Partnership Law

Question 1

What is a parternship?

Answer 1

A legal relationship between two or more persons carrying on a business in common with a view to profit.

Question 2

What are the essentail elements of a partnership?

Answer 2

• Involve at least two individuals.
• Involve an active commercial enterprise.
• Must share in the business’ operations and decision-making.
• Intention to generate profit is essential.

Question 3

What is a general partnership?

Answer 3

All partners have unlimited liability.

Question 4

What is a limited partnership?

Answer 4

At least one partner has limited liability.

Question 5

What is a limited liability partnership?

Answer 5

No partner has unlimited liability.

Question 6

What is the legal status of a partnership in Scotland?

Answer 6

A partnership is considered a separate legal entity, distinct from its partners.

Question 7

What is an agency relationship?

Answer 7

Partners act as agents for each other and the partnership.

Question 8

What is a joint and several liability relationship?

Answer 8

Partners are jointly liable for the partnership’s debts and obligations.

Question 9

What is fiduciary duty?

Answer 9

Partners owe each other a duty of good faith, loyalty, and full disclosure.

Question 10

How is a partnership formed?

Answer 10

By agreement, either written (partnership deed) or oral - written is recommended to clarify the rights and obligations of each partner.

Question 11

What are the rights of partners in a partnership?

Answer 11

Participate in management, share in profits, inspect books and records, receive information about partnership affairs.

Question 12

What are the duties of parnters in a partnership?

Answer 12

Act in good faith, make full disclosure, not compete with the partnership, and account for profits earned from partnership dealings.

Question 13

What is the expiration of a fixed term?

Answer 13

Partnership has a set duration.

Question 14

What is the termination of a single venture?

Answer 14

Partnership was formed for a specific project.

Question 15

What is meant by notice?

Answer 15

Giving notice to others of their intention to dissolve.

Question 16

What does death or bankruptcy of a partner depend on?

Answer 16

The partnership agreement.

Question 17

What is meant by the illegality of a partnership?

Answer 17

If the business becomes illegal.

Question 18

What is meant by a court order?

Answer 18

A court can dissolve a partnership if it’s just and equitable.

Question 19

What is a limited partnership?

Answer 19

At least one general partner with unlimited liability and at least one limited partner with limited liability.

Question 19

What are the consequences of a partnership dissolution?

Answer 19

Winding up of partnership affairs, distribution of assets, and potential liability of outgoing partners for existing debts.

Question 20

What is the difference between a limited partnership and a limited liability partnership?

Answer 20

LP - limited partners have limited liability but no management rights.
LLP - all members have limited liability and can participate in management.

Question 21

What are the key features of an LLP?

Answer 21

Separate legal personality, limited liability for all members, and flexibility in management and organization.

Question 22

How is an LLP formed?

Answer 22

By registering an incorporation document with the Registrar of Companies.

Question 23

What are the disclosure requirements for an LLP?

Answer 23

Required to file annual accounts and an annual return with the Registrar of Companies.

Question 24

What happens in the event of an LLP's insolvency?

Answer 24

Generally subject to the same insolvency rules as companies under the Insolvency Act 1986.

Question 25

Can a salaried partner be liable to third parties?

Answer 25

They are essentially an employee that may not be liable to third parties for partnership debts.

Question 26

Can a partnership be prosecuted for a crime?

Answer 26

Under the Partnerships (Prosecution) (Scotland) Act 2013, a partnership can be prosecuted for crimes committed even after dissolution (subject to certain time limits).

Question 27

What is the principle of 'delectus personae'?

Answer 27

Means 'choice of person' and reflects the importance of the personal element in a partnership - a new partner can be introduced without the unanimous consent of existing partners.

Question 28

What is the concept of holding out in a partnership?

Answer 28

A person can be held liable for partnership debts if they have allowed themselves to be represented as a partner, even if they are not actually a partner, and a third party has relied on that representation.