1. Business Mediums Flashcards by Olivia Harvey

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

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

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

The partners are joint and severally liable

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

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

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

Form LL IN01 and the applicable fee

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Does an LLP have a separate legal personality?

Yes

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

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

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

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

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

Shareholders are liable limited to amount unpaid on shares

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

Shareholders are liable limited to amount unpaid on shares

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How many partners are required for a partnership?

At least 2

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How many designated members are required for an LLP?

At least 2

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How many shareholders are required for a private limited company?

At least 1

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How many shareholders are required for a public limited company?

At least 1

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How many directors are required for a private limited company?

At least 1
(secretary is optional)

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How many directors are required for a public limited company?

At least 2 and a qualified secretary

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Who owns the property and assets in a partnership?

The partners (not the partnership)

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Who owns the property and assets in an LLP?

The LLP (due to separate legal personality)

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

The company (due to separate legal personality)

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

The company (due to separate legal personality)

What type of businesses do not need to publish accounts?

Unincorporated businesses

What are the accounts requirements for sole traders?

No accounting requirements

What are the accounts requirements for general partnerships?

Accounts are produced but not audited or published

What are the accounts requirements for LLPs?

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

What are the accounts requirements for private limited companies?

Accounts are audited and published

What are the accounts requirements for public limited companies?

Accounts are audited and published

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

That a company has a separate legal personality

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

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)

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

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

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

£50,000

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

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

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

IN01

What must accompany the IN01 form for registration?

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

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

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

How can application for registration as a company be completed?

Online, via post, or via specific software

What documents form the company's constitution?

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

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

Initial subscribers

What is the memorandum of association?

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

What is included in a Memorandum of Association?

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

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

Articles of association

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

Companies Act

What are shelf companies?

Companies already set up to allow for clients to quickly have companies Directors and initial subscribers will be employees of the law firm

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

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

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

Form NM01 Copy of the special resolution Applicable fee

What is an accounting reference date?

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

How can a company change their accounting reference date?

Pass a board resolution to either extend or shorten the account reference date Complete form AA01 and file at Companies House