Partnerships and LLPs Flashcards
(268 cards)
1
Q
What legislation governs traditional partnerships?
A
Partnership Act 1890
2
Q
What defines a partnership simply?
A
relationship between persons carrying on a business in common with a view to making a profit
3
Q
Is a partnership a separate legal entity from its partners?
A
No
4
Q
How many persons are needed to form a partnership at least?
A
Two
5
Q
Does the Partnership Act 1890 distinguish between actual and legal persons?
A
No
6
Q
Is intention to form a partnership always required?
A
No
7
Q
What is prima facie evidence of a partnership but not necessarily conclusive?
A
profit sharing
8
Q
What makes the existence of a partnership more likely besides profit sharing?
A
agreement to share losses
9
Q
What else makes the existence of a partnership more likely besides profit and loss sharing?
A
participation in decision making
10
Q
Does a loan of money by one party to another create a partnership?
A
No
11
Q
What might make the existence of a partnership less likely regarding a person?
A
not being held out as a partner
12
Q
What determines if a partnership actually exists?
A
the facts
13
Q
What is a reason clients might want to avoid creating a partnership?
A
outdated default provisions of PA 1890
14
Q
What is another reason clients might want to avoid creating a partnership?
A
concerns about unlimited liability
15
Q
What is a cost advantage of creating a partnership?
A
no formality required
16
Q
What is a benefit regarding running a partnership compared to companies?
A
no filing or disclosure requirements
17
Q
What type of partnerships are common among lawyers and accountants?
A
professional partnerships
18
Q
What type of business structure might many businesses start as before becoming a company?
A
partnership
19
Q
What overriding duty exists in a partnership?
A
duty of good faith
20
Q
To whom is the duty owed by partners similar?
A
trustee to a beneficiary
21
Q
What duty requires honest and full disclosure among partners?
A
fiduciary duty
22
Q
What section of PA 1890 reflects the duty of honest and full disclosure?
A
Section 28
23
Q
What duty prohibits unauthorised personal profit by a partner?
A
fiduciary duty
24
Q
What section of PA 1890 reflects the duty regarding unauthorised personal profit?
A
Section 29(1)
25
What duty addresses conflict of duty and interest for partners?
fiduciary duty
26
What section of PA 1890 reflects the duty regarding conflict of duty and interest?
Section 30
27
Why are partners personally liable for partnership debts?
no separate legal personality
28
What type of liability do partners have for firm debts in contract?
joint
29
What type of liability do partners have in tort?
joint and several
30
What act states that judgment against some partners does not discharge others?
Civil Liability (Contribution) Act 1978
31
Is a new partner automatically liable for old partnership debts?
No
32
Does a retiring partner remain liable for debts incurred while a partner?
Yes
33
How can a retiring partner be relieved of existing liability?
novation with creditor consent
34
What notice is required for former partners to avoid liability for new debts to past dealers?
actual notice
35
Where can constructive notice of a partner's departure be published?
London Gazette
36
Is notice required for a former partner to avoid liability to those who did not know them?
No
37
Under what principle may a non-partner be liable for partnership debt?
holding out
38
What is the first element for holding out liability?
representation of partnership status to a third party
39
What is the second element for holding out liability?
third party giving credit to the firm
40
What is the third element for holding out liability?
third party believing the representation
41
Whose liability does Section 14 PA 1890 relate to?
non-partner
42
What common law principle establishes firm liability for a non-partner's acts?
agency
43
What is the special statutory rule of agency for partners in contracts?
Section 5 PA 1890
44
What law may also apply when Section 5 PA 1890 is not relevant?
common law of agency
45
What law applies when a non-partner enters a contract on behalf of the firm?
common law of agency
46
What kind of authority binds the firm if all partners agree to a contract?
actual express or implied
47
What can partners do if an agent lacked authority but they want to be bound?
ratify the act
48
Whose view counts when determining if an unauthorised act of a partner binds the firm under Section 5?
third party's
49
What are the two objective conditions for an unauthorised act of a partner to bind the firm under Section 5?
business of the kind carried on by the firm and in the usual way
50
When will a firm not be bound by a partner's unauthorised act under Section 5?
third party knew of no authority
51
When else will a firm not be bound by a partner's unauthorised act under Section 5?
third party did not know or believe the person was a partner
52
What authority may a non-partner have to bind the firm at common law?
apparent authority
53
What arises when the firm represents someone has authority to bind them?
apparent authority
54
What is it called when a firm represents a non-partner as a partner?
holding out
55
How is a partnership taxed regarding income and gains?
tax transparent
56
Who is liable for tax on their share of partnership income or gains?
each partner individually
57
Does a partnership itself pay tax?
