Partnerships

Question 1

If there is a partnership agreement, which 3 decisions can only be made unanimously?

Answer 1

1. Changing nature of business
2. Introducing a new partner
3. Changing the terms of the partnership agreement

Question 2

Distribution of proceeds of sale in a partnership

Answer 2

1. Firstly, creditors of the firm must be paid in full.
2. Secondly, partners who have lent money to the firm must be repaid the amount outstanding plus interest.
3. Thirdly, partners must be paid the share of the partnerships capital to which they are entitled.
4. Any surplus is shared between the partnerships capital within the terms of their agreement.

Question 3

Restraint of trade clause

Answer 3

Seeks to restrict out going partners in their business dealings once they have left the partnership.

E.g. prevents a former partner from competing with the business.

Question 4

Will a firm be held liable to third parties, if a partner has acted with apparent authority?

Answer 4

They will be liable if:
1. Transaction relates to the business.
2. Transaction where a partner would have expected to have authority.
3. Third party was unaware that they did not have authority.
4. Third party knows or believes that the person was a partner.

Question 5

Novation agreements

Answer 5

A retiring partner will be released from an existing debt

Question 6

What must you do when leaving the partnership

Answer 6

1. Give actual notice to the firm directly.
2. If you have existing contracts with the firm, they must also be notified - place a notice in the Gazette.
3. No notice is required in relation to death/bankruptcy.

Question 7

‘Holding out’

Answer 7

When a creditor of a partnership has relied on a representation that a particular person was a partner in the firm (when they were not), they may be able to hold that person liable for the firms debt.

Question 8

Application for LLP

Answer 8

Fill form LL INO1 at companies house along with the application fee.

Question 9

What are designated members of an LLP responsible for?

Answer 9

1. Signing and filing annual accounts with the registrar.
2. Appointing and removing auditors.
3. Filing the annual confirmation statement.
4. Sending notices to the registrar of companies e.g. a member leaving/joining.
5. Winding up the LLP

Question 10

How much notice must you give when a new member joins an LLP?

Answer 10

Must give notice to the registrar of companies within 14 days of appointment.

Question 11

How are LLPs structured?

Answer 11

Free to structure it however they want.
There is no distinction between a member and a director.
Members cannot be expelled unless stated in the LLP agreement.