Topic: Partnership Law

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  • 1 Marks

BL – May 2016 – L1 – SA – Q4 – Partnership Law

Identify the characteristic that does not belong to a partnership.

Which of the following is NOT a characteristic of a partnership?
A. Sharing losses
B. Sharing profits
C. Business
D. Liability to pay income tax on its profits
E. The pooling of resources together

Answer:
D. Liability to pay income tax on its profits

Explanation:
Partnerships themselves are not subject to income tax on profits. Instead, profits are passed through to the partners, who then report the income on their personal tax returns. This is known as pass-through taxation.

  • 10 Marks

BL – May 2015 – L1 – SB – Q3a – Partnership Law

Explain the positions of law in relation to partner contributions and the introduction of a new partner.

‘X’, ‘Y’, and ‘Z’ formed a partnership in 2007 and contributed N400,000, N300,000, and N200,000, respectively. In the course of managing the firm, Y paid the electricity bills of the firm to keep the business of the partnership going, and wants to be reimbursed. X intends to introduce a friend to join the partnership.

Required:
What are the positions of the law in the situations above? (10 Marks)

  • Y, having paid for expenses incurred in the ordinary course of running the business (i.e., electricity bills), is entitled to be reimbursed by the firm under the principle of indemnity.
  • X cannot introduce a new partner without the unanimous consent of all existing partners, as per partnership law principles.

 

  • 6 Marks

BL – May 2015 – L1 – SB – Q2a – Company Law | Partnership Law

Explain three key differences between a partnership and a company.

A partnership and a company are similar in some respects, but they are different in many ways.
Required:
Explain any THREE differences between a partnership and a company. (6 Marks)

i. A company has a separate legal personality upon incorporation, while a partnership does not have a separate legal personality.

ii. Partnerships do not require a specific legal formality for formation, while a company must be incorporated with necessary documents.

iii. The liability of company members is limited to their shareholding, but partners in a partnership have unlimited liability except in the case of limited partners.

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