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FLK 1 - Business Practice > 1. Business Mediums > Flashcards

1. Business Mediums Flashcards

1
Q

What is an incorporated business?

A

A separate legal entity from owners and managers.

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2
Q

What is an unincorporated business?

A

Run by individuals and not a separate legal entity.

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3
Q

What is the most common form of an incorporated business?

A

A limited company.

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4
Q

What is the most common form of an unincorporated business?

A

A sole trader.

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5
Q

What are the characteristics of a sole trader?

A

One person running an unincorporated business, personal and unlimited liability, can have employees.

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6
Q

What is a sole practitioner?

A

A professional who operates as a sole trader.

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7
Q

How do sole traders pay income tax?

A

As a self-employed person.

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8
Q

What is the liability of a sole trader for business debts?

A

Personal and unlimited liability.

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9
Q

What happens to a sole trader’s business when they retire or die?

A

The business ceases, individual assets and the business itself can be sold.

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10
Q

What are the characteristics of a partnership?

A

Two or more people running and owning a business together, unincorporated, can be in any trade or profession.

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11
Q

What is the default partnership agreement provided by?

A

The Partnership Act 1890.

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12
Q

Is a partnership a separate legal entity?

A

No, the partnership itself does not own any assets.

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13
Q

Who owns the partnership assets?

A

The partners.

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14
Q

What is the liability of partners in a partnership?

A

Personal and unlimited liability.

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15
Q

What is the default provision if partners do not disapply certain provisions?

A

The provisions of the Partnership Act 1890 apply and are implied.

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16
Q

What is personal liability in a business partnership?

A

Personal assets are at risk if debts cannot be paid.

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17
Q

How do partners divide profits and losses?

A

Equally between them.

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18
Q

How are partners taxed if they are individuals?

A

Separately as self-employed individuals.

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19
Q

How are partners taxed if one partner is a corporation?

A

The corporation may be liable to corporation tax on their share of the profits.

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20
Q

Are partners considered employees?

A

No, but they may work for the business.

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21
Q

What is the role of a sleeping partner?

A

They are not as involved daily, only in making fundamental decisions.

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22
Q

What are the characteristics of a limited partnership?

A

At least one general partner with unlimited liability and a limited partner with liability limited to their initial investment.

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23
Q

What is the requirement for limited partnerships before they can start trading?

A

They must be registered with the Registrar of Companies.

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24
Q

What are the conditions for limited liability in a limited partnership?

A

The limited partner must not control or manage the LP, have the power to make binding decisions, or remove their contribution to the LP.

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25
Q

What happens if a limited partner breaches the conditions for limited liability?

A

They will lose the protection of limited liability and be treated as a general partner with unlimited liability.

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26
Q

What are the types of companies?

A

Private or public, and can be limited by shares or by guarantee.

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27
Q

What is the requirement for private companies limited by shares before they can start trading?

A

They must be formed by registering with the Registrar of Companies.

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28
Q

What is the concept of separate legal personality in a company?

A

The people who own and run the company are separate from the company itself and are not liable for its debts.

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29
Q

Do individuals have limited liability in a company?

A

Yes.

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30
Q

What is the concept of treating a company as an independent person?

A

Legally incorporated companies have rights and liabilities.

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31
Q

When can the corporate veil be pierced?

A

When a person deliberately evades legal obligations or restrictions.

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32
Q

Who makes decisions in a company?

A

Directors or shareholders, or someone delegated by the directors.

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33
Q

What do shareholders provide to the company?

A

Money in return for shares.

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34
Q

What decisions are shareholders involved in?

A

Fundamental decisions affecting the company.

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35
Q

What introduces formality in decision-making in companies?

A

The division of responsibility between directors and shareholders.

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36
Q

What is a public limited company (plc)?

A

A company limited by shares that complies with CA 2006 requirements.

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37
Q

What are the requirements for a company to be a public company?

A

The constitution must state it is a public company and the name must include ‘public limited company’ or ‘plc’.