No
58
What does HMRC require a partnership to submit?
single tax return of profits
59
What do partners also submit individually for tax purposes?
individual tax returns
60
Are partners liable for income tax on other partners' shares of profit?
No
61
How is a capital asset disposal by a partnership treated for tax?
each partner disposes of their fractional share
62
How is a partner's fractional share of a capital asset determined?
profit sharing ratio or equally if no ratio
63
Can a partnership be formed without specific intent?
Yes
64
Is a partnership a separate legal entity?
No
65
What type of liability do partners generally have in contract?
joint
66
What type of liability do partners generally have in tort?
joint and several
67
What section of PA 1890 applies when a contract is purportedly formed by a partner?
Section 5
68
What law applies if the person forming a contract is not a partner?
common law of agency
69
What characteristic of partnerships allows for business affairs confidentiality?
no filing or disclosure requirements
70
Who pays income tax and capital gains tax in a partnership?
the partners themselves
71
What type of provisions are most sections of the Partnership Act 1890?
fall-back
72
What varies partners mutual rights and obligations with unanimous consent?
agreement
73
Can unanimous consent to vary rights and obligations be inferred from conduct?
Yes
74
What does the Partnership Act 1890 contain for relations between partners without contrary agreement?
default code
75
Should most traditional partnerships have a formal written agreement?
Yes
76
What should a partnership agreement at minimum include regarding time?
commencement and duration
77
What should a partnership agreement specify about the business identity?
name and place
78
What should a partnership agreement define regarding possessions?
partnership property
79
What should a partnership agreement detail regarding finances?
capital profits and losses
80
What should a partnership agreement outline for partner income?
drawings or salary
81
What should a partnership agreement address for financial oversight?
accounts
82
What should a partnership agreement cover for ending the business?
dissolution
83
What should a partnership agreement define for partner responsibilities?
duties powers and restrictions
84
What should a partnership agreement specify about work expectations?
work input and roles
85
What should a partnership agreement define regarding authority limits?
limits on the authority of partners
86
What should a partnership agreement detail for internal governance?
partnership decision making
87
What should a partnership agreement address for new members?
incoming partners
88
What should a partnership agreement cover for departing members?
retirement or expulsion
89
What type of restrictions might a partnership agreement include?
non compete
90
Is the Partnership Act 1890 considered modern?
No
91
What date should a partnership agreement ideally set?
commencement date of rights and obligations
92
What applies if partners work together before the agreement commencement date?
default provisions of PA 1890
93
Can a partnership agreement have a fixed end date?
Yes
94
What is presumed if partners continue after a fixed term without a new agreement?
same terms as before
95
What words must a partnership name not include?
limited ltd LLP plc
96
What types of names are prohibited for partnerships?
offensive trademarked sensitive government connected
97
What should be set out besides the name?
place of business and nature of business
98
Who owns a share of partnership property?
each partner
99
Does an individual partner have a right to a specific partnership asset?
No
100
What should partners agree to minimise property disputes?
which assets are partnership property
101
What property is deemed partnership property under Section 20 PA 1890?
property brought into the partnership
102
What property is deemed partnership property under Section 21 PA 1890?
property bought with firm money
103
How are capital and profits shared by default under PA 1890?
equally
104
How are losses contributed to by default under PA 1890?
equally
105
What should an agreement expressly set out regarding profit distribution?
profit sharing ratio
106
What are partners entitled to take from income profits?
drawings
107
How are income profits shared in the absence of agreement?
equally
108
Is a partner entitled to a salary by default?
No
109
What must be expressly set out for partners to receive a salary?
agreement
110
Can every partner take part in management by default?
Yes
111
Is every partner required to take part in management by default?
No
112
What should a partnership agreement set out for each partner's contribution?
work requirements
113
What should be clearly defined regarding partner actions?
roles and authority limits
114
How are ordinary course of business decisions made by default?
majority
115
What decisions require unanimity by default?
changes to business nature introducing new partner varying rights
116
What consent is required for a new partner by default?
unanimous
117
Should an agreement expressly require written consent for new partners?
Yes
118
Can a partner be expelled by majority vote by default?
No
119
What must have been previously expressly agreed for majority expulsion?
majority can expel
120
What happens to a partnership if a partner leaves without agreement?
dissolved
121
What happens to a two partner firm if one leaves?
remaining becomes sole trader
122
What type of dissolution usually occurs when a partner leaves and the business continues?
technical
123
What can any partner demand after dissolution?
realisation of assets
124
What should an agreement state to prevent dissolution on retirement?
partnership continues
125
What should an agreement detail regarding a partner leaving?
how a partner can leave
126
What should an agreement include for a departing partner's share?
mechanism for buyout and valuation
127
What causes automatic dissolution if no fixed term is agreed?
any partner leaving
128
What does Section 30 PA 1890 imply regarding competition?
duty not to compete
129
Are there default clauses in PA 1890 restricting outgoing partners?
