Partnership

Question 1

“Partnership”

Answer 1

Defined in s.1 the Partnership Act 1890 as “the relation which subsists between persons carrying on a business in common with a view of profit.” Excludes incorporated companies.

Partnerships do not have to make a profit - it is the intention of partners that is important.

s.2 sets out various factors to consider: most conclusively “receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business” but this is not conclusive.

Question 2

Legal entity?

Answer 2

A partnership is not a separate legal entity and therefore must act through its partners s.4

Question 3

Agents

Answer 3

Each partner is an agent of the firm and is able to bind the firm (s.5), as can anyone authorised to act on the firm’s behalf (s.6)

Question 4

Fiduciary

Answer 4

All partners share a fiduciary relationship and have a duty not to compete with the firm by carrying on a similar business without the permission of the other partners (s.30)

Question 5

Partnership Agreement

Answer 5

Advisable to have a written partnership to avoid ambiguity and disputes.

Any agreement can be varied with the consent of all the partners (s.19)

Question 6

Profits

Answer 6

Unless agreed otherwise, all partners are entitled to an equal share of nay profits (s.24(1)).

Question 7

Liability for partnership debts

Answer 7

All partners are jointly and severally liable for the debts and obligations of the firm (s.9).

A partner is only liable for things done whilst they are a partner (s.17). They are not liable for anything done by the firm before they became a partner (s.17(1)) but after they have left can be held liable for things that occurred whilst they were a partner (s.17(2)). Partners and creditors can agree to discharge them from these obligations (s.17(3)).

Partners must contribute equally to any losses made by the firm (s.24(1)).

Question 8

Dissolution

Answer 8

A partnership is for either a fixed term (s.32(a)) or an undefined time. For an undefined time, one partner can dissolve the partnership by giving notice of his intentions to dissolve it (ss.26(1) & 32(c)).

Partnership will also dissolve upon the death or bankruptcy of any partner (s.33)

Firms assets settled in accordance with s.44: debts repaid to non-partners, then partners for any advances, then share capital, and then distributing residude to partners in the same proportion as the firm’s profits are divided.