General Partnerships and Limited Liability Partnerships (LLP)

These vocabulary flashcards cover the key legal definitions, statutory references from the Partnership Act 1890 and Limited Liability Partnerships Act 2000, and administrative procedures for forming and managing partnerships and LLPs as outlined in the SQE1 syllabus.

Partnership (s 1 PA 1890)

According to the Partnership Act 1890, this exists when two or more persons are carrying on a business in common with a view of profit.

Partnership Agreement

A contract between partners that overrides the default provisions of the Partnership Act 1890; it can be written, oral, or implied by conduct.

Section 2 PA 1890 Guidelines

Rules used to determine the existence of a partnership, noting that sharing gross returns or receipt of profit share is evidence but not conclusive proof of a partnership.

Section 24 PA 1890

The default provision stating that partners share equally in the capital and profits of the business and must share losses equally.

Capital Profits

One-off gains, such as an office building increasing in value, which are shared equally by default under the PA 1890.

Income Profits

Recurring profits, such as trading profit or rent received, which are shared equally by default under the PA 1890.

Drawings

The money taken out of the business by partners from the income profits, as partners are owners rather than employees.

Expulsion (s 25 PA 1890)

The rule that no majority of partners may expel another partner unless a power to do so has been conferred by express agreement between the partners.

Partnership at Will

A partnership that continues indefinitely until a partner ends it with immediate effect by giving notice, with no requirement for the notice to be in writing unless the agreement is a deed.

Partial Dissolution

A situation where the partnership is technically dissolved due to a partner leaving, but the remaining partners continue the business seamlessly.

Section 39 PA 1890

The provision that allows an outgoing partner to insist on the partnership business being sold to receive their share, unless otherwise agreed.

Goodwill

The reputation of a business and the value of its clients and contacts, often valued at two years' profit when a business is sold as a going concern.

Section 44 PA 1890

The rule setting the order of distribution for proceeds of sale: first to creditors, then repayment of partner loans/interest, then partner capital, and finally surplus.

Actual Authority

The power of a partner to bind the firm when they act with express permission or implied permission based on the ordinary course of business.

Apparent Authority (s 5 PA 1890)

When a firm is liable for a partner’s unauthorized actions because the transaction relates to the firm's kind of business and the third party believes the person is a partner with authority.

Joint and Several Liability

A legal principle meaning a claimant can sue any or all partners for the total damages of a partnership debt, and the defendants must seek contributions from one another.

Novation Agreement

A contract where a creditor and the partners agree to release a retiring partner from an existing debt and substitute the liability with the newly constituted firm.

Section 36 PA 1890

The notice requirement for a retiring partner to escape liability for future debts: actual notice to existing contacts and a notice in the London Gazette for the 'whole world'.

Holding Out (s 14 PA 1890)

A situation where a person is held liable for a firm's debt because they represented themselves, or allowed themselves to be represented, as a partner to a creditor.

Limited Liability Partnership (LLP)

A corporate body with a separate legal identity from its members, introduced by the Limited Liability Partnerships Act 2000, offering limited liability for debts.

Designated Members

Members of an LLP (at least two required) who are responsible for administrative duties such as filing annual accounts and confirmation statements at Companies House.

LLP Regulations 2001

The secondary legislation providing a default contract for LLPs in the absence of a formal written LLP agreement.

Fixed and Floating Charges

Security interests that an LLP can grant over its assets, whereas a general partnership is restricted to granting only fixed charges.

Form LL IN01

The document required to be filed at Companies House, along with a fee, to incorporate a Limited Liability Partnership.

Appropriate Email Address

A requirement under ECCTA 2023 for LLPs to provide an address where emails from the registrar would come to the attention of a person acting for the LLP.