partnerships Flashcards
when does a partnership arise
A partnership automatically arises when two or more people agree to run a business together for profit. It is, therefore a business relationship based on agreement, a contract, which can be written or oral, and express or implied.
how is a partnership governed
if no written agreement - by the PA1890
if a partner breaks the partnership agreement, they are liable for breach of contract as well as for any other consequences that may be set out in the agreement.
what does the PA1890 say about the share of profits and the losses of the partnership?
PA1890 says partners must share profits and losses equally, and any gain or fall in value of any capital asset is also borne equally. this is subject to the partnership agreement
what does the PA1890 say about how partners make decisions
all decisions to be made by majority vote. except in the cases of the introduction of a new partner, an amendment to the written partnership agreement, or a change in the partnership’s business requires unanimity.
these rules can amended by the agreement so that only majority vote is needed.
How can a partnership be dissolved under the PA1890
Partnership at will - a partner can give notice to the other partners at any time to dissolve the partnership (if there is defined term to the partnership in the agreement.)
fixed-term partnership, and its term expires.
when a partner retires
Death or bankruptcy of one of the partners
A partner has their share of the partnership charged for a separate debt
If the continuing operation of the partnership is unlawful, it will automatically cease to exist
Application by a partner to court to dissolve.
when will the partnership be liable for a partner’s actions
A partner has the power to bind the firm / is an agent of the firm
they will not bind the firm where they act without authority and the counterparty knew the partner was acting without authority or did not know or believe that they were a partner
a contract or deed entered into by a partner if that partner has either:
actual authority/ apparent authority.
what if a partnership is liable for a partner’s actions, acting with authority?
all partners have joint and several liability under the partnership, so can be personally sued if they enter into a contract (either with the other partners as a firm or as a single partner on behalf of the firm)
if a partner who is personally sued has acted with authority, they can claim an indemnity from the other partner because of joint and several liability
what if a partnerships is liable for a partner’s actions, acting without authority
As the partnership is liable, the counterparty can sue the partnership or the individual partners.
but the partner who has breached the agreement and acted without authority will need to recoup the other partners and for his losses and if he is sued, will not be able to claim an indemnity from the other partners;
why does a partner who is retiring care about debts incurred before and after they have left ?
A retiring partner is jointly and severally liable for debts incurred before and after they retire. They therefore need to take steps to avoid
what happens when a partner cannot pay
- third party can obtain a charge over the partner’s property or properties, and then applying for order of sale of those properties in order to satisfy the outstanding debt.
- other partners have the same enforcement options as a third party
- partnership agreement may give other partners the right to expel that partner
what is an LLP
hybrid between a company and a partnership . limited liability for debts and fewer admin requirements than a company - they are corporate bodies with a separate identity from their members .
How are LLPs governed
LLP regulations 2001 provide default contract for an LLP in the absence of members agreeing terms which they would usually do in a formal agreement.
what are the membership requirements for an LLP
- must have two members on incorporation
-two designated members responsible for filing at companies house - they will be subscribers to the incorporation document.
what is the effect of an LLPs membership reducing to one for more than 6 months?
that person will be jointly and sevrally liable for any of the LLP’s debts incurred during the period from the six-month point onwards
which form is filed at companies house to incorporate an LLP?
form LL IN01 + applicable fee
Companies house will then issue a certificate of registration.