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38
Q

What is the authorized minimum for share capital in a company?

A

£50,000

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39
Q

What is the requirement for each allotted share in a company?

A

To be paid up to at least a quarter of its nominal value, plus any premium on it

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40
Q

Why operate as a plc?

A

More prestigious, can raise money by offering shares to the public, can join the stock market

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41
Q

What is the difference between plc’s and private companies in terms of regulation?

A

Plc’s are more regulated as they offer shares to the public, publicly traded companies are even more regulated

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42
Q

Can unlisted public companies offer shares to the public?

A

Yes, but it is harder for them to find buyers as their shares are not listed

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43
Q

How can a private company become a plc?

A

By re-registering and operating as a plc

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44
Q

What are the characteristics of an LLP?

A

Separate legal personality, limited liability for owners, informal and flexible management, partners taxed as in partnership

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45
Q

How many members are required to form an LLP?

A

Two or more members

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46
Q

What is the requirement for forming an LLP?

A

Filing a series of documents with the Registrar of Companies and paying the applicable fee

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47
Q

Is same-day registration available for forming an LLP?

A

Yes, but it is more expensive

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48
Q

When does an LLP legally come into existence?

A

On the date of incorporation on the certificate issued by the Registrar

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49
Q

What do the LLP Regulations 2001 provide?

A

A default contract with implied provisions for partners

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50
Q

What is a limited liability partnership (LLP)?

A

A partnership where individual members register as self-employed.

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51
Q

What are companies limited by guarantee used for?

A

Non-profit organizations.

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52
Q

How do shareholders in a company limited by guarantee guarantee the company’s debts?

A

By guaranteeing up to a specified amount, usually £1.

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53
Q

Why are unlimited companies rare?

A

Most people prefer running a business with limited liability.

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54
Q

What are community interest companies?

A

Limited liability companies that use profits for public good.

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55
Q

What are charitable incorporated organisations?

A

Corporate structures with reduced personal liability and single regulation.

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56
Q

What must overseas companies do if they want to operate in the UK?

A

Register details of their establishment within one month of opening.

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57
Q

What is a joint venture?

A

A commercial enterprise undertaken jointly by two or more parties.

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58
Q

What factors determine the best type of business?

A

Liability, tax, formalities, publicity, cost, status, finance.

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59
Q

Which types of businesses have a high risk of personal liability?

A

Sole traders and partnerships (not LLPs).

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60
Q

Which types of businesses have a low risk of personal liability?

A

Companies (private and public) and LLPs.

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61
Q

What are the advantages of a limited liability partnership (LLP)?

A

Individual members can register as self-employed.

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62
Q

What are the advantages of companies limited by guarantee?

A

Suitable for non-profit organizations.

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63
Q

What are the advantages of community interest companies?

A

Profits and assets used for public good.

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64
Q

What are the advantages of charitable incorporated organisations?

A

Reduced personal liability and single regulation.

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65
Q

What are the advantages of joint ventures?

A

Parties retain their own identity while pooling resources.

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66
Q

What are the disadvantages of unlimited companies?

A

Rare due to high personal liability for debts.

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67
Q

What are the disadvantages of overseas companies operating in the UK?

A

Must register details of establishment within one month.

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68
Q

What are the disadvantages of sole traders, partnerships, and LLPs in terms of tax?

A

May have higher tax obligations compared to companies.

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69
Q

What is the tax treatment for self-employed individuals?

A

Individuals are taxed as self-employed individuals.

Self-employed people only pay income tax on their profit, not their total earnings like employed people.

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70
Q

Who suffers the direct tax charge on the taxable profit for a company?

A

The company itself.

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71
Q

What is the standard rate of tax charged for companies?

A

A standard rate is charged irrespective of the company’s profit level.

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72
Q

What are the formalities required to set up sole traders and partnerships?

A

No formalities are required.

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73
Q

What are the formalities required to set up companies and LLPs?

A

Costly and time-consuming formalities, legal advice is likely required.

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74
Q

Are there any legal documents to be prepared after setting up sole traders and partnerships?

