Partnership

Question 1

What is a partnership?

Answer 1

Two or more people carrying on a business with a view to a profit

Question 2

When does The Partnership Act 1890 apply?

Answer 2

When the partners have not got their own agreement in place

Question 3

What are the main provisions of The Partnership Act 1890?

Answer 3

• profits/losses shared equally
• all partners involved in managing business
• no partner entitled to remuneration for carrying out partnership business
• change in business nature unanimous decision
• no interest on original capital
• new partners agreed unanimously
• partners expelled by majority decision
• records available to all partners
• wound up like normal company
• capital deficiency shared on ratio of capital injected

Question 4

Can a partner work with another company that has a conflict of interest?

Answer 4

If the partners are aware and agree to it then yes, but otherwise it should be avoided

Question 5

What is the authority of a partner?

Answer 5

Similar to agent:

• express/actual authority
• implied authority

Question 6

Partner acts beyond excess authority…

Answer 6

Partnership bound by action unless:
- he had no authority and third party knows this or believe he is not a partner

Assume they know unless it says they did not know

Question 7

What is the general liability for partners in a partnership?

Answer 7

• all partners jointly or severally (individually) liable

- up to third party to choose

Question 8

What is the liability for new partners?

Answer 8

Only liable to debts incurred when they joined, unless stated otherwise

Question 9

What is the liability for retiring partners?

Answer 9

• liable for debts incurred until retirement
• must give notice of retirement
• can enter into indemnity agreement with other partners

Question 10

What are the main differences of a company to a partnership?

Answer 10

• created by registration
• shares transferrable
• can create both fixed and floating charges as security for borrowing
• cannot usually return capital to members
• finance info public
• pay corp tax

Question 11

How should an LLP be registered?

Answer 11

With the registrar with an incorporation document in the required format

Question 12

What is the main legal difference between LLP and normal P?

Answer 12

Separate legal entity

Question 13

What must an LLP publish?

Answer 13

Annual accounts and file annual return