No
130
What type of clauses can limit outgoing partner competition?
non compete non solicit non dealing
131
What are clauses limiting outgoing partner competition known as?
restraint of trade
132
What are requirements for enforceable restraint of trade clauses?
reasonable duration area scope necessary for legitimate interest
133
What can cause automatic dissolution of a partnership?
expiry of fixed term completion of venture death bankruptcy
134
How can a partnership with no fixed duration be dissolved?
notice from any partner
135
What causes dissolution if the business becomes illegal?
unlawfulness
136
What is a last resort method of dissolving a partnership?
dissolution by the court
137
What happens to the partnership relationship upon dissolution?
ceases
138
What can any partner demand after dissolution?
assets are realised
139
How are remaining assets distributed after debts are paid by default?
original capital repaid first
140
What type of provision often deals with surplus asset distribution?
asset surplus ratio
141
How are surplus assets shared if there is no agreed ASR?
agreed profit share ratio
142
How are surplus assets shared if there is no PSR?
equally
143
Are partners strongly advised to have a written agreement?
Yes
144
What happens if there is no partnership agreement or it is silent?
PA 1890 default provisions apply
145
What are some matters covered by PA 1890 default provisions?
commencement duration property profit loss drawings salary decision making incoming partners expulsion retirement leaving effect dissolution asset distribution
146
What type of vehicle is a limited liability partnership?
hybrid
147
What two business structures does an LLP have elements of?
company and partnership
148
Is an LLP legally separate from its members?
Yes
149
What act governs limited liability partnerships?
Limited Liability Partnerships Act 2000
150
What advantage does an LLP offer members regarding liability?
limited liability
151
What is the legal status of an LLP?
body corporate
152
Who is liable for an LLPs own debts?
the LLP
153
With whom can an LLP contract?
third parties
154
Why was the LLPA enacted partly?
litigation growth affecting professional partnerships
155
What protection did traditional partnerships lack compared to limited liability corporations?
limited liability
156
What is a common use for LLPs besides professional partnerships?
joint ventures
157
What is another commercial use for LLPs?
investment schemes
158
What is a further commercial use for LLPs?
venture capital investments
159
What feature makes LLPs useful for investment structures?
tax transparent
160
What level of management participation do LLPs allow members?
high
161
What benefit does limited liability give LLP members?
protection from debts
162
Who increasingly uses LLPs for one-off projects?
property developers
163
What act are LLPs incorporated pursuant to?
Limited Liability Partnerships Act
164
What supplements the LLPA regarding insolvency and governance?
Limited Liability Partnerships Regulations 2001
165
What governs corporate law aspects of LLPs?
Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009
166
What act has provisions applied to LLPs in modified form since introduction?
Insolvency Act 1986
167
What other act has provisions applied to LLPs in modified form?
Company Directors Disqualification Act 1986
168
What recent act has resulted in changes to LLP legislation?
Economic Crime and Corporate Transparency Act 2023
169
How many persons are needed to incorporate an LLP?
two or more
170
What type of entity can be a person forming an LLP?
company or individual
171
What type of activity is required for an LLP?
commercial business
172
What form is filled out for LLP registration?
LL IN01
173
Where is the registration form sent?
Companies House
174
What fee is required for LLP registration?
relevant fee
175
What must the registration form state about the LLP name?
name
176
What must the registration form state about the registered location?
registered offices address
177
What must the registration form state about electronic contact?
registered email address
178
What must the registration form state about member responsibilities?
designated members
179
Who can challenge or reject inaccurate LLP registration information?
Companies House
180
What type of registered address is required since March 2024?
appropriate registered address
181
What has ECCTA increased control over regarding LLPs?
company names
182
Who cannot be a member of an LLP?
disqualified director
183
What personnel identification verification has ECCTA brought in for LLPs but is not yet in force?
identification verification
184
What does the Registrar of Companies issue upon registration?
certificate of incorporation
185
What is the certificate of incorporation conclusive evidence of?
legal requirements compliance
186
Where is the LLPs name entered?
index of company names
187
What is the LLPs identification number?
company number
188
What must LLPs continue to file with Companies House after registration?
change of name
189
What else must LLPs continue to file?
change of registered office and email
190
What further filings are required for LLPs?
changes in membership
191
What security interest filing is required for LLPs?
creation of a charge
192
What annual filing is required for LLPs?
annual confirmation statement
193
What financial reporting is required for LLPs?
accounts
194
What records must an LLP maintain in-house?
registers of its members
195
What other register must an LLP maintain in-house?
register of people with significant control
196
Who are the initial members of an LLP?
those who subscribed to incorporation document
197
How can someone become a member after incorporation?
agreement with existing members
198
Can corporate bodies be members of an LLP?
