Partnerships Flashcards
What is a partnership?
An unincorporated business run by two or more people together
Partnerships can be formed through an oral agreement, written agreement, or implied by conduct.
How can a partnership be formed?
Through an oral agreement, written agreement, or implied by conduct.
What is a Partnership Agreement?
A formal document outlining the terms of the partnership.
What can a Partnership Agreement do?
It can amend the default rules in the Partnership Act 1890.
Who can be a partner in a partnership?
Anyone legally capable, with a maximum of 20 partners (certain professions like solicitors are excluded).
What are the naming rules for a partnership?
If the name includes only partners’ surnames, no restrictions apply.
What happens if a partnership name includes other terms?
It must comply with the Companies Act 2006 and relevant business name regulations.
What is the purpose of a written Partnership Agreement?
Provides evidence of the partners’ relationships and the terms of the partnership.
What does a partnership agreement define?
The partners involved in the partnership.
What is a partnership at will?
A partnership with no fixed term, continuing until any partner decides to end it.
How can a partnership at will be ended?
Any partner can end the partnership with notice.
What is the default rule for sharing profits and losses in a partnership?
If there’s no express or implied agreement, profits and losses will be shared equally.
Do partners have a right to interest on capital contributions?
No, partners do not have a right to interest on their capital contributions under the Partnership Act 1890.
What is a duty of good faith in a partnership?
Partners owe each other a duty of good faith.
What is actual authority in the context of partnerships?
A partner is expressly authorized to act on behalf of the partnership.
What is apparent authority?
A third party believes the partner has authority to act on behalf of the partnership based on its outward appearance.
What is the liability of partners in a partnership?
Partners are jointly and severally liable for the debts and obligations of the partnership without limit.
What is the effect of a partner’s retirement on liability for debts?
A retiring partner remains liable for debts incurred while they were part of the partnership.
What is holding out in partnerships?
Actions or representations made by a partner suggesting they are still part of the partnership.
What must a retiring partner do to avoid liability for debts incurred after retirement?
Directly inform third parties that they are no longer a partner.
In what order are proceeds from selling partnership assets used?
- Repay third-party creditors
- Repay partner creditors
- Repay the partner’s capital entitlement
- Any remaining balance is divided according to profit-share ratio.
What is required for a partner to be expelled from the partnership?
An express provision in the partnership agreement is needed for expulsion.
What should a partnership agreement outline regarding the retirement of a partner?
What happens if a partner leaves to ensure the partnership does not dissolve.
What is a partnership property?
Assets that belong to the partnership, which should be specified in the agreement.
What happens to a partnership upon the death or bankruptcy of a partner?
The partnership is automatically dissolved.
What is the default provision for sharing income, profits, and losses?
If there’s no agreement, profits and losses are shared equally.
What does the Partnership Act 1890 state about management rights?
All partners are entitled to participate in the management of the business.
What is required for certain decisions in a partnership?
Unanimity is required for certain decisions.
What is the significance of specifying contributions in a partnership agreement?
It clarifies what each partner is contributing and how profits and losses will be shared.
