Concise BLP study guide/revision notes covering all content you would need to achieve a high Distinction grade (except procedure plans, tax and business accounts - see other notes); I achieved 91% using these notes.
The notes were written for the course using BPP answer guides and from SGSs/lec...
Notes created using BPP materials and statute for the purpose of assisting existing BPP LPC students in BPP LPC exams only. They are
intended to be used as a supplemental tool to aid revision in conjunction with BPP materials, not as a replacement for them.
SETTING UP A BUSINESS
CHOICE OF BUSINESS MEDIA
Sole trader Partnership LLP Companies Limited
by shares
Legislation No specific leg PA 1890 LLPA 2000 CA 2006
Subject to Followed by LLP
commercial/tax Regulations:
leg, accounting • LLP Regs 2001
rules and • LLP (Accounts &
common law Audit)
(Application of CA
2006) Regs 2008
• LLP (App of CA
2006) Regs 2009
No persons 1 2 2 1 – s7(1) CA
needed
Control and ST has complete Re PA, but if no LLPA and regs leave Director and
management control agreement then matters to LLP shareholder meetings
default agreement if one held re CA 2006 and
provisions in PA exists articles
1890 apply
Liability Unlimited Unlimited Limited to the Shareholders’ liability
personal liability personal liability amount they have is limited to the
agreed to pay under amount, if any,
the agreements terms unpaid on their
shares – s3(2) CA
Legal status No separate legal No separate legal Separate legal entity Separate legal entity –
entity identity BUT members taxed company may own
as partners on their property/enter
share of income contracts/be sued
Expenses when No incorp costs None necessary, Reg free + Incorp doc Higher set up costs –
setting up but Partnership Legal fees for setting legal costs re
Agreement up LLP Agreement constitutional docs +
useful Printing of LLP incorp fees due to CH
stationery
,BLP
On-going None, but None, but 2008 Regs: accounts Accounts prepared
expenses accountants may accountants may must be prepared annually
be involved to be involved to annually. High admin costs due
help help Most LLPs that do not to greater reg and
qualify as ‘small’ disclosure
must file audited
accounts.
SBEEA 2015: file a
Confirmation
Statement annually
Higher costs due to
reg and disclosure
rules
Finance Can only borrow Can only borrow Borrow Borrow
Create floating Create floating
charges charges
If any financing is If any financing is
underwritten by a underwritten by a
member’s personal member’s personal
guarantee, this guarantee, this
removes the safety of removes the safety of
limited liability limited liability
Issue shares
Publicity Fewer req, easy Few req Must disclose Must disclose to
to maintain No disclosure req 1. Reg office Registrar:
privacy 2. Details of 1. S86 CA: Reg office
members 2. S441 CA:
3. Details of accounts
‘designated 3. Info on directors
members’ and members –
4. PSC Register SBEEA 2015:
5. Certain Companies can
invoices/payment keep reg at CH
practices 4. PSC Register
5. Certain
invoices/payment
practices
2
,BLP
PARTNERSHIP
S1 PA Partnership = persons carrying on business with view of profit
No separate legal personality, therefore:
• Need at least 2 persons
• A company can be a partner
• S1(1) PA: No need for intention (to form partnership) so clients often for advice re avoiding creating a
partnership
S2(3): profit sharing is prima facie evidence of a partnership
• No formality required
• Can be v cheap to set up
• Cannot create charges over a partnership’s assets
Partnership agreement
NO need for partnership agreement or deed
As partnerships can be created unintentionally
In the absence of a partnership deed, ss24-25 PA 1890 provides default provisions:
• S24(1): Profit sharing ratio – partners share equally even if not contributed equally
• S24(6): No salary to partners
• S24(8): Decisions made by simple majority
• S25: Cannot expel a partner without a Partnership Agreement
o To remove a partner, ALL partners must agree, including the 1 to be removed – unlikely to occur!
o Can only agree by majority if you agree to this formality at the start of the partnership
NB s19: Partners’ mutual rights and obligations can be carried at any time by unanimous consent
Partnership agreement should cover:
• How to vary the agreement
• Initial investments eg which property belongs to whom
• Process in order to add/remove partners
Agency
s5 PA Partners are agents of the firm and will bind the firm/other partners
s6 PA Firm bound by actions of anyone authorised to act on firm’s behalf
s30 All partners share a fiduciary rel and have a duty not to compete with the firm by conducting similar
business without other partners’ permission
Property
Each partner owns a share in partnership property
Individual partners do not have rights to partnership assets
3
, BLP
Tax
HMRC requires a tax return for the partnership
BUT, partnership is transparent as to tax so each partner taxed individually on share of profit received
Normal capital gains tax on disposal of a capital asset by a partnership
Liability
Each partner is personally liable
S9 Joint liability in contract
S10/12 Joint and several liability in tort
S17(1) New partner will not automatically be liable re debts incurred by the partnership before he joined
S17(2) Partner still liable after he retired re debts incurred by partnership whilst he was partner
S17(3) Unless: Creditor agrees
Specifically absolve them
Novate the contract
A non-partner may be personally liable on a partnership debt if he has held himself out as a partner, where:
• Rep made to a 3rd party to the effect that a person is a partner
• 3rd party’s action in response
• 3rd party’s state of mind
Dissolution/Termination
In the absence of a partnership deed, governed by PA:
S32(a) and (b) Automatic dissolution:
o Expiry of fixed term
o S33: death/bankruptcy of partner
o S34: partnership business becomes unlawful
Ss26 and 32(c) Dissolution at will by notice from any partner
Leaving a partnership will dissolve the partnership unless provision in agreement
Even if 10 partners and 1 leaves, original P will dissolve and new P will be formed with the remaining 9
Winding up
S44(b)(3) Assets left will be distributed so that each partner is paid back their original capital investment
Partnership Agreements usually have a provision dealing with prop in which any surplus assets are shared -
Asset surplus ratio
S44(b)(4) If no agreed ASR, surplus assets are shared re agreed profit sharing ratio
S24(1) If no PSR, shared equally
4
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller GDLandLPC. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £7.49. You're not tied to anything after your purchase.
