Partnership Flashcards
What are the types of business organisations?
Sole trader / sole practionioner, partnership and company
What are the different types of partnerships?
General, limited and limited liability
What are the different types of company?
Private - limited and unlimited, and public limited
What is a sole trader?
An individual who carries on a business on an individual basis in his own name or some other name
Is a sole trader personally liable for the debts of the business?
Yes, the sole trader business form has no separate legal personality
What is a general partnership?
An incorporated business where the partners have unlimited liability for the debts of the business
What Act applies to every partnership?
The Partnership Act 1890
What is a limited partnership?
Allows for one or more of the partners to have limited liability, provided at least one of the partners has full/unlimited liability.
Where should all limited partnerships be registered at?
Companies House, until registered, it will be regarded as a general partnership
What is a limited liability partnership?
A hybrid form of business vehicle, representing a cross between a partnership and a company
What are limited liability partnerships governed by?
The Limited Liability Partnerships Act 2000
What is a company?
An artificial legal person, which has separate legal personality distinct from its members (shareholders), directors or employees
What is the most common type of company?
A registered company
What is a partnership?
A relationship which subsists two or more persons carrying on a business in common with a view of profit
What are the different types of partners?
General, sleeping, salaried or a limited partner in a limited partnership
What is a general partner?
Actively involved in the day to day running of the business
What is a sleeping partner?
Takes no active part in the running of the business. However, is jointly and severally liable for the debts and contracts of the business
What is a limited partner in a limited partnership?
Contributes a specific amount of capital. Liability limited to that amount. Cannot take part in the management of the firm
What is a salaried partner?
Will receive a fixed amount in income. Not a real partner unless he also receives a share of the profits
What does the Partnership Act 1890 provide?
It provides default rules for the regulation of the partnership but partners can oust or modify these rules in a partnership agreement
What is the minimum number of partners required to form a partnership?
2, and there is no statutory maximum
What must a business have a view of?
Profit
What are the essential elements of a partnership?
Persons, business, carrying on and with a view of profit
When does the partnership begin?
As soon as the partners start their business activity
What is not necessary to create a partnership?
Joint ownership of property (s 2(1)), the sharing of gross returns (s 2(2)), and receiving share of profits (s 2(3))
What is covered in s 4 of the 1890 Act?
Being called a “firm”
What is covered in s 5-18 of the 1890 Act?
The relationship between partners, the partnership and third parties
What does ss 5-9 deal with?
The liability of the partnership and the partners to third parties in contract
What does section 5 state?
That every partner is deemed to be an agent of the partnership and of the other partners
What kind of authority could a partner have?
Express, implied or ostensible authority
What is express authority?
It is set out in the partnership agreement
What is implied authority?
The individual partner must be acting within the usual scope of a partner’s powers in the particular business concerned
What is ostensible authority?
Where it is arguable that the partner does not have implied authority, there may be circumstances in which the partnership has represented to third parties, by their own words or conduct, that the partner has authority to act on their behalf
What does section 9 state?
Every partner in a firm is liable jointly with the other partners, and in Scotland severally also, for all debts and obligations of the firm while he is partner
Why is the joint and several liability rule significant?
It means that a creditor of the partnership can choose to sue on partner, some partners or all of the partners for the recovery of the debts due to them by the partnership
What does sections 10-13 cover?
The liability of the partnership and partners for wrongs committed against third parties
What does sections 14-18 deal with?
Various matters which arise when the partners and/or the partnership interact with third parties
What sections deal with the dissolution of a partnership?
Ss 32-35
Under s 35, the court can bring a partnership to and end if what?
Partner has mental disorder or permanent incapacity, engages in activity prejudicial to the business, wilfully or persistently breaches the partnership agreement, conducts themselves in a way that is no longer reasonably practicable for the others to carry on in business with him, etc
The proceeds from the sale of assets would be applied to who? (in order)
Paying debts to outsiders, paying the partners any advance they made to the firm beyond their capital contribution, and paying the capital contribution of the partners
What happens if there is a residue remains from the proceeds of the sale of assets?
It will be divided between the partners in the same proportion in which they share the profits of the partnership
What are the advantages of an LLP?
Substantial protection of members’ personal assets, internal flexibility regarding management and structure and tax transparency and benefits
What are the disadvantages of an LLP?
Limited financial privacy, giving the filing requirements
What is the Partnership (Prosecution) Scotland Act 2013?
Legislation passed to close the loophole that partnerships could not be found guilty of a criminal offence because the partnership had been dissolved
