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FLK 1 BUSINESS LAW > TB - PARTNERSHIPS > Flashcards

TB - PARTNERSHIPS Flashcards

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1
Q

Formalities are a strict requirement in order to form a partnership - true or false

A

False

formalities arent a strict requirement in order to form a partnership - the agreement to operate a partnership can be oral or in writing or may even be implied by conduct

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2
Q

where theres a partnership at will, without a formal written partnership agreement and no other express or implied agreement to the contrary, how much notice must a partner give in order to leave the partnership

A

The partner may leave immediately provided that they give notice to the other partners

in the absence of any written or oral agreement as to how long the partnership should last, or how it should be ended, it’s a partnership at will under s26 PA and can be dissolved immediately by any party giving notice to the other at any time

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3
Q

Jesper and Laurits are in partnership
J invests 60% of the capital of the business and L invests 40%
J works full time for the business and L works part time
in the absence of a formal partnership agreement or informal agreement, how will income profits be shared

A

equally
in the absence of an express or implied agreement to the contrary, the income and capital profits will be shared equally - it would most probably be implied that they would be able to draw capital unequally
in these citcumstances the parties would be best advised to enter into a formal written partnership agreement

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4
Q

in a partnership at will, without a formal written partnership agreement, what is the impact of death pr insolvency of a partner on the partnership

A

the partnership will be dissolved - s33(1) PA

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5
Q

where a partner acts beyond the scope of his actual authority in making a deal with a third party, that deal may still be binding on the partnership if the partner had … authority to make it

fill the gap

A

apparent/ostensible: under the principle of ostensible/apparent authority, the firm may be liable for actions which were not actually authorised but which may have been appeared to an outsider to be authorised

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6
Q

what is a partnership

A

one medium through which a business may be run

an unincorporated business

exists where two or more persons agree that they will run a business together and actually do so

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7
Q

is a partnership an incorporated/unincorporated business and does it have separate legal entity from its partners

A

it is an unincorporated business and is not a separate legal entity from its partners

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8
Q

does the agreement to operate in partnership have to be oral, in writing or implied by conduct

A

it could be either of these

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9
Q

is there any legal requirements in setting up a partnership

A

no

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10
Q

what is a partnership agreement

A

a formal doc setting out the terms of a partnership - it usually deals with the relationship between the partners and their relationships with third parties

it will often vary or amend key default provisions under the Partnership Act 1890

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11
Q

any legally capable person may enter into a partnership and companies as well as individuals may be partners with other companies/individuals - true or false

A

true

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12
Q

the max number of persons who ma be members of a partnership used to be 20 - certain professions (sols and accountants) were exempt from this limit - what is the law on this now, are there any limits

A

since 2002 no limits apply in any circumstances

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13
Q

where is the law relating to business names contained

A

Part 41 of the Companies Act 2006

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14
Q

will any restrictions apply if the partnership name consists only of the surnames of all partners, with or without forenames or initials

A

no

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15
Q

certain words or expressions forming part of the business name may require prior approval - true or false

A

true
these include words and expressions contained in the company, limited liability partnership and business names (sensitive words and expressions) regulations 2014

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16
Q

what must any partnership that uses a business name must also comply eith

A

the prescribed disclosure requirements under the CA (ss 1200-1206)

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17
Q

Generally, details about the partners must appear at the main place of business and on partnership stationery - true or false

A

true

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18
Q

a formal partnership agreement isn’t a strict requirement but does have clear benefits - what are these

A
  • provides evidence of partners relations and of partnerships terms
  • overrides some of the provisions of the PA which will automatically apply, except to the extent that there’s contrary agreement - many of these default provisions may have undesirable consequences for modern partnerships
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19
Q

the default provisions within the PA that apply in the absence of express or implied agreement to the contrary may be unsuitable for specific client circumstances - true or false

A

true

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20
Q

who will be the parties to the agreement

A

the partners

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21
Q

no new partners may be admitted without the consent of all of the partners - true or false

A

true s24 (7) PA

although this is sensible for smaller partnerships, it may be unworkable for larger ones

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22
Q

what is the commencement date

A

the existence of a partnership is a q of fact
the partnership will exist from the date the s1 PA criteria are satisfied

an agreement subsequent to that date will only govern rights and responsibilities from that date

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23
Q

nature and place of business

A

the nature of the business is important to the q of a partners authority and extent to which a partner may bind the partnership

24
Q

unanimity is required by the partners in order to change the nature of the business - true or false

A

true - s24(8) PA

25
Q

is it usual to specify the place at which the business will be carried on

A

yes

26
Q

a partnership may run for a specific venture or for a fixed term - a fixed term partnership that continues after expiry will be presumed to continue on terms that are consistent with..

