Partnerships

Partnerships

types of partnership
1. general partnership
  1. Partnership Act 1890
    1. relationship existing between persons carrying on a business in common with a view of profit
      1. default form of partnership
  2. the following don't create a partnership
    1. joint ownership of property
    2. sharing of gross returns
    3. sharing of expenses
  3. begins as soon as business activity has started
  4. partnership agreement is a contract
    1. may be made before or after beginning of business activity
      1. partners are contractually bound by the terms they have agreed, even if they conflict with PA 1890
    2. may be express or implied
  5. can only create fixed charges
  6. is a private business, no disclosure of results required
2. Limited partnership
  1. Limited Partnership Act 1907
  2. partnership in which liability of one or more partners is limited to the amount of capital they've contributed
    1. must be registered with the Registrar of Companies as LP
    2. must have at least one partner with unlimited liability
    3. limited partners MAY NOT participate in management, otherwise they are not limited
    4. limited partners have no power to bind the firm to contracts, i.e. they are not agents
3. limited liability partnership
  1. Limited Liability Partnerships Act 2000
  2. artificial legal entity with perpetual succession
    1. can hold property in its own right
    2. can enter into contracts in its own name
    3. can create floating charges
    4. can sue and be sued
    5. separate legal personality
  3. liability of members
    1. limited to the amount of capital they agreed to contribute
      1. no reqs for contribution amount; any contribution may be withdrawn at any time
        in case of liquidation, court may order members to repay any drawings made in last 2 years
  4. must file annual accounts and annual report with Companies House
  5. name must end with LLP
  6. members pay income tax, not corporation tax
  7. created by registration
    1. must be registered with Registrar
      1. sends Incorporation document and Declaration of compliance
        minimum 2 members first, later join by agrmnt w/existing
        membership agrmt sets out rights and duties
        each is an agent
        Inc doc names designated members
        responsible for filing and administrative functions
        must be at least 2
        if none named, all are
      2. Registrar issues certificate of incorporation
types of partners
1. general partner
  1. actively involved in the day-to-day business
2. sleeping partner
  1. takes no active part in the running of business; is nonetheless is jointly and severably liable for the debts
3. limited partner in a limited partnership
  1. cannot take part in management; contributes a specific amount to capital and is liable within that amount
4. salaried partner
  1. will receive a fixed amount in income
    1. not a real partner unless also entitled to share in profits
    2. can run the business
no upper limit exist on the amount of partners
in other countries
1. civil law
  1. société en nom collectif (SNC)
    1. type of limited partnership
    2. has corporate personality
    3. partners are responsible for the debts in full
    4. managers (gerants) may also be responsible
      1. partners are gerants
    5. there must be at least two partners
    6. decisions requiring unanimity
      1. shares transfer
      2. partner removal
      3. cision to cease trading
  2. société en commandite simple (SCS)
    1. similar to limited partnership in UK
      1. some partners have limited liability
2. sharia law
  1. Shirkah
    1. Shirkat-ul-milk
      1. owning of property by two or more persons
    2. Shirkat-ul-'aqd
      1. joint commercial enterprise
        Shirkat-ul-A'mal = Musharakah
        partners are agents of each other
        profits are distributed according to percentage set in agreement
        no agreement - no Musharakah
        losses are shared according to share in capital
        liability is unlimited
        all partners contribute to capital
        Mudarabah
        one party has finance - Rabb-ul-Maal
        may not take part in management
        other party can manage - Mudarib
        not entitled to salary
        profits shared acc to agreement
        if no agreement - shared equally
        only Rabb-ul-Maal is liable to the extent of his investment
liability
1. Firm is liable for the contracts made by partner if he was acting within his actual or implied authority
2. Firm is not bound by implied authority of a partner if
  1. 3rd party knows the partner has no actual authority
  2. partner has no actual authority and 3rd party does not believe him to be a partner
3. tort
  1. partners are jointly and severably liable to person who suffered tort
4. holding out
  1. person who represents himself as partner is liable as partner to anyone who thereby gives credit to the firm
5. new partners
  1. not personally liable for debts incurred before they became partners
6. retiring partner
  1. remains liable for debts incurred while he was a partner
    1. if no notice of retirement is given - he is still held out as partner
      1. notice
        for existing customers - actual notice
        other 3rd parties - constructive notice in the London Gazette
7. novation
  1. creditor agrees with the outgoing, continuing and incoming partners that liability of existing debt will be that of continuing and incoming partners
authority
1. express
  1. set out in Partnership Agreement
2. implied
  1. set out in s5 PA 1890
    1. specific for trading partnership
      1. borrow money
    2. for trading and non-trading partnerships
      1. each partner is agent to firm and other partners
      2. sell the firm's goods
      3. buy necessary goods
      4. receive payments of debt due to firm
      5. engage employees
      6. employ a solicitor
dissolution
1. w/o court order
  1. expiry of fixed term
  2. completion of a specific enterprise
  3. notice given by one of the partners
  4. death or bankruptcy of a partner
  5. where continuation of p'ship would be illegal
2. by court order
  1. partner has mental disorder or permanent incapacity
  2. partner engages in activity prejudicial to the business
  3. partner willfully or persistently breaches the p'ship agrmnt
  4. partner conducts himself in a way that it's no longer reasonably practical to carry on in business with him
  5. business can only be carried on at a loss
  6. it is just and equitable to do so
3. distribution of assets
  1. assets will be used to pay off debts
    1. if the proceeds don't cover the debts, partners' personal wealth will be used
    2. then profits held back from previous years and partners' capital will be used
  2. 1. pay off debts to outsiders
  3. 2. pay out any advance that partners made (i.e. a loan)
  4. 3. pay the capital contribution of partners
  5. 4. the rest is divided between partners in the same proportion profits are usually divided

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