Partnerships and Sole Traders - Info Flashcards
(15 cards)
What are the four main business structures in the UK?
Sole Trader, Partnership, Company, Limited Liability Partnership (LLP)
What percentage of UK businesses are sole traders?
Around 60% (according to Dept for Business, Energy & Industrial Strategy)
What is the key difference between incorporated and unincorporated businesses?
Incorporated businesses have a separate legal identity; unincorporated do not, exposing owners to unlimited liability.
What is a sole trader?
An unincorporated business run by one person who keeps all profits and bears all risks personally.
What tax does a sole trader pay?
Income tax on profits and VAT if turnover exceeds £90,000.
What defines a general partnership under the Partnership Act 1890?
A business carried on by two or more people with a view to profit.
Does a general partnership have to register formally?
No, but it must notify HMRC and keep tax records; registration is informal.
What is the liability of partners in a general partnership?
Unlimited, personal, and joint and several – each partner can be held responsible for the full debt.
What does ‘joint and several liability’ mean in partnerships?
Each partner is liable both together and individually for the entire debt.
Why is a written partnership agreement recommended?
To override default rules under the Partnership Act 1890 and clearly define roles, profit shares, and decision-making.
What are the key partner duties under the Partnership Act 1890?
Duty of disclosure (s.28), duty to account (s.29), and duty not to compete (s.30).
What happens if no partnership agreement is in place?
The default rules of the Partnership Act 1890 apply (e.g. equal profit share, majority decisions).
What must a business partnership name comply with?
Companies Act 2006 – must avoid restricted terms and display partner details on documents and premises.
What is a Limited Liability Partnership (LLP)?
A hybrid business type combining partnership flexibility with company-style limited liability, regulated under the LLP Act 2000.
