Partnership

Question 1

What are the types of business organisations?

Answer 1

Sole trader / sole practionioner, partnership and company

Question 2

What are the different types of partnerships?

Answer 2

General, limited and limited liability

Question 3

What are the different types of company?

Answer 3

Private - limited and unlimited, and public limited

Question 4

What is a sole trader?

Answer 4

An individual who carries on a business on an individual basis in his own name or some other name

Question 5

Is a sole trader personally liable for the debts of the business?

Answer 5

Yes, the sole trader business form has no separate legal personality

Question 6

What is a general partnership?

Answer 6

An incorporated business where the partners have unlimited liability for the debts of the business

Question 7

What Act applies to every partnership?

Answer 7

The Partnership Act 1890

Question 8

What is a limited partnership?

Answer 8

Allows for one or more of the partners to have limited liability, provided at least one of the partners has full/unlimited liability.

Question 9

Where should all limited partnerships be registered at?

Answer 9

Companies House, until registered, it will be regarded as a general partnership

Question 10

What is a limited liability partnership?

Answer 10

A hybrid form of business vehicle, representing a cross between a partnership and a company

Question 11

What are limited liability partnerships governed by?

Answer 11

The Limited Liability Partnerships Act 2000

Question 12

What is a company?

Answer 12

An artificial legal person, which has separate legal personality distinct from its members (shareholders), directors or employees

Question 13

What is the most common type of company?

Answer 13

A registered company

Question 14

What is a partnership?

Answer 14

A relationship which subsists two or more persons carrying on a business in common with a view of profit

Question 15

What are the different types of partners?

Answer 15

General, sleeping, salaried or a limited partner in a limited partnership

Question 16

What is a general partner?

Answer 16

Actively involved in the day to day running of the business

Question 17

What is a sleeping partner?

Answer 17

Takes no active part in the running of the business. However, is jointly and severally liable for the debts and contracts of the business

Question 18

What is a limited partner in a limited partnership?

Answer 18

Contributes a specific amount of capital. Liability limited to that amount. Cannot take part in the management of the firm

Question 19

What is a salaried partner?

Answer 19

Will receive a fixed amount in income. Not a real partner unless he also receives a share of the profits

Question 20

What does the Partnership Act 1890 provide?

Answer 20

It provides default rules for the regulation of the partnership but partners can oust or modify these rules in a partnership agreement

Question 21

What is the minimum number of partners required to form a partnership?

Answer 21

2, and there is no statutory maximum

Question 22

What must a business have a view of?

Answer 22

Profit

Question 23

What are the essential elements of a partnership?

Answer 23

Persons, business, carrying on and with a view of profit

Question 24

When does the partnership begin?

Answer 24

As soon as the partners start their business activity

Question 25

What is not necessary to create a partnership?

Answer 25

Joint ownership of property (s 2(1)), the sharing of gross returns (s 2(2)), and receiving share of profits (s 2(3))

Question 26

What is covered in s 4 of the 1890 Act?

Answer 26

Being called a "firm"

Question 27

What is covered in s 5-18 of the 1890 Act?

Answer 27

The relationship between partners, the partnership and third parties

Question 28

What does ss 5-9 deal with?

Answer 28

The liability of the partnership and the partners to third parties in contract

Question 29

What does section 5 state?

Answer 29

That every partner is deemed to be an agent of the partnership and of the other partners

Question 30

What kind of authority could a partner have?

Answer 30

Express, implied or ostensible authority

Question 31

What is express authority?

Answer 31

It is set out in the partnership agreement

Question 32

What is implied authority?

Answer 32

The individual partner must be acting within the usual scope of a partner's powers in the particular business concerned

Question 33

What is ostensible authority?

Answer 33

Where it is arguable that the partner does not have implied authority, there may be circumstances in which the partnership has represented to third parties, by their own words or conduct, that the partner has authority to act on their behalf

Question 34

What does section 9 state?

Answer 34

Every partner in a firm is liable jointly with the other partners, and in Scotland severally also, for all debts and obligations of the firm while he is partner

Question 35

Why is the joint and several liability rule significant?

Answer 35

It means that a creditor of the partnership can choose to sue on partner, some partners or all of the partners for the recovery of the debts due to them by the partnership

Question 36

What does sections 10-13 cover?

Answer 36

The liability of the partnership and partners for wrongs committed against third parties

Question 37

What does sections 14-18 deal with?

Answer 37

Various matters which arise when the partners and/or the partnership interact with third parties

Question 38

What sections deal with the dissolution of a partnership?

Answer 38

Ss 32-35

Question 39

Under s 35, the court can bring a partnership to and end if what?

Answer 39

Partner has mental disorder or permanent incapacity, engages in activity prejudicial to the business, wilfully or persistently breaches the partnership agreement, conducts themselves in a way that is no longer reasonably practicable for the others to carry on in business with him, etc

Question 40

The proceeds from the sale of assets would be applied to who? (in order)

Answer 40

Paying debts to outsiders, paying the partners any advance they made to the firm beyond their capital contribution, and paying the capital contribution of the partners

Question 41

What happens if there is a residue remains from the proceeds of the sale of assets?

Answer 41

It will be divided between the partners in the same proportion in which they share the profits of the partnership

Question 42

What are the advantages of an LLP?

Answer 42

Substantial protection of members' personal assets, internal flexibility regarding management and structure and tax transparency and benefits

Question 43

What are the disadvantages of an LLP?

Answer 43

Limited financial privacy, giving the filing requirements

Question 44

What is the Partnership (Prosecution) Scotland Act 2013?

Answer 44

Legislation passed to close the loophole that partnerships could not be found guilty of a criminal offence because the partnership had been dissolved