02 Partnerships Flashcards
What is a partnership?
A partnership is an unincorporated business that exists where 2 or more people carry on a business in common with a view of profit.
The agreement to operate in a partnership can be oral or in writing, or may even be implied by conduct.
=> no separate legal entity
=> no specific formalities required
Can a new partner be admitted without the consent of all of the partners?
No
What is a partnership at will?
A partnership where no specific duration or term is set
How are, income, capital profits and losses shared in a partnership?
In the absence of express or implied agreement to the contrary, the PA provides that income, capital profits and losses will be shared equally (s 24(1))
When is unanimity required under the PA? (i.e. in the absence of a partnership agreement)
Unanimity is required when changing the nature of the business
When a partnership will be dissolved under the PA? (i.e. in the absence of a partnership agreement)
- notice given by one of the partners at any time
- retirement
- death
- bankruptcy
- expulsion
Can partners force another partner to leave without his/her consent in the absence of a formal partnership agreement?
No. If the partner doesn’t agree to leave, they must carry on in business with him/her or dissolve the partnership
What are partners’ duties to each other under the PA?
- duty to provide true accounts and full information on partnership matters
- duty to account for profits derived from the position as partner
- duty to account for profits from a competing business
How is the liability of the partnership engaged towards third parties?
A partner acting within the scope of their actual authority OR apparent/ostensible authority will bind the partnership as a whole
What are the rules governing the liability of partners?
*Partners are jointly and severally liable for the debts and obligations of the partnership without limit (s 9 PA)
*A partner is liable for the debt incurred whilst they are a partner
*A new partner is not liable for debts incurred by the partnership before they became a partner
*A retiring partner is not released from debts incurred by the partnership whilst they were a partner
*A retired partner may be liable for debts incurred after their retirement (future debts) if they fail to comply with s36 (notice) & s14 (holding out)