A

consistent with a partnership at will s27(1) PA, otherwise it will be dissolved s32 PA

27
Q

Partnership at will meaning

A

a partnership where no specific duration or fixed term is set - the most common type of partnership

28
Q

with a partnership at will - what rules will appl

A
  • any partner may determine the partnership (ie bring to an end) at any time on giving notice to the other partners, there’s no requirement for written notice unless the partnership agreement was made by deed s26(1) PA
  • the partnership shall be dissolved from the date specified in the notice or if none is specified, the date of communication of the notice s32 PA
29
Q

is there potential for the dissolution of a partnership to be immediate

A

yes - this can have serious consequences for the business

this would be a technical dissolution and the remaining partners may seek to continue in what would be a ‘new’ business

30
Q

is it normal to provide in a partnership agreement that the partnership will continue despite the retirement, death, expulsion or bankruptcy of a partner

A

yes

31
Q

PRACTICE EXAMPLE
Kikki and Carola are in a partnership together
no formal partnership agreement in place and K decides one day to leave the business to travel the world.
how much notice does K need to give C and what will the impact be on the partnership

A

K needs to give notice to C
it doesn’t need to be in writing and may take effect immediately
partnership will be dissolved

32
Q

it’s important to specify what each partner is contributing to the business and how capital profits/losses will be shared between the partners
in the absence of express or implied agreements to the contrary
the PA provides that capital profits and losses will be shared equally or unequally?

A

equally - s24(1)

33
Q

it may be implied that unequal contributions of capital result in the right to make unequal withdrawals of capital - true or false

A

true - a formal written partnership agreement should make this clear

34
Q

the partnership agreement may also provide for interest to be paid on partners capital contributions - is there a right to interest on capital under the PA

A

no there is no right to interest on capital under the PA s24(4)

this may be important where large capital contributions have been

provision should also be made for how future capital contributions will be made

35
Q

should the partnership agreement specify how the income profits/losses of the business will be shared between the partners

A

yes

36
Q

in the absence of express or implied to the contrary, will income profits and losses be shared equally or unequally

A

equally - s24(1) PA

this may not be suitable to clients specific circumstances

37
Q

should the partnership agreement deal with the payment of salaries from profits before or after the final profit shares are divided

A

before

38
Q

does the PA provide for salaries to be paid to partners

A

no - s24(6)

this could be particularly important where not all partners work full time for the business

39
Q

what are drawings

A

the amount that partners withdraw on account of profits

40
Q

a well drafted agreement should deal with how and when drawings are made - should they provide for repayment with interest if too much is taken

A

yes

41
Q

James and Suri are in partnership together
there is no formal partnership agreement in place or any express or implied agreement as to how they will share income and cap profits
both of them contributed the same amount of capital, but S only works part time for the business

how are their income and capital profits shares

A

in the absence of an express or implied agreement to the contrary, income and capital profits will be shared equally

42
Q

do the assets belonging to the firm need to be specified and why

A

yes they should be specified so that they are clearly distinguishable from those assets belonging to the individual partners

eg a freehold or leasehold property may remain owned by one partner but be used for the purposes of business - a failure to deal with this properly can lead to disputes on dissolution and problems with taxation.

43
Q

are all partners entitled to take part in the management of the business

A

yes - s24 (5) PA

this may not be what is desired between the partners, eg one partner may wish to take the role of a sleeping partner and simply invest in the business

44
Q

all matters connected with the partnership business may be decided by a majority of the partners - true or false

A

true - s24 (8) PA

45
Q

all matters connected with the partnership business may be decided by a majority of the partners - except one case…

A

except for changing the nature of the business, where unanimity is required

46
Q

note

A

thought should be given to whether unanimity should be required for other decisions and whether a majority decision should always be applicable, for example, the partners may wish for certain issues to be decided upon by the senior partners only

authority of the partners to bind the partners is also significant

47
Q

should absences (leave and illness eg) be catered for

A

yes

48
Q

what does retirement in this context mean

A

leaving the partnership

49
Q

does the PA provide for the possibility of a partner leaving a partnership without the partnership being dissolveed

A

no - this is a significant shortcoming of the PA and can have serious consequences for the continuing partners

50
Q

the agreement should include a mechanism for a partner to leave, following appropriate notice, and get what is owing to them without dissolving the firm - true or false

A

true

51
Q

unless otherwise agreed by the partners - how will a partnership be dissolved

A

by the death or bankruptcy of any partner s33(1) PA

this can have serious consequences for the continuing partners

52
Q

should provision be made in the agreement for the continuation of the firm by the surviving/solvent partners and for payment of the deceased/bankrupt partners share

A

yes

53
Q

under the PA no majority may expel any partner - true or false

A

true

54
Q

under the PA no majority may expel any partner, therefore which power should be included in the agreement

A

an express power to expel a problem partner should be included in the agreement, specifying the grounds for expulsion and providing for payment of the expelled partners share in the partnership

there should also be provision that the partnership should continue as regards the remaining partners

55
Q

Tom, Alexandra and Fred are in partnership together
there’s no formal partnership agreement in place
T and A become disappointed with Fs performance and want to remove him from the partnership - are they able to do this

A

T and A can’t force F to leave without his consent, if he doesn’t agree to do so, they must carry on in business with him or dissolve the partnership

56
Q
A

FLK 1 BUSINESS LAW (7 decks)

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