Business Structures

Business structure with no formalities for creation

Sole Trader and General Partnership

Business structure with unlimited personal liability

Sole trader
General partnership
General partner in a limited partnership

Business structure(s) which allows for limited liability

Partners in an LLP

Shareholders in a limited company

Limited partners in a limited partnership

Business structure(s) which allows transfer of ownership via unanimous consent

General partnership

Limited partnership

LLP

Business sturcture(s) paying income tax

Sole trader

General partnership

Limited partnership

LLP

Business structure paying corporation tax

Limited company

Business structure with no legal requirement to keep record or publish accounts

Sole traders

General practice

Business structure that must file records but not always accounts at Companies House

Limited partnership

Business structure that must file records and accounts at Companies House

LLP

Limited company

General partnership definition

Two or more people (can include a company)

carrying on a business in common

with intention to making a profit (does not actually need to make profit)

What is actual authority?

Firm will be bound by any act which is done in a way of showing intention to bind the firm, by any person actually authorised to undertake this act.

What is implied (actual) authority?

Where a partner is allowed to act on behalf of the partnership without explicit permission, based on the nature of the partnership's business.

What is apparent (ostensible) authority?

The act of a partner carrying on business in the usual way and of the kind carried on by the firm. This authority binds the firm to third parties who reasonably believe the partner has the authority to act.

Usual business test is objective: what would a reasonable third party think?

What is the liability of incoming partners in a general partnership?

No liability for anything done before they became partner. Liability as usual after.

What is the liability of outgoing partners for debts incurred BEFORE retirement in a general partnership?

For debts incurred before retirements, partners remain liable unless released by firm (through hold harmless agreement) or third party/creditor through a novation.

What is the liability of outgoing partners incurred for debts incurred AFTER retirement for a general partnership?

Outgoing partners must discharge themselves from future debts by giving notice of their retirement. This is by giving actual notice to existing creditors and advertisement in the London Gazette.

If a partner retires and they were not known to a person dealing with the partnership to have been a partner, that retiring partner will not be liable for partnership debts contracted with that person after the date of their retirement.

If a partner ‘holds out’, may they be held liable as if they were a partner to any third party who has given credit?

Yes.