2020/2021 Updated
LPC Notes
Business Law & Practice –
(Distinction Grade)
,LPC Notes Business Law
& Practice
written by
excellentnotes
,
, Always Apply to the Facts, make a Company Diagram, and Give Advice/Conclude
Partnerships
Existence of a • Partnership is the relationship (s1):
Partnership o Between persons (2+);
o Carrying on a business in common
▪ ‘Business’ includes every trade, occupation or profession (s45)
▪ 2+ persons are not carrying on business in common if one of
those persons is the agent of the other.
o With a view to profit
▪ The receipt by a person of ‘a share of the profits of a business
is prima facie evidence that is a partner’ (s2(3))
• No formalities required, a partnership comes into existence if the above
elements are satisfied, even if a formal agreement doesn’t exist.
• Other ‘badges of partnership’ (p262)
o Partners are involved in making decisions that affect the business
o Partners share in gross profits and losses
o Partners have a right to examine the accounts
o Fiduciary relationship with other partners
o Having a ‘specific purpose’
o Being made ‘for a pre-determined period’
Although these aren’t strictly necessary they are indicative of a partnership.
Advantages and Advantages • Allows for commercial secrecy
disadvantages • Informal in nature, easy to set up
• Flexible – can make own arrangements/rules
• Tax relief for start-up losses can be claimed
Disadvantages • Can create fixed charges, but not floating
• Each partner is fully liable for all debts of the partnership
• Any partner may act in apparent authority and bind the firm
Partner’s duties The main duty is that of utmost good faith. This is codified in ss28-30 and is
and responsibilities characterised by partners having to:
• Divulge all relevant information regarding their business or relationship
(s28)
• Share all profits derived from the partnership
• Share all profits they make from a competing business carried on without
partner’s consent (s30)
• Bear their share of any losses made by the business (s24(1))
• As a firm, indemnifying fellow partners against bearing more than their
proportion of liability (s24(2))
Partnership Note, this can be altered by way of an express agreement between the partners. All
decision making decisions are made on a simple majority basis. Except in the following three instances
(under the PA1890) where there must be unanimity:
• Introducing a new partner (s24(7))
• Changing the nature of the business (s24(8))
• Varying the terms of the partnership agreement itself (s19)
o The consent here can be inferred by express agreement, or course
of dealing.
For more details see p261-263
Default ‘Partnership Agreement’ Provisions under the PA1890
The existence of a partnership agreement can vary the default rights and duties of partners found in the Act
(s19).
Definition of a s1 Partnership is a relationship:
partnership • Between persons (2+);
LPC Notes
Business Law & Practice –
(Distinction Grade)
,LPC Notes Business Law
& Practice
written by
excellentnotes
,
, Always Apply to the Facts, make a Company Diagram, and Give Advice/Conclude
Partnerships
Existence of a • Partnership is the relationship (s1):
Partnership o Between persons (2+);
o Carrying on a business in common
▪ ‘Business’ includes every trade, occupation or profession (s45)
▪ 2+ persons are not carrying on business in common if one of
those persons is the agent of the other.
o With a view to profit
▪ The receipt by a person of ‘a share of the profits of a business
is prima facie evidence that is a partner’ (s2(3))
• No formalities required, a partnership comes into existence if the above
elements are satisfied, even if a formal agreement doesn’t exist.
• Other ‘badges of partnership’ (p262)
o Partners are involved in making decisions that affect the business
o Partners share in gross profits and losses
o Partners have a right to examine the accounts
o Fiduciary relationship with other partners
o Having a ‘specific purpose’
o Being made ‘for a pre-determined period’
Although these aren’t strictly necessary they are indicative of a partnership.
Advantages and Advantages • Allows for commercial secrecy
disadvantages • Informal in nature, easy to set up
• Flexible – can make own arrangements/rules
• Tax relief for start-up losses can be claimed
Disadvantages • Can create fixed charges, but not floating
• Each partner is fully liable for all debts of the partnership
• Any partner may act in apparent authority and bind the firm
Partner’s duties The main duty is that of utmost good faith. This is codified in ss28-30 and is
and responsibilities characterised by partners having to:
• Divulge all relevant information regarding their business or relationship
(s28)
• Share all profits derived from the partnership
• Share all profits they make from a competing business carried on without
partner’s consent (s30)
• Bear their share of any losses made by the business (s24(1))
• As a firm, indemnifying fellow partners against bearing more than their
proportion of liability (s24(2))
Partnership Note, this can be altered by way of an express agreement between the partners. All
decision making decisions are made on a simple majority basis. Except in the following three instances
(under the PA1890) where there must be unanimity:
• Introducing a new partner (s24(7))
• Changing the nature of the business (s24(8))
• Varying the terms of the partnership agreement itself (s19)
o The consent here can be inferred by express agreement, or course
of dealing.
For more details see p261-263
Default ‘Partnership Agreement’ Provisions under the PA1890
The existence of a partnership agreement can vary the default rights and duties of partners found in the Act
(s19).
Definition of a s1 Partnership is a relationship:
partnership • Between persons (2+);