Yes
199
What is the minimum number of members an LLP must have?
two
200
Is there a limit on the maximum number of LLP members?
No
201
How many members must be designated members at least?
two
202
What is a responsibility of designated members?
signing the accounts
203
What is another obligation of designated members?
making filings at Companies House
204
What is a further duty of designated members?
acting on behalf of the LLP if wound up
205
Under what circumstances does a member cease to be a member?
death
206
What is another reason for membership cessation?
agreement with other members
207
What is a further reason for membership cessation?
giving notice
208
What is a final reason for membership cessation for a corporate member?
dissolution
209
What documents does an LLP not have like a company?
Memorandum or Articles of Association
210
Does the LLPA lay down a particular management structure?
No
211
What flexibility do LLPs have regarding management?
complete
212
What agreement is necessary in practice for LLPs regarding internal affairs?
LLP or Members Agreement
213
What type of document is the LLP Agreement?
private
214
What does the LLP Agreement set out?
formal procedures and arrangements
215
Are LLP members obliged to have a formal Members Agreement?
No
216
What contains default provisions in the absence of a Members Agreement?
2001 Regulations
217
How many default provisions are in the 2001 Regulations?
eleven
218
Does partnership law under PA 1890 fill gaps in LLP agreements?
No
219
What law is disapplied to LLPs by Section 1(5) LLPA?
PA 1890
220
How do members share capital and profits by default?
equally
221
What must an LLP do for members regarding business conduct payments and liabilities?
indemnify
222
Can every member take part in management by default?
Yes
223
Are members entitled to remuneration for managing by default?
No
224
What consent is needed for new members or membership assignment by default?
all existing members
225
How are ordinary decisions made by default?
majority of members
226
What requires all members consent by default?
change to nature of business
227
Where must LLP books and records be available for inspection?
registered office
228
What must each member give to other members regarding LLP affairs?
true accounts and full information
229
What must a member do if they compete with the LLP without consent?
account for profits
230
What duty does every member have regarding benefits from LLP transactions?
duty to account
231
Is there an implied power of expulsion by majority by default?
No
232
What is needed for expulsion by majority?
express provision in Members Agreement
233
How is an LLP treated for tax purposes?
as a partnership
234
How are individual members of an LLP taxed?
as individuals
235
What taxes might LLP members be liable for?
income tax or capital gains tax
236
What is the tax status of an LLP?
tax transparent
237
What tax do companies pay on their income profit?
corporation tax
238
What tax might company owners pay on dividends?
income tax
239
How is a business carried on by an LLP with a view to profit treated for tax?
carried on in partnership by members
240
Can LLP members get the same tax reliefs as traditional partners?
Yes
241
How are assets held by an LLP treated for capital gains tax?
held by members as partners
242
How is a disposal of an LLP asset treated by HMRC?
disposal by the members
243
What relief does the LLPA give for partnership incorporation as an LLP?
stamp duty relief
244
Is VAT registration done by the LLP or the members?
LLP
245
Does an LLP have separate legal personality?
Yes
246
Do LLP members generally have limited liability?
Yes
247
Do LLPs have to file accounts at Companies House?
Yes
248
Does this lead to a loss of financial privacy?
Yes
249
Can LLPs create a floating charge over assets?
Yes
250
Do some provisions of company and corporate insolvency law apply to LLPs?
Yes
251
Does an LLP have share capital?
No
252
Are there capital maintenance requirements for LLPs?
No
253
Is there a real distinction between members and the management board in an LLP?
No
254
Can members agree how to share profits and duties?
Yes
255
Is the Members Agreement like a private partnership agreement?
Yes
256
Are LLPs tax transparent?
Yes
257
Does the corporate insolvency regime apply to LLPs?
Yes
258
What rule applies to LLP members regarding money taken out before winding up?
clawback rule
259
What is the time limit for the clawback rule before winding up?
two years
260
What is the advantage of an LLP regarding legal status?
separate legal entity
261
Where must LLPs be incorporated and registered?
Companies House
262
Who are the equivalent of partners in an LLP?
members
263
Should clients consider drafting a Members Agreement for an LLP?
Yes
264
Can an LLP contract with third parties on its own behalf?
Yes
265
Who bears liability for an LLPs debts?
the LLP
266
What is a benefit of an LLP regarding taxation?
tax transparent
267
What does the LLP model allow for?
limited liability and tax transparency
268
For what type of firms is the LLP a very popular vehicle?
law firms and accountancy firms