A

No, except for tax formalities to HMRC.

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75
Q

What formalities and documents must companies maintain and file?

A

Companies must maintain certain formalities, file documents to Companies House, and may require auditing.

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76
Q

Do sole traders and partnerships have freedom over decision-making?

A

Yes, they have freedom over decision-making.

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77
Q

Are companies subject to rules and requirements in decision-making?

A

Yes, companies are subject to the rules and requirements of the CA 2006.

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78
Q

What can partners do to ensure decision-making in partnerships?

A

Partners may enter into a partnership agreement to set out how decisions must be made.

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79
Q

What documents must limited liability partnerships file at Companies House?

A

LLPs are required to file certain documents, but not as many as companies.

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80
Q

Do LLPs have freedom over decision-making?

A

Yes, LLPs have freedom over how they make decisions, similar to general partnerships.

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81
Q

What is a partnership agreement?

A

A contract between partners that sets out terms and conditions of their relationship.

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82
Q

Is a partnership agreement made public?

A

No, it is confidential and there is no requirement to publish it.

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83
Q

Why is a partnership agreement advisable?

A

To address provisions in the PA 1890 that may be unacceptable for modern businesses.

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84
Q

What information must sole traders and partnerships disclose?

A

They must disclose the identity of the sole trader/partners and an address for service of documents.

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85
Q

What information must companies and LLPs reveal to the public?

A

They must reveal certain financial information and other information to the public at large.

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86
Q

What information must companies make public?

A

Directors, shareholders, significant decisions

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87
Q

What is the cost to set up sole traders and partnerships?

A

No legal or administrative costs

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88
Q

What is the cost to set up companies and LLPs?

A

Charge to set up and legal costs

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89
Q

What are the general charges for sole traders and partnerships?

A

General business charges

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90
Q

What are the general charges for companies and LLPs?

A

Extra administrative and legal requirements

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91
Q

What is the status of sole traders and partnerships?

A

Less commonly used

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92
Q

What is the status of companies and LLPs?

A

Preferred by businesses and individuals

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93
Q

What is a disadvantage of privacy for sole traders and partnerships?

A

Can make it undesirable to do business with them

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94
Q

What is an advantage of publicity for companies and LLPs?

A

Makes doing business with them easier

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95
Q

What is the finance security for sole traders and partnerships?

A

No additional security

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96
Q

What is the finance security for companies and LLPs?

A

Floating charge over all business assets

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97
Q

What is the advantage of finance security for companies and LLPs?

A

More desirable to lenders

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98
Q

What forms and documents are required to incorporate a new company?

A

Form IN01, Memorandum of association, Articles of association

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99
Q

Where are the applications processed for incorporating a new company?

A

Companies House in Cardiff

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100
Q

Who can make the application for incorporating a new company?

A

Individuals or professionals like solicitors, accountants, and company formation agents

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101
Q

How can an individual make their own application for incorporating a new company?

A

By post or online

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102
Q

How can professionals make an application for incorporating a new company?

A

By post, online, or using specialized software

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103
Q

What is a shelf company?

A

A pre-existing company used to avoid starting from scratch.

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104
Q

Who is the application addressed to?

A

The Registrar of Companies.

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105
Q

What does Companies House process and check?

A

Completeness, disqualified directors, and correct fee.

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106
Q

What does the certificate of incorporation state?

A

Company name, number, incorporation date, type, and registered office.

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107
Q

Who signs the certificate of incorporation?

A

The Registrar or their official seal.

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108
Q

What does the certificate of incorporation serve as?

A

Conclusive evidence of compliance.

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109
Q

What is the requirement for registering with HMRC?

A

All companies must register for corporation tax.

110
Q

How is tax registration done if the application is made online?

A

It is automatic.

111
Q

How is tax registration done if the application is made by post, formation agent, or third-party software?

A

Separate application to HMRC within three months of starting business.

112
Q

What information is required on the IN01 form?

