner?

A

This is when a partner leaves the partnership. It is noting to do with a partner stopping work altogether, its just stopping the partnership role

32
Q

Under the PA, what are the 4 situations when a partnership is dissolved?

A

When a parter retires

On an expiry of a fixed term

By the death or bankruptcy of any of the partners

If the partners give notice of dissolution to a rather who has granted a chagre over their share of the partnership prperty for a debt owed by them alone

33
Q

Can section 32 and 33 be disapplied?

A

Yes, they can - notice provisions can remove the partners rights to dissolve the partnership with immediate effect.

34
Q

What is s 35 of PA?

A

Partners can apply to court to dissolve the partnership if:

A partner becomes incapable of performing contract
A partners conduct is calculated to be prejudicial
The partnership can only be carried on at a loss
The court thinks that it is just and equitable to order that partnership to be dissolved

35
Q

What is the effect of dissolution on a partnership?

A

Partnership must come to an end, all assets must be sold. Outgoing partner has to receive their share.

36
Q

What is a partial dissolution?

A

Partnership is TECHNICALLY dissolved, but will continue seamlessly with one less partner.

37
Q

In dissolution, can the other partners by the partners share?

A

There can be specific provisions which set out if the other partners can buy the outgoing partners shares.

It is useful to include a provision stating that the outgoing partner will be paid in instalments.

38
Q

Can there be an indemnity clause in favour of the ongoing partner?

A

Yes, there should be a provision containing an indemnity in favour of the outgoing partner if their liabilities were taking into account when their partnership share was valued.

39
Q

What is goodwill?

A

This is the business’s reputation and the value of its clients and contacts.

40
Q

How is goodwill valued?

A

Usually 2 years profit is taken as the value of good will.

41
Q

What happens when a partnership business is dissolved

A

Under s 44, when a partnership business is sold, the proceeds of sale of the business or its assets are given accordingly to a hierarchy

42
Q

What is the hierarchy of the partnerships assets when it is sold?

A

Creditors of the firm must be paid in FULL. If shortfall, partners must pay balance form private assets

Partners who have LEND money to firm must be repaid amount outstanding to the loan, including interest

Partners must be paid the share in the partnership capital to whcih they are entitled

Any surplus is shared between the partners in accordance with the terms of the PA.

43
Q

Who has authority to wind up a partnership?

A

All of the partners, unless they are bankrupt.
If any of them are bankrupt of deceased, the trustee in bankruptcy or personal representative can also make such an application

44
Q

What is a restraint of trade?

A

This seeks to restrict outgoing partners in their business dealings once they have left the partnership.

45
Q

Is there restraint of trade in the partnership agreement?

A

N,o, there is no implied restraint of trade.

46
Q

What will a restraint of trade cover?

A

Only be enforcement if it protects a legitimate business interest (contracts, goodwill, confidential information)

47
Q

What are non-competing clauses?

A

Seeks to prevent former partners for competing with the partnership business

48
Q

What are non-solicitation clauses?

A

Prevents former partners from soliciting business from their partnership clients, or offering employment to their employess

49
Q

What are non-dealing clauses?

A

More restsructive ,prevents outgoing partner from entering into contracts with clients, former clients or employees of the partnership that they have just left.

50
Q

Which sections are the partners responsibilities under in PA?

A

Ss 28-30

51
Q

What are specific responsibilities of the partners in a partnership?

A

Must be completely open with one another

Must account to the firm for any private profits they haev earned without the others consent from any transaction concerning the partnership

Must not compete with the firm. This is classed as carrying on any business of the same nature, and competing with that of the firm.

52
Q

What responsibilities are present in s 24 of PA?

A

Partners must :

Bear the share of any loss made by the business, in accordance with their PA

Indemnity fellow partners who have borne more than their share of any liability or expense connected with the partnership

53
Q

What is actual authority?

A

Under s 6 PA, the firm is bound by any contract or deed entered into by partners , in the firms name, provided that the partners actions were authorised by the partners

54
Q

What is express actual authority?

A

The partners may have EXPRESSLY given one of the partners permission to enter into a particular transaction or type o transaction, or instructed them to enter into a particular transaction or type.

55
Q

What is implied actual authority?

A

The partners may have IMPLIEDLY accepted that one or more partners have authority to represent the firm.

56
Q

What is apparent authority?

A

Firm may be liable for actions which were not actually authorities but which may have appeared to an outsider to be authorised.

This liability derives from application of the principles of agency law, based on the fact that each partner is an agent of the firm.

57
Q

When is the firm liable to third parties under s 5 PA?

A

Apparent authority

Transaction is one which relates to business of kind carried on by the firm

Transaciton is one for which a partner in such a firm would usually be expected to have the authority to act

The other party to transaction did not know that the partner did not have authority to act

The other party deals with a person whom they know, or believe to be a partner.

58
Q

When is the apparent authority partner personally liable?

A

When a partner has acted with apparent authority, the firm will be liable to third party under the contract.

The partner who has MADE the firm liable by virtue of apparent authority is also liable to INDEMNIFY their fellow partners for any liability or loss that they incur.

59
Q

What are partners liability in tort?

A

Sometimes the firm (and partners) are liable for a partners act which is TORTIOUS in nature - eg, negligence.

Under s 10, the firm is liable for any wrongful act or omission of a para toner who acts int eh ordinary course of the business

60
Q

Are the partners liable before leaving the partnership?

A

Yes, each partner is liable JOINTLY with the other partners for debts incurred by the partnership whilst they were partner.

61
Q

What are notation agreements?

A

A retiring partner will be released from an existing debt, by entering into a contract with the creditor and the other partners, and POSSIBLY the incoming partner.

The creditor will release the original partners from their liability under the contract, and the instead the firm will take over the liability

62
Q

Wat is the difference between a notation agreement and an indemnity?

A

Indemnity is an agreement between the retiring rather and other partners. Creditors are NOT a party to this agreement, and are not bound by it.

Notation clause - are bound.

63
Q

What happens to the liabiliity of a partner once they have left the partnership?

A

Once left, they will remain liable for debts incurred WHILE they were partner. However, they ESCAPE liability for any debts entered into AFER they had left the partnership - as long as they comply with the requirements of s 36

64
Q

What are the requirements of s 36?

A

This is when a partner is leaving and doesnt wnat to be liable for debts incurred after leaving.

Anyone with whom the firm has dealt before, must be given ACTUAL notice of the partner in question leaving.

They must be informed DIRECTLY, rather than a notice in the newspaper etc.

Anyone who has NOT had a dealing with the firm, must also e notified of retirement. A notice must be placed in the London Gaette.

65
Q

What is holding out?

A

This is when a creditor of a partnership has relied on a representation that a particular person was a partner in the firm, therefore they may be liable for the firms debt.

Eg. May be oral, in writing, (pencils, notepaper) , or by conduct.

66
Q

Who are potential defendants when a person is seeking to enforce a liability of the firm?

A

Can sue the partner with whom they made the contract (privity of contract)

Can sue anyone who was a para toner at the time when the debt was incurred.

Claimant can sue the FIRM, in the firms NAME. Jointly and severally liable.

67
Q

What happens to an insolvent partnership?

A

It ca be wound up the same as an unregistered company, or may use rescue proceedings available to companies.

68
Q

What tax do partners need to pay?

A

VAT, national insurance, and income or corporation tax, depending on if the partner in question is a COMPANY or an INDIVIDUAL.

Business Law (14 decks)

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