Partnerships Flashcards
(29 cards)
What is a partnership?
An unincorporated business run by two or more people together
Partnerships can be formed through an oral agreement, written agreement, or implied by conduct.
How can a partnership be formed?
Through an oral agreement, written agreement, or implied by conduct.
What is a Partnership Agreement?
A formal document outlining the terms of the partnership.
What can a Partnership Agreement do?
It can amend the default rules in the Partnership Act 1890.
Who can be a partner in a partnership?
Anyone legally capable, with a maximum of 20 partners (certain professions like solicitors are excluded).
What are the naming rules for a partnership?
If the name includes only partners’ surnames, no restrictions apply.
What happens if a partnership name includes other terms?
It must comply with the Companies Act 2006 and relevant business name regulations.
What is the purpose of a written Partnership Agreement?
Provides evidence of the partners’ relationships and the terms of the partnership.
What does a partnership agreement define?
The partners involved in the partnership.
What is a partnership at will?
A partnership with no fixed term, continuing until any partner decides to end it.
How can a partnership at will be ended?
Any partner can end the partnership with notice.
What is the default rule for sharing profits and losses in a partnership?
If there’s no express or implied agreement, profits and losses will be shared equally.
Do partners have a right to interest on capital contributions?
No, partners do not have a right to interest on their capital contributions under the Partnership Act 1890.
What is a duty of good faith in a partnership?
Partners owe each other a duty of good faith.
What is actual authority in the context of partnerships?
A partner is expressly authorized to act on behalf of the partnership.
What is apparent authority?
A third party believes the partner has authority to act on behalf of the partnership based on its outward appearance.
What is the liability of partners in a partnership?
Partners are jointly and severally liable for the debts and obligations of the partnership without limit.
What is the effect of a partner’s retirement on liability for debts?
A retiring partner remains liable for debts incurred while they were part of the partnership.
What is holding out in partnerships?
Actions or representations made by a partner suggesting they are still part of the partnership.
What must a retiring partner do to avoid liability for debts incurred after retirement?
Directly inform third parties that they are no longer a partner.
In what order are proceeds from selling partnership assets used?
- Repay third-party creditors
- Repay partner creditors
- Repay the partner’s capital entitlement
- Any remaining balance is divided according to profit-share ratio.
What is required for a partner to be expelled from the partnership?
An express provision in the partnership agreement is needed for expulsion.
What should a partnership agreement outline regarding the retirement of a partner?
What happens if a partner leaves to ensure the partnership does not dissolve.
What is a partnership property?
Assets that belong to the partnership, which should be specified in the agreement.
