Partnership Flashcards
(166 cards)
1
Q
What is a partnership?
A
A partnership is a business structure formed where two or more people run and own a business together.
2
Q
How is a partnership created?
A
It is created when the definition in s1 of the Partnership Act 1890 is satisfied. There are no further formalities required.
3
Q
Is a written agreement required for a partnership?
A
There is no requirement for a written agreement, although it may be advisable to have one.
4
Q
Can a partnership exist without intention?
A
A partnership will exist even if the individuals involved did not intend to create a partnership or are unaware of what they have created legally.
5
Q
What does s1 of the Partnership Act 1890 define?
A
Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.
6
Q
Who can be partners in a partnership?
A
Partners can be individuals or companies.
7
Q
What is included in the definition of ‘business’?
A
The definition of ‘business’ includes ‘every trade, occupation or profession’.
8
Q
What is required for a partnership to be formed?
A
There must be more than ‘mere agreement’ for a partnership to be formed.
9
Q
Is actual trading required to establish a partnership?
A
There is no requirement for the parties to have actually commenced trading.
10
Q
What was established in Khan v Miah regarding partnerships?
A
In Khan, a partnership was held to exist where the parties had agreed to open a restaurant together, even though they had not traded.
11
Q
What is the definition of ‘business’?
A
The definition of ‘business’ includes ‘every trade, occupation or profession’ ($45, PA 1890).
12
Q
What is required for a partnership to be formed?
A
There must be more than ‘mere agreement’ for a partnership to be formed.
Illot v Williams & Others [2013] EWCA Civ 645.
13
Q
Is actual trading required for a partnership to exist?
A
There is no requirement for the parties to have actually commenced trading.
Khan v Miah [2000] 1 WLR 2123.
14
Q
What steps did the parties in Khan v Miah take to establish a partnership?
A
The parties agreed to open a restaurant, opened a joint bank account, obtained a bank loan, and acquired premises.
15
Q
What is the purpose of a business in a partnership?
A
The purpose of the business must be to make money. Charitable motives cannot constitute partnerships.
16
Q
What is the legal personality of a partnership?
A
A partnership is unincorporated; it has no separate legal personality.
17
Q
What are the implications of a partnership having no separate legal personality?
A
Partners will be personally liable for the debts of the partnership, and partnership assets are owned jointly by the partners.
18
Q
What are the benefits of a partnership compared to a company?
A
Partners do not have to go through extensive administrative and accounting requirements, allowing them to focus on the business itself.
19
Q
What is the requirement regarding public information for partnerships?
A
There is no requirement to make as much information public; partnerships are not required to publish business accounts.
20
Q
What are the fundamental characteristics of a partnership?
A
Partnerships are not required to publish business accounts and partners have rights and responsibilities such as decision-making, profit sharing, and examining accounts.
Business Law & Practice, 13.2.2; 15.3
21
Q
What rights do partners have in a partnership?
A
Partners have the right to be involved in decision-making, share in profits, examine accounts, insist on honesty, veto new partners, share losses, and indemnify fellow partners against excess liability.
s24(5); s2(3); s24(1); s24(2); s24(7)
22
Q
How are decisions made in a partnership?
A
Decisions are made by majority vote, but changing the nature of the partnership requires unanimous consent.
s24(8)
23
Q
What are the naming requirements for a partnership?
A
A partnership can be called anything the partners choose, subject to restrictions in Chapter 1 of Part 41 of the Companies Act 2006.
Chapter 1 of Part 41
24
Q
What restrictions apply to partnership names?
A
Certain business names cannot be used without approval from the Secretary of State, especially those suggesting a connection to the Government or Local Authority.
Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulation 2014 (SI 2014/3140)
25
What is a Partner's Duty of Utmost Good Faith?
Partners are under a duty of the utmost fairness and good faith to each other.
26
What must partners comply with according to s28 - 530 PA 1890?
Partners must comply with the following duties: divulge information, account for benefits, and account for profits from competing businesses.
27
What does the duty to divulge information entail?
Partners must divulge all information on 'all things affecting the partnership' to the other partners.
28
What is an example of breaching the duty to divulge information?
A partner sells their business premises to the partnership but suppresses information about the value of that premises.
## Footnote
Example of breach of duty.
29
What must partners account for regarding benefits?
