Partnerships (Business and organisational characteristics)-FS Flashcards
(8 cards)
What statutory definition governs partnerships in English law?
Section 1(1) of the Partnership Act 1890 defines a partnership as “the relation which subsists between persons carrying on a business in common with a view of profit.”
What is the minimum number of people required to form a partnership?
A minimum of two persons is required to form a partnership. A single person cannot create a partnership alone.
Is a partnership a separate legal entity from its partners?
No. A partnership is an unincorporated business structure, meaning it is not a separate legal entity from the partners. Business assets and liabilities are legally owned and owed by the partners personally.
What is the liability status of partners in a partnership?
Partners share personal liability for all the business’s debts and obligations. This includes joint liability for contracts and joint and several liability for torts.
How are profits and losses dealt with in a partnership?
Profits and losses are typically shared according to the terms of the partnership agreement. If no agreement exists, the default rules under the Partnership Act 1890 apply.
How is tax applied to profits earned in a partnership?
Each partner pays tax individually on their share of the profits. If the partner is an individual, they pay income tax; if the partner is a company, it pays corporation ta
What happens if partners do not create their own written partnership agreement?
If no separate agreement is made, the default provisions of the Partnership Act 1890 automatically govern the relationship between the partners.
Is it a legal requirement for a partnership to have silent partners?
No. There is no legal requirement to have silent partners in a partnership. Partners may be active or passive as determined by the partnership agreement.
