Partnerships Flashcards
Requirements for the formation of an LLP:
The filing of an application to register an LLP with the Registrar of Companies in form LL IN01 stating:
The LLP’s name
Location of the registered office of the LLP
The address of the registered office
The details of each proposed member
Any persons with significant control
That approval has been requested from the Secretary of State if the LLP name contains a prescribed or sensitive word
How does an LLP change its name?
An LLP may change its name:
In accordance with any procedure set out in the LLP agreement; or
If no procedure, by a decision of the majority of the members.
How do you execute a document by an LLP?
For a document to be validly executed by an LLP, it must be signed on behalf of the LLP by one of the following methods:
By two members of the LLP, or
By a member of the LLP in the presence of a witness who attests the signature
Land transactions - a document is validly executed by an LLP as a deed only if it is:
Duly executed by the LLP, and
Delivered as a deed
Taxation of members of an LLP:
An LLP does not pay corporation tax. Members are assessed for taxation purposes on each member’s share of the LLP’s income or gains - in the same way as a general partnership.
A partnership has 3 partners. It entered into a 4-year loan agreement with a bank last year. One of the 3 partners retired from the partnership 6 months later. The remaining 2 partners bought his partnership share from him and indemnified him against existing debts and liabilities.
The retiring partner put a notice of his retirement in the London Gazette. However, actual notice was not given to the bank.
Last week the partnership defaulted on the loan.
Is the partner who retired liable to the bank?
Yes, because he was a partner when the loan was entered into. On retirement, partners do not cease to be liable for debts of the partnership incurred before the date of their retirement.
Actual notice would be relevant to debts incurred AFTER retirement, rather than before.
The indemnity between the partners does not affect the bank’s right of action against the partners.
Notice in the London Gazette would be relevant to debts incurred after retirement, rather than before.
The relevant time for determining which partners are liable is the time the loan was entered into.
Retired partners:
A partner is jointly and severally liable for partnership debts which were incurred whilst they were a partner of the firm.
Whilst the partner may be pursued for the full extend of the debt, they may be able to claim a contribution from the other partners provided that they are solvent.