Partners must account to the firm for any benefit derived, without the consent of the other partners, from a transaction concerning the partnership.
30
What happens if a partner does work for a client in their spare time?
The money received will be cash of the partnership unless the other partners consent to the individual partner keeping it.
31
What should be considered in problem questions regarding benefits?
Consider if the partner derived a benefit and whether this was with the other partner's consent.
32
What must a partner account for if they run a competing business?
The partner must account for any profits made by the competing business unless they have the consent of the other partners.
33
What types of businesses are caught by the duty to account for profits?
This duty catches businesses in direct competition with the partnership.
34
Does the duty to account include similar but non-competing businesses?
No, it does not necessarily include similar, but non-competing businesses, such as a partner setting up a business in a different part of the supply chain.
35
What does the Partnership Act 1890 provide?
The Partnership Act 1890 provides a default set of rules that apply to partnerships where there is no express or implied agreement to the contrary.
36
Why might the default rules of the Partnership Act not be appropriate?
The default rules may not be appropriate for every partnership, and they are not necessarily comprehensive in what they cover.
37
What is often necessary for parties in a partnership?
It is often necessary for the parties to enter into an express written agreement that modifies or departs from the terms implied by the Act.
38
What key skill should students learn regarding the Partnership Act?
Students should learn what the PA 1890 implies in the absence of any agreement and what changes might need to be made by way of a written agreement to suit the needs of a client.
39
What is arbitration in the context of partnerships?
Arbitration is a form of alternative dispute resolution where the parties agree to submit any disputes to an independent third party (an arbitrator) who will make a binding decision on the dispute.
40
Why is it desirable to include an arbitration clause in a partnership agreement?
Including an arbitration clause can help resolve disputes between partners without resorting to litigation.
41
What is the significance of specifying a commencement date in a partnership agreement?
Specifying a commencement date is desirable to ensure certainty about when the parties' rights and obligations arise.
42
When does a partnership come into being according to the Partnership Act?
The partnership comes into being when the statutory definition is satisfied.
43
What does the Partnership Act imply about dissolution?
The death or bankruptcy of a partner will automatically dissolve the partnership (s33).
44
Why is the automatic dissolution of partnership problematic?
It is normally desirable to provide that the remaining partners will automatically continue in partnership upon buying out the deceased/bankrupt partner's share.
45
What is a potential limitation on partner drawings?
It may be desirable to place a monthly limit on how much each partner can draw from the business to prevent any one partner from draining funds.
46
What does the Partnership Act say about duration?
No duration is supplied by the Act; any partner may terminate the entire partnership at any time by giving notice to all other partners (s26).
47
What is a 'partnership at will'?
If there is no agreement to the contrary, the partnership will be a 'partnership at will' (s26), meaning it continues indefinitely unless a partner gives notice to terminate.
48
What happens if a partner gives notice to terminate?
A notice to terminate under the Act has immediate effect and does not need to be in writing unless the partnership agreement is made by deed (s26(2)).
49
What are some suggested amendments regarding partner expulsion?
Suggested amendments might include specifying a minimum period of notice, requiring written notice, agreeing on a fixed term, or providing that the partnership continues as long as there are two surviving partners.
50
What may be desirable regarding expulsion of partners?
It may be desirable to provide a term enabling the partners to expel a partner in prescribed circumstances.
51
What does the PA 1890 say about expulsion of partners?
The PA 1890 does not provide for the expulsion of partners as long as there are two surviving partners.
52
What may be desirable in a partnership agreement regarding expulsion?
It may be desirable to provide a term enabling the partners to expel a partner in prescribed circumstances.
53
What does the PA 1890 imply about competition after leaving a partnership?
Nothing in the PA 1890 prevents partners from setting up in competition on leaving the partnership.
54
Why is it important to limit an outgoing partner's freedom to compete?
Where the firm continues on a partner retiring, it is important to provide a term limiting the outgoing partner's freedom to compete.
55
What must non-competition clauses do to be valid?
Such clauses must protect a legitimate interest and be reasonable to protect that interest.
56
What is an example of a legitimate interest in a non-competition clause?
The firm's business connections, employees, or confidential information.
57
What factors make a non-competition clause potentially unreasonable?
If it is wider than it needs to be, such as restrictions lasting more than 3 years over an unduly wide area.
