Types of Trade Flashcards
Sole Trader - Advantages
- No formal set up process is required
- Independence, privacy
- Personal supervision
- Profit accrue to sole trader
Sole Trader - Disadvantage
- Unlimited liability for losses of the business
- Reliance on the individual results in long hours
- Succession issues
- Skill of trader
what is a general partnership?
If a partnership is not registered as a limited partnership or limited liability partnership, it is automatically a general partnership. When set up, this partnership may have a partnership agreement which specifies the rights and duties of the partners. If not, the rules in the Partnership Act will apply.
what is a limited partnership?
If a partnership is registered with the registrar of companies under the Limited Partnership Act 1907 it will have two types of partners.
- limited partners
- unlimited partners
what do limited partners do?
- can take no part in the running of the business
- are only liable for the total of the capital they have invested.
what do unlimited partners do?
- who are responsible for running the business
- who can bind the partnership in contract
- who are fully liable for the debts of the business.
Partnership - Fiduciary duties
These duties are;
- Act in good faith
- Not to exercise a legal right for an improper motive
- Not to keep profits derived without the consent of other parties
- To avoid conflicts of interest without full disclosure
Partners’ liability and authority
Partners are jointly and severally liable for the acts of their fellow partners as they bind the firm
what does holding out mean?
if an individual acts as if they are a partner, they will be liable as if they are
Partners’ liability for debts
A partner’s liability depends upon the date when the debts were incurred
Debts incurred before he joined - liable only after he becomes a partner
Debts incurred whilst he is a partner - liable for debts incurred whilst he is a partner even after he has left
Debts incurred after he leaves - liable if do not give creditor notices of retirement
when does novation occur?
when a creditor agrees the liability on the debt will be that of the continuing or incoming partner not the outgoing partner
To gain a certificate of incorporation, the LLP must deliver an incorporation document to the Registrar as well as a
declaration of compliance
As well as having to follow similar rules to a company, an LLP is also entitled to one of the main benefits of trading through a limited company.
The partners benefit from limited liability. Their liability is limited to their
capital contribution
An LLP must keep similar books and records to a company.
The LLP must keep registers of members and people with significant control. These can be kept at the LLP’s registered office or ______________.
Companies House
