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340 Chapter 12Partnership, limited liability partnership and choice of legal status

Numbers of partners

Until recently, most firms were not allowed to have more than 20 partners. This prohibition

has now been lifted, so that there is no upper limit on the number of members a firm may

have.

Illegal partnerships

A partnership formed for an illegal purpose will be void. The purpose will be illegal if

either statute or the common law prohibits it. So many statutes prohibit so many types of

behaviour that it would be pointless to try to list them all. As we saw in Chapter 4, the

common law makes several different types of contract illegal, including contracts to commit

a crime, tort or fraud.

If a partnership is declared illegal, the courts will refuse to recognise its existence and will

not order one partner to pay towards losses suffered by another.

The partnership name

Partnerships do not need to register the names under which they trade. Apart from the

prohibition as to using the word ‘limited’, ‘LLP’ or ‘Ltd.’, partners can trade under any

name they like, as long as they comply with the Companies Act 2006, and as long as the

name is not designed to confuse the public.

The Companies Act 2006

The Companies Act requires partnerships to comply with certain rules if they carry on busi-

ness in a name other than the surnames of all the partners. If the partners merely add their

first names, or their initials, to their surnames they will not be subject to the Act. However,

if anything else is added, even the words ‘& Co.’, the name must comply with the Act.

Section 1193 makes it a criminal offence to use names which would suggest a connection

with Government or local authorities. The Secretary of State can grant permission for such

names to be used. Section 1194 makes it a criminal offence to use 100 or so sensitive words,

which are listed in the Companies and Business Names Regulations 1981.

Sections 1202 and 1204 apply where a firm uses a business name. A business name is one

which consists of anything other than all of the partners’ surnames, or all of their surnames

along with their first names or initials. Section 1202 requires firms to display the names of

all partners, and an address at which documents can be served, on all business documents.

Section 1204 requires firms to display the same information on all business premises to

which the customers or suppliers have access. Business documents include all business

letters, written orders for goods or services, invoices, receipts and written demands for

Everett vWilliams (1725)

Two highwaymen robbed a coach, intending to share the proceeds. One highwayman sued

the other for his share, claiming that he was entitled to this as a partner.

HeldNo partnership existed as the business carried on was illegal. (Both of the highway-

men were hanged and the claimant’s lawyer was fined for bringing the case!)