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Summary LPC notes on Partnership
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Detailed Notes on Partnership Workshop 1- LPC full time
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Partnership ConsolidationWhat is a partnership?
A partnership arises where two or more persons agree that they will run a business
together and actually do so. The term partnership therefore describes no more than a
business relationship based on an agreement (i.e. contract). This can be orally or in
writing, or implied by conduct.
This is in s1 of PA 1890- ‘partnership is the relation which subsists between persons
carrying on a business in common with a view of profit.’
E.g. Khan v Miah (2000) 1 WLR 2123 where a partnership commenced even
though the restaurant had not opened.
Young v Zahid (2006) EWCA Civ 613
There must be more than an agreement or setting up a partnership form a partnership
(Ilott v Williams & Others (2013) EWCA Civ 645). There must be ‘carrying on a business
in common’ meaning two or more persons share responsibility and decisions that would
effect it, so two or more proprietors. A partnership is not a separate legal existence.
A partnership can be created;
a) For a specific purpose or for a pre-determined period of time or
b) So as to continue without reference or duration- a partnership ‘at will.’
In order to identify a particular relationship as a partnership there are fundamental
characteristics;
a) The right to be involved in making decisions
b) Right to share profits
c) To examine the accounts of a business
d) To insist on openness and honestly from fellow partners
e) To veto the introduction of a new partner
f) The responsibility for sharing any losses of the business
, SETTING UP
There is no necessary formality, however a written agreement may be best- as
evidence and for the partners to refer to. E.g. Ham v Ham & Another (2013) EWCA Civ
1301 the CoA criticized the poor drafting.
FORMATLIES BY STATUE
ss.1192-1206 of the CA 2006 apply-
Ss193-4 there are controls over the choice of partnership name
To reveal names and business address of partners s.1201.
These controls and requirements will not apply if the name and business is the same.
However, if the act does apply the business name will require the written approval of
SoS for business, innovation and skills. Will also have to notify the HMRC of the identity
of partners.
JOINT VENTURES- This maybe more suitable for a group to engage in a business
venture as the informal nature and also two or more companies which wish to combine
forces.
PARTNERSHIP AGREEMENT
COMMENCEMENT DATE
The existence of a partnership is established when s.1 PA 1890 is satisfied, so it
is desirable to specify a date when the duties are taking effect.
NAME
Should be stated.
FINANCIAL INPUT-
The agreement should state how much capital each partner is contributing and
possibly, deal with the question of future increases in contributions, if increases
are anticipated.
SHARES IN INCOME PROFITS/LOSSES
Partners may be content to share income profits the business equally.
Salary- can be differing fixed amounts depending on circumstances.
Interest- (at a specified rate) might be allowed on partners capital
contribution.
Profit sharing- a suitable ratio
DRAWINGS-
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