1. Business Mediums

Question 1

What are the factors to consider when identifying the best type of business?

Answer 1

• Liability - consider nature of business; if unlikely to face many uninsured risks then partnership can be ok
• Tax - consider financial circumstances of business and owner; partnerships don’t pay corporation tax (partners pay income tax and NI instead); limited companies pay corporation tax on profits
• Formalities - more time consuming to set up an LLP or company and more costly to run
• Publicity of information - lack of requirement for publicity for sole traders / partnerships
• Costs - charge to form a company or LLP, and legal advice often required
• Status - many businesses or individuals prefer to trade with a company than partnership / sole trader, as reassured by amount of information which is publicly available
• Finance - companies and LLPs can offer floating charge over business assets, which partnerships or sole traders cannot offer

Question 2

In a partnership, who is liable and how much for?

Answer 2

The partners are joint and severally liable

Question 3

Is there any restriction on how large a partnership can be?

Answer 3

No - e.g. Slaughter and May is a partnership / unincorporated business entity

Question 4

What must be filed with the Registrar of Companies to incorporate an LLP?

Answer 4

Form LL IN01 and the applicable fee

Question 5

Does an LLP have a separate legal personality?

Answer 5

Yes

Question 6

In an LLP, who is liable and how much for?

Answer 6

Liability is limited to amount agreed - members may be liable to contribute

Question 7

What does it mean if a private company is “limited by shares”?

Answer 7

The shareholders’ liability is limited to the amount they paid or agreed to pay for their shares

Question 8

In a private limited company, who is liable and how much for?

Answer 8

Shareholders are liable limited to amount unpaid on shares

Question 9

In a public limited company, who is liable and how much for?

Answer 9

Shareholders are liable limited to amount unpaid on shares

Question 10

How many partners are required for a partnership?

Answer 10

At least 2

Question 11

How many designated members are required for an LLP?

Answer 11

At least 2

Question 12

How many shareholders are required for a private limited company?

Answer 12

At least 1

Question 13

How many shareholders are required for a public limited company?

Answer 13

At least 1

Question 14

How many directors are required for a private limited company?

Answer 14

At least 1
(secretary is optional)

Question 15

How many directors are required for a public limited company?

Answer 15

At least 2 and a qualified secretary

Question 16

Who owns the property and assets in a partnership?

Answer 16

The partners (not the partnership)

Question 17

Who owns the property and assets in an LLP?

Answer 17

The LLP (due to separate legal personality)

Question 18

Who owns the property and assets in a private limited company?

Answer 18

The company (due to separate legal personality)

Question 19

Who owns the property and assets in a public limited company?

Answer 19

The company (due to separate legal personality)

Question 20

What type of businesses do not need to publish accounts?

Answer 20

Unincorporated businesses

Question 21

What are the accounts requirements for sole traders?

Answer 21

No accounting requirements

Question 22

What are the accounts requirements for general partnerships?

Answer 22

Accounts are produced but not audited or published

Question 23

What are the accounts requirements for LLPs?

Answer 23

Accounts are audited and published (although might be abbreviated accounts / exempt from audit)

Question 24

What are the accounts requirements for private limited companies?

Answer 24

Accounts are audited and published

Question 25

What are the accounts requirements for public limited companies?

Answer 25

Accounts are audited and published

Question 26

What is the key principle from the case Salomon v A Salomon?

Answer 26

That a company has a separate legal personality

Question 27

What is the key principle from the case Adams v Cape?

Answer 27

If it is not possible to claim damages from a company (i.e. in the event of insolvency), then cannot go to parent company in order to claim damages (unless guarantee was provided)

Question 28

What is the key principle from the case Prest v Petrodel?

Answer 28

The court may only “pierce the corporate veil” when there has been a scam or fraud - equity is not a consideration in this

Question 29

What is the minimum amount which owners must invest for use by a company in order to register it as a public limited company?

Answer 29

£50,000

Question 30

What does “nominal value” (or “par value”) mean in relation to shares?

Answer 30

The value they have been allotted, which does not change even if the market value of the shares has changed

Question 31

What Companies House form must be completed for registration as a private or public company?

Answer 31

IN01

Question 32

What must accompany the IN01 form for registration?

Answer 32

Memorandum of association
Articles of association (if not using Model Articles)
Applicable fee

Question 33

What additional information is required in setting up a limited company?

Answer 33

The identity, date of birth and address of the proposed company’s first shareholders, directors and any company secretary, the address of the registered office, the name of the company and how many shares the first shareholders will have

DO NOT need to include information about articles IF incorporating MAs

DO NOT need to include trading name as this is a business decision

Question 34

How can application for registration as a company be completed?

Answer 34

Online, via post, or via specific software

Question 35

What documents form the company’s constitution?

Answer 35

S 17 CA 2006 - company’s articles, memorandum of association and the resolutions and agreements specified in section 29, key ones being shareholder special resolutions and agreements and court orders and legislation which affect the company’s constitution

Question 36

In the registration of a company, what are the first shareholders commonly known as?

Answer 36

Initial subscribers

Question 37

What is the memorandum of association?

Answer 37

A legal statement signed by all the initial shareholders or guarantors agreeing to form the company

Question 38

What is included in a Memorandum of Association?

Answer 38

Statement that the partners wish to form the company and have agreed to subscribe for the Shares

Question 39

Where would information regarding the notice period for board meetings, minimum number of directors required and further general director powers be contained?

Answer 39

Articles of association

Question 40

In the event of conflict between a company’s articles of association and the Companies Act, which prevails?

Answer 40

Companies Act

Question 41

What are shelf companies?

Answer 41

Companies already set up to allow for clients to quickly have companies

Directors and initial subscribers will be employees of the law firm

Question 42

How can a company seal be used to execute a document?

Answer 42

Can execute a document on behalf of the company as long as the document is also
signed by at least one authorised person in the presence of a witness who attests the
signature

Question 43

What form must a company file when changing their name? What else needs to be filed with it?

Answer 43

Form NM01
Copy of the special resolution
Applicable fee

Question 44

What is an accounting reference date?

Answer 44

Date up to which a company must prepare its annual accounts - will be the last day of the month in which the company was incorporated

Question 45

How can a company change their accounting reference date?

Answer 45

Pass a board resolution to either extend or shorten the account reference date

Complete form AA01 and file at Companies House