58
What are less burdensome alternatives to non-competition clauses?
Non-dealing clauses and non-solicitation clauses.
59
What does a non-dealing clause do?
It prevents the partner from entering contracts with customers.
60
What does a non-solicitation clause do?
It prevents the partner from soliciting contracts.
61
What must remaining partners do when a partner leaves the business?
The remaining partners will need to pay for that partner's share, or otherwise this will need to be sold to an external third party.
62
What does the Partnership Act imply regarding a partner's share?
5% interest on the partner's share; or such profits as are attributable to their share ($42).
63
What are desirable terms to specify in a partnership agreement?
Terms should specify:
- Whether partners have an obligation or option to purchase an outgoing partner's share;
- The basis on which the share will be valued;
- How to resolve disputes as to the valuation (e.g., professional valuation);
- The date on which payment will be due;
- An indemnity for the outgoing partner's liabilities;
- Valuation of goodwill;
- A term enabling a partner to retire without unanimous agreement.
64
What rights do partners have regarding retirement under the Partnership Act?
Partners have no right to retire under the Act. However, partners can vary the partnership agreement (to remove a partner) by unanimous consent.
65
How do partners share capital in a business?
Partners share equally in the capital of the business. Increases or decreases in the value of assets are also shared equally.
66
Can partners deviate from equal sharing of capital?
Yes, partners may want to deviate from equal sharing to reflect the capital contribution of each partner to the business.
## Footnote
For example, if Partner A provides a factory worth £50,000 and Partner B puts in £10,000 cash, under the PA 1890, if the factory increases in value to £60,000, the increase of £30,000 is shared equally despite differing contributions.
67
What does the Partnership Act imply about sharing profits and losses?
Profits and losses of the business are to be shared by the partners equally (524(1)).
## Footnote
524(6) explicitly prohibits partners from receiving a salary unless an agreement to the contrary excludes this.
68
What rights do partners have regarding management of the business?
Partners have a right, but not an obligation, to take part in the management of the business (s24(5)).
69
What is a desirable term to specify in the Partnership Agreement?
It may be worth specifying what assets are 'Partnership Assets' to prevent disputes.
70
How can profits be shared to reflect each partner's contribution?
Profits can be shared by paying partners on a salary basis, allowing interest in proportion to capital contributions, or sharing profits/losses in specific percentages.
71
What is a 'sleeping partner' under the PA 1890?
A 'sleeping partner' is one who effectively contributes nothing to the business.
72
What can partners do to avoid unequal profit sharing?
Partners may want to fix each partner's obligations, specifying that a partner must devote their whole time and attention to the business or a specific number of hours per week.
73
What should the clause regarding partner obligations cover?
The clause should cover sick leave and holiday entitlement.
74
Who can enter into contracts during the course of partnership business?
Contracts may be entered into by either all of the partners collectively or an individual partner acting on behalf of the partnership.
75
When can individual partners bind the partnership?
Individual partners may bind the partnership when they have actual or apparent authority.
76
What is the liability of a partner who enters into a contract?
The partner who entered into the contract can always be sued.
77
What happens if a contract is breached?
A debt/liability under such a contract can be enforced against the partner who made the contract or the firm if the partner had actual or apparent authority.
78
When is the firm liable for a contract made by an individual partner?
The firm will be liable if the contracting partner had actual authority or apparent/ostensible authority.
79
When is the firm not liable for a contract?
The firm will not be liable if the contracting partner had no authority at all.
80
Who can sue if the firm is liable and goes unpaid?
A contracting party who goes unpaid can sue the firm as a whole or any individual who was a partner at the time the debt was incurred.
81
What does PA 1890 state about partner liability?
Under PA 1890, partners are jointly and severally liable.
82
What is the liability of individual partners for partnership debts?
Each individual partner is fully liable for the performance of contractual obligations which bind the partnership.
83
What happens if a partner enters into a contract with apparent authority only?
They will have to indemnify the other partners for any liability or loss they incur.
84
What defines actual authority in a partnership?
A partner will contract with actual authority where they are authorised by the partnership to enter into the agreement.
85
What is the legal effect of a contract entered into with actual authority?
An agreement entered into where the partner has actual authority will ALWAYS bind the partnership.
86
What is express actual authority?
Express actual authority arises where there is a specific agreement between the partners granting the partner authority.
