Partnership Flashcards
When is a partnership formed?
When two or more people are carrying on a business in common with a view of profit. Specifically when the definition set out in Partnership Act 1890 is met.
What is the difference between a partnership and sole trader business structure?
They are both unincorporated businesses but a partnership involves more than one person running the business.
What is a partnership usually referred to as?
Usually referred to as a general partnership to distinguish it from limited partnerships and limited liability partnerships.
What is a limited partnership? How is it similar to a general partnership?
A limited partnership must have at least one general partner who has unlimited liability for the partnership debts. The difference is they are allowed to have a limited partner.
What is a limited partner?
Partner whose liabiliability is limited to the amount they iinitially invested in the business. But the limited liability is conditional.
What is the condition for a partner to be a limited partner?
They must not control or manage the limited partnership.
Must not have the power to take binding decisions on behalf of the LP or remove their contribution to the LP for as long as it is in business.
What happens if the limited partner breaches these rules/
A breach of any of these rules means the limited partner will be treated as a general partner with unlimited liability.
Which act governs the LP?
Limited Partnership Act 1907.
Are LPs registered?
Yes they must be registered with the registrar of Companies before they can start trading.
