Partnerships

Question 1

What is a partnership?

Answer 1

relationship between persons carrying on business with common view to making a profit

Question 2

Is a partnership a legal entity?

Answer 2

No

Question 3

How many people are needed to form a partnership?

Answer 3

At least 2

Question 4

Can a company be a partner in a partnership?

Answer 4

Yes

Question 5

Is intention needed to form a partnership?

Answer 5

no

Question 6

What can indicate a partnership?

Answer 6

• profit/loss sharing
• decision making
• holding out as a partner

Question 7

What are the advantages of partnerships?

Answer 7

• no costs
• no formalities
• no filing/disclosure requirements (confidentiality)

Question 8

What are the elements of the fiduciary relationship in a partnership?

Answer 8

Duty of good faith
- honest + full disclosure
- unauthorised personal profit
- conflict of duty and interest

Question 9

What are the partners liability in a partnership?

Answer 9

Personally liale
Contractual - jointly
Tort - jointly and severally

Question 10

Will new partners be liable for debts incurred before they joined?

Answer 10

No

Question 11

Will partners be liable for debts after they retire?

Answer 11

Yes - those incurred whilst they were partner

Question 12

Can former partners be liable for debts incurred after they have left?

Answer 12

Yes unless third party notified

Question 13

How can a debtee be notified of a change in partners?

Answer 13

Had dealings = actual notice
Didnt have dealings = constructive notice
Not aware = none needed

Question 14

When will a person who is held out to be a partner be liable for partnership debts?

Answer 14

1. Representation to third party that they are partner
2. Third party response
3. Third party state of mind

Question 15

If the partners have given actual/express/implied authority to enter into a contract, will the firm be bound by it?

Answer 15

Yes

Question 16

When will a partnership not be bound by a contract which a partner has no authority to enter?

Answer 16

• third party knew wasnt authorised or
• third party didnt know/believe they were a partner

Question 17

What is the consequence of a partner binding their firm without actual authority?

Answer 17

Liable to other partners for breach of contract

Question 18

When will a person who is not a partner be able to bind the firm in a contract?

Answer 18

Held out by firm as partner or
Representation to third party that they have authority to bind

Question 19

How are partners in a partnership liable to tax?

Answer 19

Individually on share of income/gains

Question 20

What does HMRC require of partnerships?

Answer 20

Single tax return of profits

Question 21

what is needed for a partnership agreement?

Answer 21

Unanimous consent

Question 22

How can unanimous consent to a partnership agreement be shown?

Answer 22

Express
Inferred from course of dealing

Question 23

How is partnership property owned by defalt?

Answer 23

Each partner has individual share

Question 24

How is capital, profits and losses attributed in a partnership by default?

Answer 24

Partners entitled to share equally

Question 25

How is salary attributed in a partnership by default?

Answer 25

None

Question 26

How are decisions made in a partnership by default?

Answer 26

Majority except unanimity for:
- change nature of business
- introduce new partner
- vary rights and duties

Question 27

When can a partner be expelled by the majority?

Answer 27

Previously expressly agreed

Question 28

What is the effect of a partner retiring by default?

Answer 28

Partnership dissolved

Question 29

What is the default non compete clause for partnerships?

Answer 29

If partner without consent carries on business of same nature, must account for profits

Question 30

What are the default restrictions on outgoing partners?

Answer 30

None

Question 31

How may a partnership be dissolved?

Answer 31

• automically
• by notice
• business becomes unlawful
• by court

Question 32

When will a partnership be automatically dissolved?

Answer 32

• expiry of fixed term
• completion of specific venture
• death/bankruptcy

Question 33

How is the money left on winding up of a partnership distributed?

Answer 33

Paid back original capital first
For surplus…
1. Asset surplus ratio? if no
2. Profit sharing ratio? if no
3. Equally

Question 34

What is an LLP?

Answer 34

2 or more persons carrying on a lawful business with a view to profit

Question 35

Can a company be a ‘person’ for an LLP?

Answer 35

Yes

Question 36

What are the formation requirements for an LLP?

Answer 36

Registration at companies house + fee

Question 37

What is included in form IN01 to register an LLP?

Answer 37

Name
Registered office
Designated members

Question 38

What is conclusive evidence of an LLP being incorporated?

Answer 38

Certificate of incorporation

Question 39

What is an LLP obliged to continue to file at companies house?

Answer 39

• change name
• change regsitered office
• change membership
• annual confirmation statement
• accounts

Question 40

Who is a person with significant control in an LLP?

Answer 40

• over 25% interest or
  significant influence/control

Question 41

Who is a member in an LLP?

Answer 41

• subscribed to incorporation document or
• later agreement with existing members

Question 42

IS there a maximum number of members that an LLP can have?

Answer 42

No

Question 43

When will a member cease to be a member of an LLP?

Answer 43

death
agreement
notice
dissolution if corporate

Question 44

How many members must be designated members?

Answer 44

At least 2

Question 45

What is the role of designated members?

Answer 45

Sign accounts
File at companies house
act in winding up