Business Law and Practice
Table of Contents
Business and organisational characteristics..............................................................................................1
Legal personality and limited liability.......................................................................................................4
Procedures and documentation required to incorporate a company/form a partnership/LLP....................5
Finance.....................................................................................................................................................7
Corporate governance and compliance:....................................................................................................9
Company Decision-Making and Meetings:..............................................................................................11
Partnership decision-making and authority of partners:.........................................................................14
Corporate Insolvency..............................................................................................................................15
Personal Insolvency................................................................................................................................17
Income Tax:............................................................................................................................................19
Capital Gains Tax:...................................................................................................................................21
Corporation Tax:.....................................................................................................................................23
Value Added Tax:....................................................................................................................................26
Inheritance Tax:......................................................................................................................................27
Business and organisational characteristics
Traditional Partnership
Preliminaries
1. Two or more persons
2. Carrying on a business in common
3. With the intention to make profit
- Persons can mean companies as well as individuals
- If there is no intention to make a profit, there is no partnership, however a partnership exists if there is
intention to make a profit and there has in fact been a loss
- No requirement for a written partnership agreement, however it is good practice to have one
- No filing requirements at Companies’ House
- If the requirements are met, there is prima facie evidence of a partnership even if the partners did not
expressly intend to form a partnership; however, this presumption does not apply if the ‘profits’
intended are:
o Repayment of a debt
o Payment to an employee or agent
o Annuity to a survivor of a partner on account of a share of profits or sale of the business
- Agreement to share losses is not prima facie evidence of a partnership, nor is two people owning
property even if they agree to share profits
- Partners are not required to make financial contributions to the partnership
- No limit to the amount of partners
Partners’ Liability
- Partners are jointly but not severally liable for partnership debts and torts
o Creditors can pursue any combination of the partners for partnership debts
- Incoming partners will not be liable to creditors for anything done before they became a partner
,- Outgoing partners will remain liable for any debts or obligations incurred before they leave the
partnership
- Third parties can treat all members as partners until they receive notice of the change of partnership
o Actual notice should be given to existing creditors and a notice should be published in the London
Gazette
- Anyone stating they are a partner (even if they are not) may be held liable to creditors as if they were a
partner
Partnership Property
- Property belonging to a partner individually will remain their property after dissolution of the
partnership
- Property given to the partnership by the partner becomes partnership property and constitutes a
capital contribution
o Each partner can keep track of their contributions, profits and losses
- Determining if property belongs to the partner or firm will depend on intention
- Partnership property can only be used for the purposes of the partnership
- Creditors pursuing an individual partner cannot seize partnership assets for the separate debt, but can
require the court to make an order charging the partners’ interest in the firm
o Creditor can then seize any distributions which are due to the partner
Partners’ Management Power and Duties
- Every partner has an equal right to manage the firm, in the absence of contrary agreement
- Most decisions are made by simple majority, but unanimous vote is required for:
o Admission of a new partner
o Change in the nature of the partnership business
o Alteration to the partnership agreement
- Partners have a fiduciary duty to one another and a duty to disclose all information on all things
affecting the partnership
- Partners must account for any profit obtained without consent of the other partners
- Partners carrying on business in competition with the partnership must account for profits made in that
business
Termination of a Partnership
- Termination of a partnership can happen:
o If the partnership agreement provides for termination, on the date laid out
o If a partner gives notice of their intention to dissolve the partnership
o Upon death or bankruptcy of any single partner
o If something makes is unlawful for the partnership to continue
o Where the court decides a partner no longer has mental capacity to continue in the partnership
- Partners can apply for the court to dissolve a partnership if:
o A partner becomes permanently incapable of performing their obligations in the partnership
o A partner is guilty of conduct that would prejudicially affect carrying on the business
o A partner wilfully or persistently breaches the partnership agreement
o The partnership is carried on only at a loss
o It is just and equitable to do so