87
What is implied actual authority?
Implied actual authority arises through a course of conduct, where one partner is regularly responsible for a particular course of dealing.
88
What is apparent or ostensible authority?
If a partner does not have actual authority, the partnership may still be bound if the partner contracted with apparent or ostensible authority.
89
What does section 5 of the Partnership Act 1890 state?
The acts of every partner who does any act for carrying on the usual business of the firm bind the firm and his partners unless the partner has no authority.
90
Under what conditions will a partner bind the partnership with apparent authority?
A partner will contract with apparent authority and bind the partnership if the partner carries on business of the kind carried on by the firm.
91
What is the usual authority of a partner in a firm?
The transaction is one for which a partner in such a firm would usually be expected to have the authority to act.
92
What is the effect of contracts entered into by a partner with apparent authority?
Contracts entered into by a partner with apparent authority will bind the firm (partnership), and hence the other partners.
93
What happens if a partner acts without actual authority?
Contracts entered into without authority do not bind the firm, but the contracting partner will be personally liable.
94
What is apparent authority in the context of partnership?
The person with whom the partner is dealing does not know the partner does not have authority, but knows or believes the partner to be a partner.
95
What example illustrates apparent authority?
John, a partner in Plumbers, agrees to purchase a quantity of copper piping, a Jacuzzi, a new van, and roofing felt and heavy timber.
## Footnote
John will have apparent authority to make all contracts except for the roofing felt and timber, as it does not relate to the firm's business.
96
Why would the contract for roofing felt and timber not bind the firm?
E F Plumbers are plumbers; purchasing roof timbers has no apparent connection to the firm's business.
97
What is the liability of incoming partners for partnership debts?
Incoming partners are generally NOT liable for partnership debts incurred before they joined the partnership.
## Footnote
S17(1) PA 1890 states that a new partner is not liable 'to the creditors of the firm for anything done before he became partner'.
98
What is the liability of outgoing partners for partnership debts?
Outgoing partners remain liable for partnership debts incurred before their retirement.
## Footnote
S17(2) PA 1890 specifies this liability.
99
What measures can an outgoing partner take to avoid liability for partnership debts?
Two potential measures are indemnity and novation agreement.
100
What is an indemnity in the context of partnership debts?
An indemnity is a contractual agreement where remaining partners agree to repay the outgoing partner if they are sued by a creditor for a debt.
## Footnote
The outgoing partner remains liable to the creditor but has a contractual right to be repaid.
101
What is a novation agreement?
A novation agreement cancels one contract and replaces it with another, transferring both obligations and rights to a new contract.
102
Who can enter into a novation agreement when a partner leaves a firm?
A creditor can enter into a novation agreement with the partners at the time the contract was made and the newly constituted partnership.
103
What does the agreement do regarding original partners' liability?
The agreement will release the original partners from their liability and result in the firm, as newly constituted, taking over the liability.
104
What is the outcome for an outgoing partner in a novation agreement?
The outgoing partner will be released from their debt as a member of the original partnership and not the newly constituted partnership.
105
What does a novation agreement imply for incoming partners?
A novation agreement makes all partners in the newly constituted firm liable for debts incurred before they became partners.
106
What is required for a novation agreement to be binding if no new partner joins?
There must be consideration for the creditor's promise to release the retiring partner from liability, or the agreement must be executed as a deed.
107
Can a partner who leaves a firm be liable for debts incurred after their departure?
Yes, a partner who leaves a firm before a debt is incurred can still be liable for that debt.
108
What are the conditions under which an outgoing partner may be liable for a debt?
This can occur through holding out or if the outgoing partner fails to give sufficient notice of their departure.
109
What is 'holding out' in the context of partnership liability?
A person may be liable for a debt under s14 of the Partnerships Act 1890 if they are 'held out' to be a partner to a third-party creditor.
110
What are the three elements to 'holding out' as per Nationwide Building Society v Lewis [1998]?
1. A representation. 2. Reliance. 3. The consequent giving of credit to the firm.
111
What constitutes a representation in the context of 'holding out'?
A representation that X is a partner in the firm can be made by X, or someone else with X's knowledge. It may be oral, written, or by conduct.
112
What is an example of a written representation?
The firm, with X's knowledge, continues to use headed note-paper with X's name on it after X's retirement.
