ACCA Applied Skills · Corporate and Business Law (Global)

Partnerships for ACCA LW: Chapter Study Guide

A partnership is a relationship between persons carrying on a business in common with a view to profit. In LW you must know how partnerships form, what partners can bind the firm to, who is liable, how LPs and LLPs differ, and how a firm ends. Solve questions by applying the rule to the facts.

What this chapter covers

This chapter covers business organisations where people trade together without necessarily forming a company. You start with what makes a relationship a partnership, then look at how it is formed and what a partnership agreement does. You then study the authority of partners to bind the firm, and who bears liability when things go wrong.

The chapter also covers limited partnerships and limited liability partnerships (LLPs). These show how the law can add limited liability to a partnership structure. Finally, you study how a partnership comes to an end and how its affairs are wound up.

This chapter links closely to other parts of LW. Agency law explains why a partner can bind the firm. Contract law explains the partnership agreement. Company law gives you the contrast: a company has separate legal personality, while a traditional partnership may not, depending on the jurisdiction. Rules vary between jurisdictions, so LW tests the general principles in the Global syllabus. Read each question for the facts given and apply the principle stated.

Partnerships are a compact, rule-based topic, which makes them good value for revision time. LW is a two-hour exam with 45 objective questions in Section A and five six-mark multi-task questions in Section B, and objective questions are marked all or nothing. Questions on partnerships are usually short scenarios: is there a partnership, did the partner have authority, who is liable, how does a limited form differ. If you know the rules and their conditions, you can pick up marks quickly and avoid losing them to careless reading.

Partnerships: topics in the order to study them

1Nature and Types of PartnershipStart here because every other rule depends on knowing what a partnership is and how it differs from a company.
2Formation and Partnership AgreementOnce you know what a partnership is, learn how it is created and what the agreement sets out between the partners.
3Partners' Authority and LiabilityThis builds on formation and agency ideas, and it is the area most likely to appear in scenario questions.
4Limited Partnerships and LLPsStudy these after general liability, so you can see exactly how limited liability changes the position.
5Dissolution and Winding Up of PartnershipsFinish with how a firm ends, as it draws on everything before it: the agreement, authority and liability.

How to prepare Partnerships

Treat this chapter as a set of rules plus conditions. Your aim is to spot which rule a scenario is testing and apply it to the facts.

Read the chapter once for the overall structure: what a partnership is, how it operates, how limited forms differ, how it ends.
Write a one-page comparison of a general partnership, a limited partnership and an LLP covering liability, management and legal status.
For each topic, list the rule and its conditions. For example, note when a partner binds the firm and when the third party's knowledge changes the result.
Practise objective questions in short sets, and for every wrong answer write down which fact in the scenario you misread.
Practise Section B style questions: read the scenario, identify the legal issue for each task, state the rule, apply it, and give a clear conclusion in a few sentences.
Revisit agency and contract basics briefly, since authority and the partnership agreement rely on them.
In the last days, use a quick sheet of rules and test yourself without looking at notes.

Common mistakes in Partnerships

Treating every profit-sharing arrangement as a partnership.
Fix: Look at the whole relationship: is there a business carried on in common with a view to profit? Treat profit sharing as evidence, not proof.
Assuming a partner always binds the firm.
Fix: Check the type of act, whether it is usual for that kind of business, and what the third party knew.
Mixing up limited partnerships and LLPs.
Fix: Remember that a limited partnership has two classes of partner, while an LLP gives limited liability to its members and has its own legal personality.
Confusing liability between partners with liability to outsiders.
Fix: Separate the two questions. Outsiders look to the partners as the law provides; the agreement governs the sharing between partners.
Forgetting that a limited partner can lose protection by managing the firm.
Fix: Add the condition to your notes and check scenarios for a limited partner taking part in running the business.
Ignoring the order of payments on winding up.
Fix: Learn the sequence: outside creditors first, then partner accounts and settlement between partners.

Last-day revision: Partnerships

A partnership is a relationship between persons carrying on a business in common with a view to profit.
Sharing profits is a strong indicator of partnership, but not conclusive on its own.
The partnership agreement sets the partners' rights and duties between themselves; it can be written or oral depending on the jurisdiction.
Where the agreement is silent, default rules in the applicable law fill the gaps.
Partners act as agents of the firm and of each other when carrying on its usual business.
A partner can bind the firm where acting within actual or apparent authority.
In a general partnership, partners usually have unlimited personal liability for the firm's debts.
A limited partnership has at least one general partner with unlimited liability and limited partners whose liability is capped.
A limited partner who takes part in management risks losing limited liability.
An LLP has its own legal personality and its members' liability is generally limited.
A partnership can end by agreement, expiry of a term, a partner's departure, or by court order, depending on the rules.
On winding up, the firm's assets are used first to pay outside creditors, then to settle accounts between partners.

Partnerships practice questions

Partnerships in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Partnerships: frequently asked questions

What is the main difference between a partnership and a company?

A company is a separate legal person from its owners, so it owns assets and enters contracts in its own name. A traditional partnership is a relationship between the partners, and partners generally have personal liability. Check how the Global syllabus treats this when you answer.

Do I need to memorise section numbers for partnership law?

No. LW tests the principles in the Global variant of the exam, so focus on the rules and their conditions. Spend your time applying them to scenarios.

How are partnership questions asked in LW?

They appear as objective questions in Section A and as multi-task scenarios in Section B. Typical issues are whether a partnership exists, whether a partner had authority, who is liable and how a firm ends.

How should I answer a Section B question on partnerships?

Identify the issue in each task, state the rule briefly, apply it to the facts given and finish with a conclusion. Keep each answer short and tied to the scenario.