The Start of a Partnership Flashcards

Covers Chapter 13 of the BLP book

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1
Q

What is the pincipal act governing partnerships?

A

Partnership Act 1980 (PA 1980)

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2
Q

What is a key advantage of partnerships in terms of formality?

A

Advantage of Formality:
A major advantage of partnerships is the lack of formality.
This characteristic was particularly significant in the past when forming a new company was challenging in the nineteenth century.

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3
Q

What is the role of documentation within a partnership, and how does it differ from companies?

A

Documentation in Partnerships:
Partnerships may have documents governing their relations, but there is no obligation to do so.
Unlike companies, partnerships enjoy privacy, and there are no disclosure requirements for partnership documents.

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4
Q

Did the Law Commission propose any changes to the law of partnerships?

A

Law Commission Consultation:
The Law Commission issued a Consultation Paper in 2000 for the revision of partnership law.
The status of this proposal seems uncertain as it appears to have been shelved.

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5
Q

How is a partnership defined, and what does the term ‘partnership’ describe?

A

Definition of Partnership:
A partnership arises when two or more persons agree to run a business together.
The term ‘partnership’ refers to a business relationship based on an agreement, whether oral, written, or implied by conduct

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6
Q

What determines the existence of a partnership according to Section 1 of the PA 1890?

A

Partnership Definition (Section 1 PA 1890):
Section 1 defines a partnership as the relation between persons carrying on a business in common with a view of profit.
The existence of a partnership is determined by the criteria in this definition, as illustrated in legal cases like Khan v Miah and Young v Zahid

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7
Q

Is a separate legal existence granted to a partnership?

A

Legal Existence of Partnership:
Unlike a company, a partnership does not have a separate legal existence.
This means that the partners themselves, not the partnership entity, are legally responsible for the business

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8
Q

What is required beyond mere agreement to form a partnership?

A

Formation of Partnership:
Mere agreement or setting up a partnership is not sufficient (Ilott v Williams & Others [2013] EWCA Civ 645).
There must be the element of ‘carrying on a business in common,’ signifying shared responsibility and decision-making.

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9
Q

How can a partnership be created, and what are the possible structures?

A

Creation of Partnership:
A partnership may be formed for a specific purpose, a predetermined period, or as a partnership ‘at will’ without a specified duration.
‘Persons’ in partnership can be individuals or companies, especially in joint ventures for specific projects.

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10
Q

What are the fundamental characteristics of a partnership relationship?

A

Rights of Partners:
(a) Right to be involved in making decisions affecting the business.
(b) Right to share in the profits of the business.
(c) Right to examine the accounts of the business.
(d) Right to insist on openness and honesty from fellow partners.
(e) Right to veto the introduction of a new partner.
(f) Responsibility for sharing any losses made by the business.

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11
Q

Can these fundamental characteristics be varied or excluded in the partnership agreement?

A

Variation of Characteristics:
Theoretically, any or all of these fundamental characteristics may be varied or excluded by the agreement governing the relationship.
However, extreme variations or exclusions could reach a point where the existence of the partnership is denied

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12
Q

Is there a necessary formality for setting up a partnership?

A

Setting Up a Partnership:
The existence of a partnership is established by applying the definition to the relationship.
No necessary formality required.

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13
Q

Why is a written agreement valuable in setting up a partnership?

A

Value of a Written Agreement:
A written agreement serves as evidence of the partnership relationship and its terms.
Useful for partners to have a written ‘constitution’ to which they can refer.

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14
Q

What issues can a written partnership agreement address?

A

Addressing Issues in Partnership Agreement:
- Provides solutions to possible disagreements or disputes.
- Helps avoid future litigation.
- Ensures that undesired aspects of the PA 1890 have been avoided

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15
Q

What can poorly drafted partnership agreements lead to?

A

Consequences of Poorly Drafted Agreements:
- Criticism from the Court of Appeal, as seen in Ham v Ham & Another [2013] EWCA Civ 1301.
- Causes anxiety, expense, and delay.
- Emphasizes the importance of precise drafting in partnership agreements.

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16
Q

What formalities are required by statute for partnership business names?

A

Formalities for Business Names:
Statutory controls and requirements (ss 1192–1206 of the CA 2006).
Includes control over partnership names (ss 1193, 1194).
Mandates revealing partners’ names and business address (s 1201).

17
Q

When are controls and requirements not applicable to partnership names?

A

xemption from Controls:
Exemptions when the business name includes only partners’ names.
Examples not subject to the Act: ‘Jones and Burns’, ‘P Jones and A Burns’.
Examples subject to the Act: ‘P Jones’, ‘Jones, Burns & Co’, ‘JB Services’.

18
Q

What words or expressions may require written approval for business names?

A

Approval Requirements:
Words or expressions in the Company, LLP, and Business Names (Sensitive Words and Expressions) Regulation 2014 (SI 2014/3140).
Approval needed from the Secretary of State.

19
Q

What information must appear on stationery under the Act?

A

Required Information:
Names of partners and their addresses for service (s 1202).
Notice required at locations accessible to customers or suppliers (s 1204).
Non-compliance is an offence with potential fines (ss 1205, 1206).

20
Q

How can partnerships handle stationery compliance when there are many partners?

A

Stationery Compliance Alternative:
Include a statement on stationery indicating a full list of partners available at the principal place of business (s 1203).
No size limitation for partnerships.

21
Q

What statutory obligations, common to all businesses, arise at the beginning of a partnership?

A

Statutory Obligations:
Apply universally to businesses.
Cover aspects like income tax or corporation tax (for partnerships with corporate partners), VAT, and National Insurance.
Special duty for partnerships: Notify HMRC of the partners’ identities.

22
Q

Why might a partnership be an appropriate choice for individuals or companies engaging in a joint business venture?

A

Suitability for Joint Ventures:
Informal nature of partnerships.
Allows commercial secrecy.
Enables partners to claim tax relief for start-up losses.
Applicable not only to individuals but also to companies.
Relevant law: Partnership Act 1890, even though it wasn’t originally drafted for such corporate situations.