113
What must occur for there to be reliance upon a representation?
The creditor must make payment to the firm as a result of reliance on the representation.
114
Can X be bound by a debt if they were not a partner at the time of the representation?
Yes, X may be bound by a debt even if they were not a partner at the time the representation was made.
115
What is an example scenario illustrating 'holding out'?
X is a retired partner. The partnership writes to Farmer Giles on headed notepaper bearing X's name, offering to purchase his crop of potatoes. Farmer Giles relies on this representation.
116
What happens if X knew about the representation regarding the partnership's use of old notepaper?
X will be liable for the debt through holding out.
## Footnote
Farmer Giles relied upon this.
117
When would X not be liable for the partnership debt?
X would not be liable if Y and Z, along with Farmer Giles, agreed to the contract orally and confirmed it on headed notepaper stating that Partner X was a partner.
## Footnote
Farmer Giles would not have had the necessary reliance.
118
Under what conditions may a partner (X) be liable for a debt after leaving the firm?
A partner may be liable if:
1. A creditor enters into a transaction knowing X was a partner.
2. The creditor is unaware that X is no longer a partner.
3. X has failed to give the appropriate notice specified in s36 PA 1890.
119
What does s36 PA 1890 state regarding dealing with the firm?
A person dealing with the firm is entitled to treat all apparent members of the old firm as still being members until they have notice of the change.
120
What are the two types of notices required when a partner leaves?
1. Actual Notice (s36(1)): Letters should be sent to all existing customers announcing the partner's departure.
2. Notice in the London Gazette (s36(2)): A notice must be placed in the London Gazette to notify those who have not previously dealt with the firm.
121
Is it necessary for a creditor to have read the notices for them to be effective?
No, there is no requirement for a creditor to have actually read the notices; they must simply be made public.
122
When can the ground of liability not be relied upon?
This ground cannot be relied upon if the creditor was never aware that the person had been a partner (s36(3)).
123
Is there a requirement for the estate/trustee of a deceased/bankrupt partner to give notice?
No, there is no requirement for the estate/trustee to give notice.
## Footnote
(536(3))
124
Who can a firm's debts be enforced against?
1. The partner who made the contract.
2. The firm (and hence all partners individually), IF...
3. An outgoing partner, IF...
125
When can a firm's debts be enforced against the firm?
When the debt was incurred by the partner who made the contract with actual or ostensible authority.
126
What happens if a partner had ostensible authority only?
They must indemnify the firm.
127
Under what conditions can an outgoing partner be liable for debts incurred before leaving the firm?
1. The debt was incurred before the partner left the firm; and
2. The partner has NOT signed a novation agreement discharging their liability.
128
What can an outgoing partner seek if they incur debts before leaving the firm?
The partner may be reimbursed by the remaining partners if they have agreed an indemnity.
129
Under what conditions can an outgoing partner be liable for debts incurred after leaving the firm?
1. There has been 'holding out';
2. The partner has NOT given the appropriate notices of their departure.
130
What constitutes 'holding out'?
1. A representation made by the retired partner, or with their knowledge, that they are a partner;
2. The creditor relied on this when contracting with the firm;
3. The creditor makes payment to the firm as a result.
131
What must an outgoing partner do to avoid liability for debts after leaving the firm?
They must give actual notice to existing customers and place a notice in the London Gazette to notify new customers.
132
What does 'dissolution' refer to in a partnership?
'Dissolution' refers to a partnership coming to an end.
133
What must happen after a partnership is dissolved?
The firm's assets must be collected and valued before being distributed to creditors, with any surplus being distributed to the partners in accordance with their agreement.
134
What are the reasons a partnership may come to an end?
A partnership may end due to the expiry of a fixed term, notice, or the death or bankruptcy of one of the partners.
135
What happens if a partnership is stated to be for a fixed term?
The expiry of that term will end the partnership unless the partnership agreement provides that it shall continue beyond the fixed term.
136
What is a 'partnership at will'?
If the partnership agreement specifies continuation, it becomes a 'partnership at will', meaning it continues indefinitely, but any partner may terminate it at any time by giving notice.
137
What is required for a partner to terminate a partnership at will?
A partner may terminate the partnership at will by giving notice to all other partners without needing to provide a reason.
138
What is the effect of giving notice to terminate a partnership?