- After dissolution, authority and other rights and obligations continue in order to permit winding up and
complete unfinished transactions
- Partnership assets will pay off partnership debts after dissolution
o If the amount remaining is insufficient, the partners will personally pay the creditors
, Limited Liability Partnership
Membership and Companies House
- Without a partnership agreement, LLPA will govern the LLP
- Has a separate legal personality from its members
o Can contract and own property on its own behalf
o Has perpetual succession
- If there are less than 2 partners for a period of 6 months, any business carried out after the 6 month
period will leave the remaining member fully liable for all debts incurred after the initial 6 months
- Admitting a new partner will require unanimous consent
- Designated members must:
o Appoint auditors
o Submit annual confirmation statement
o Sign and file accounts
o Comply with statutory filing requirements
- If an LLP has no designated members, all members will be treated as designated
- Companies House must be notified of any changes to membership within 14 days
- All members are agents of the LLP and owe a duty of care to the LLP
o All members can bind the LLP in a contract and make it liable
- LLPS are not bound by a member if they act without authority and the person dealing with the member
knows they have no authority
- Members can retire by giving reasonable notice to the other members and to Companies House within
14 days of retirement
- PSC is defined as a person or entity who holds rights to:
o More than 25% of surplus assets on a winding up
o More than 25% of the voting rights
o Appointment or removal of the majority of those entitled to take part in management
o Exercise of significant influence or control
- Members have the right to share equally in capital and profits but are not entitled to remuneration for
acting in the business or management
- The LLP must indemnify each member for payments and personal liabilities incurred in connection with
the business of the LLP
- Members can access and inspect the books and records at any time
- Every member can manage the LLP and decide ordinary matters, but changes to the nature of the
business of the LLP must be made with consent of all members
- If a member carries on business in competition with the LLP without consent, they must account for all
profits and personal benefits
- Members are not liable for wrongful acts or omission of other members, but the LLP is liable to the
extent of such members
Liability of Members
- Members are not liable for LLP debts owed to creditors and are only liable to the extent of their capital
contribution
- Members who act wrongfully or trade fraudulently can be held personally liable for LLP debts upon
insolvency
- Clawback provisions exist for LLPs
Termination of LLPs
- If members decide the LLP is no longer needed or is dormant, a majority can apply to Companies House
for the LLP to be struck off the register and dissolved
- Companies House can strike of an LLP if it believes it is not carrying on business
- LLPs cannot be struck off if:
o It carried on business in the last 3 months
Table of Contents
Business and organisational characteristics..............................................................................................1
Legal personality and limited liability.......................................................................................................4
Procedures and documentation required to incorporate a company/form a partnership/LLP....................5
Finance.....................................................................................................................................................7
Corporate governance and compliance:....................................................................................................9
Company Decision-Making and Meetings:..............................................................................................11
Partnership decision-making and authority of partners:.........................................................................14
Corporate Insolvency..............................................................................................................................15
Personal Insolvency................................................................................................................................17
Income Tax:............................................................................................................................................19
Capital Gains Tax:...................................................................................................................................21
Corporation Tax:.....................................................................................................................................23
Value Added Tax:....................................................................................................................................26
Inheritance Tax:......................................................................................................................................27
Business and organisational characteristics
Traditional Partnership
Preliminaries
1. Two or more persons
2. Carrying on a business in common
3. With the intention to make profit
- Persons can mean companies as well as individuals
- If there is no intention to make a profit, there is no partnership, however a partnership exists if there is
intention to make a profit and there has in fact been a loss
- No requirement for a written partnership agreement, however it is good practice to have one
- No filing requirements at Companies’ House
- If the requirements are met, there is prima facie evidence of a partnership even if the partners did not
expressly intend to form a partnership; however, this presumption does not apply if the ‘profits’
intended are:
o Repayment of a debt
o Payment to an employee or agent
o Annuity to a survivor of a partner on account of a share of profits or sale of the business
- Agreement to share losses is not prima facie evidence of a partnership, nor is two people owning
property even if they agree to share profits
- Partners are not required to make financial contributions to the partnership
- No limit to the amount of partners
Partners’ Liability
- Partners are jointly but not severally liable for partnership debts and torts
o Creditors can pursue any combination of the partners for partnership debts
- Incoming partners will not be liable to creditors for anything done before they became a partner
,- Outgoing partners will remain liable for any debts or obligations incurred before they leave the
partnership
- Third parties can treat all members as partners until they receive notice of the change of partnership
o Actual notice should be given to existing creditors and a notice should be published in the London
Gazette
- Anyone stating they are a partner (even if they are not) may be held liable to creditors as if they were a
partner
Partnership Property
- Property belonging to a partner individually will remain their property after dissolution of the
partnership
- Property given to the partnership by the partner becomes partnership property and constitutes a
capital contribution
o Each partner can keep track of their contributions, profits and losses
- Determining if property belongs to the partner or firm will depend on intention
- Partnership property can only be used for the purposes of the partnership
- Creditors pursuing an individual partner cannot seize partnership assets for the separate debt, but can
require the court to make an order charging the partners’ interest in the firm
o Creditor can then seize any distributions which are due to the partner
Partners’ Management Power and Duties
- Every partner has an equal right to manage the firm, in the absence of contrary agreement
- Most decisions are made by simple majority, but unanimous vote is required for:
o Admission of a new partner
o Change in the nature of the partnership business
o Alteration to the partnership agreement
- Partners have a fiduciary duty to one another and a duty to disclose all information on all things
affecting the partnership
- Partners must account for any profit obtained without consent of the other partners
- Partners carrying on business in competition with the partnership must account for profits made in that
business
Termination of a Partnership
- Termination of a partnership can happen:
o If the partnership agreement provides for termination, on the date laid out
o If a partner gives notice of their intention to dissolve the partnership
o Upon death or bankruptcy of any single partner
o If something makes is unlawful for the partnership to continue
o Where the court decides a partner no longer has mental capacity to continue in the partnership
- Partners can apply for the court to dissolve a partnership if:
o A partner becomes permanently incapable of performing their obligations in the partnership
o A partner is guilty of conduct that would prejudicially affect carrying on the business
o A partner wilfully or persistently breaches the partnership agreement
o The partnership is carried on only at a loss
o It is just and equitable to do so
- After dissolution, authority and other rights and obligations continue in order to permit winding up and
complete unfinished transactions
- Partnership assets will pay off partnership debts after dissolution
o If the amount remaining is insufficient, the partners will personally pay the creditors
, Limited Liability Partnership
Membership and Companies House
- Without a partnership agreement, LLPA will govern the LLP
- Has a separate legal personality from its members
o Can contract and own property on its own behalf
o Has perpetual succession
- If there are less than 2 partners for a period of 6 months, any business carried out after the 6 month
period will leave the remaining member fully liable for all debts incurred after the initial 6 months
- Admitting a new partner will require unanimous consent
- Designated members must:
o Appoint auditors
o Submit annual confirmation statement
o Sign and file accounts
o Comply with statutory filing requirements
- If an LLP has no designated members, all members will be treated as designated
- Companies House must be notified of any changes to membership within 14 days
- All members are agents of the LLP and owe a duty of care to the LLP
o All members can bind the LLP in a contract and make it liable
- LLPS are not bound by a member if they act without authority and the person dealing with the member
knows they have no authority
- Members can retire by giving reasonable notice to the other members and to Companies House within
14 days of retirement
- PSC is defined as a person or entity who holds rights to:
o More than 25% of surplus assets on a winding up
o More than 25% of the voting rights
o Appointment or removal of the majority of those entitled to take part in management
o Exercise of significant influence or control
- Members have the right to share equally in capital and profits but are not entitled to remuneration for
acting in the business or management
- The LLP must indemnify each member for payments and personal liabilities incurred in connection with
the business of the LLP
- Members can access and inspect the books and records at any time
- Every member can manage the LLP and decide ordinary matters, but changes to the nature of the
business of the LLP must be made with consent of all members
- If a member carries on business in competition with the LLP without consent, they must account for all
profits and personal benefits
- Members are not liable for wrongful acts or omission of other members, but the LLP is liable to the
extent of such members
Liability of Members
- Members are not liable for LLP debts owed to creditors and are only liable to the extent of their capital
contribution
- Members who act wrongfully or trade fraudulently can be held personally liable for LLP debts upon
insolvency
- Clawback provisions exist for LLPs
Termination of LLPs
- If members decide the LLP is no longer needed or is dormant, a majority can apply to Companies House
for the LLP to be struck off the register and dissolved
- Companies House can strike of an LLP if it believes it is not carrying on business
- LLPs cannot be struck off if:
o It carried on business in the last 3 months