The giving of notice has immediate effect and need not be in writing unless the partnership agreement was made by deed.
139
What happens to a partnership upon the death or bankruptcy of a partner?
The death or bankruptcy of a partner automatically terminates the partnership.
140
Can a partnership be dissolved if a partner has charged partnership property for private debt?
Yes, partnerships may be dissolved at the option of the other partners if a partner has any partnership property charged under s23 for payment of that partner's private debt.
141
What happens to a partnership if an event makes it unlawful to carry on business?
The partnership will be automatically terminated if an event occurs that makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry it on in partnership.
## Footnote
This may occur if, for example: the business loses a license required to carry on its business, a partner is struck off, or a change in the law makes the type of business illegal.
142
Can the illegality term be excluded by a written partnership agreement?
No, this term cannot be excluded by a written partnership agreement.
143
What grounds can a court order a partnership to dissolve?
A court can order a partnership to dissolve on the grounds of incapability, conduct, breach of the partnership agreement, or when the partnership can only carry on at a loss.
144
What is the incapability ground for dissolution?
If a partner becomes permanently incapable of performing his part of the partnership contract.
145
What does the conduct ground for dissolution entail?
The conduct must have prejudicially affected the carrying on of the business.
146
What constitutes a breach of the partnership agreement?
If a partner has wilfully or persistently breached the partnership agreement so that it is not reasonably practicable for the other partners to carry on business with him.
147
Under what condition can a partnership be dissolved due to financial loss?
If the partnership is consistently losing money and there is no reasonable prospect of it returning to profitability, a partner may apply to the court to have the partnership dissolved.
148
What is the purpose of preventing partners from being tied to a failing business?
The idea is to prevent partners from being tied to a failing business that is eroding.
149
What happens to a partnership if an event makes it unlawful to carry on business?
The partnership will be automatically terminated if an event occurs that makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry it on in partnership.
## Footnote
This may occur if, for example: the business loses a license required to carry on its business, a partner is struck off, or a change in the law makes the type of business illegal.
150
Can the illegality term be excluded by a written partnership agreement?
No, this term cannot be excluded by a written partnership agreement.
151
What grounds can a court order a partnership to dissolve?
A court can order a partnership to dissolve on the grounds of incapability, conduct, breach of the partnership agreement, or when the partnership can only carry on at a loss.
152
What is the incapability ground for dissolution?
If a partner becomes permanently incapable of performing his part of the partnership contract.
153
What does the conduct ground for dissolution entail?
The conduct must have prejudicially affected the carrying on of the business.
154
What constitutes a breach of the partnership agreement?
If a partner has wilfully or persistently breached the partnership agreement so that it is not reasonably practicable for the other partners to carry on business with him.
155
Under what condition can a partnership be dissolved due to financial loss?
If the partnership is consistently losing money and there is no reasonable prospect of it returning to profitability, a partner may apply to the court to have the partnership dissolved.
156
What is the purpose of preventing partners from being tied to a failing business?
The idea is to prevent partners from being tied to a failing business that is eroding.
157
What is the purpose of dissolving a partnership?
To prevent partners from being indefinitely tied to a failing business that is eroding their personal wealth.
158
What is the 'just and equitable' ground for dissolution?
The court considers it just and equitable to dissolve the partnership, making other grounds usually unnecessary.
159
When are other grounds for dissolution used?
When the partnership agreement prevents dissolution except by unanimous agreement, such as if a partner refuses to leave.
160
What happens if a court order for dissolution is made?
The order will break the partnership agreement without any partner being liable for breach of contract.
161
What is the first step after a partnership is dissolved?
The partners will wind up the partnership business and assets.
162
What does 'winding up' involve?
Getting in and valuing all the partnership assets, paying off debts, and distributing any surplus to former partners.
163
What are dissolution accounts?
Accounts prepared by the partners during the winding up process.
164
What can a partner do if there is a dispute or assets are in jeopardy?
Any partner may apply to the court for the appointment of a receiver to deal with the assets.
165
In what order are the firm's assets distributed?
1. Creditors
2. Partners who have loaned the firm money must be repaid.
3. Partners must be paid their capital entitlement.
4. Any surplus will be split according to the partnership agreement.
166
What happens if there is a shortfall for creditors?
The partners will be personally liable for this debt, as there is no limited liability or separate legal personality.