A

Company name and required ending for private and public companies.

private- Ltd lw public- plc

113
Q

What are the requirements for choosing a different/new name for a company?

A

Cannot be the same or similar to another company’s name.

114
Q

Under what circumstances can a new company have a similar name to an existing one?

A

If it is part of the same group and written confirmation is provided.

115
Q

What types of names are prohibited or restricted?

A

Offensive words, names suggesting a connection with the government, names containing sensitive words, names referring to geographical areas or regulated professions.

116
Q

What are some examples of letters, characters, signs, symbols, and punctuation that cannot be used in a company name?

A

Not specified in the notes.

117
Q

What is the maximum character limit for a company name?

A

160 characters, including spaces.

118
Q

When can a trading name be decided?

A

Once a company is incorporated.

119
Q

Can a trading name be different from the registered name?

A

Yes, a trading name can be different from the registered name.

120
Q

What can happen if a company or trading name is too similar to a trademark?

A

The owners of the trademark can make a complaint for it to be changed or bring a claim for trademark infringement.

121
Q

Can a complaint be made for passing off if a name is not registered as a trademark?

A

Yes, a complaint can still be made in tort for passing off based on suggesting association and benefiting from the trademark’s good reputation.

122
Q

What is the purpose of a registered office?

A

To serve as an address for correspondence by Companies House and for any official documents, including court documents.

123
Q

Is the registered office address publicly available?

A

Yes, the registered office address must be publicly available.

124
Q

Where must the registered office be located?

A

In the same part of the UK where the company is registered.

125
Q

Can a solicitor or accountant address be used as the registered office address?

A

Yes, smaller companies often use a solicitor or accountant address as the registered office address.

126
Q

What is required to change the registered office address?

A

A board resolution and an AD01 form to Companies House.

127
Q

What happens to documents sent to the old registered office address after it has been changed?

A

Documents can still be sent to the old address for 14 days after changing.

128
Q

Where are board and general meeting minutes held?

A

At the registered office.

129
Q

What form is the registered office address inserted in?

A

The IN01 form.

130
Q

Who uses the registered office address for correspondence?

A

Companies House and for any official documents, including court documents.

131
Q

What is the purpose of the IN01 form?

A

To insert the registered office address.

132
Q

What are statutory books?

A

Records kept by companies or at Companies House.

133
Q

What information must be included for the first directors?

A

Name and date of birth.

134
Q

What is the minimum age requirement for directors?

A

16 years old.

135
Q

What is a director’s service address?

A

Address for official documents.

136
Q

Can a director’s service address be the same as the registered address?

A

Yes.

137
Q

Are residential addresses public?

A

No, they are private.

138
Q

Under what circumstances can a director’s residential address be kept private?

A

Evidence of serious risk of violence.

139
Q

Do private companies need to have a company secretary?

A

No, but they can choose to have one.

140
Q

What tasks are the company secretary responsible for?

A

Filing documents and keeping board minutes.

141
Q

Who is liable if the company secretary fails to carry out their duties?

A

Directors.

142
Q

What are first shareholders called?

A

Subscribers.

143
Q

What information must be provided for first shareholders?

A

Name, address, and shareholding details.

144
Q

What is the minimum number of first shareholders?

A

At least one.

145
Q

Can a company issue more shares after trading starts?

A

Yes, to raise money.

146
Q

What does the Statement of Capital provide information about?

A

Shares and shareholders.

147
Q

What is included in the Statement of Capital?

A

Number and value of shares, and names and addresses of shareholders.

148
Q

What are prescribed particulars?

A

Information about the rights each type of share gives the shareholder.

149
Q

What must prescribed particulars include?

A

Share of dividends, redeemability, voting rights, and number of votes.

150
Q

What is the nominal value of shares?

A

The nominal value of a share is the minimum amount a shareholder must pay for a share of a company.

151
Q

What is the significance of £1 shares?

A

They will always be called £1 shares, regardless of their future value.

152
Q

What does it mean for a share to be sold at ‘par value’?

A

It was sold for its nominal value.

153
Q

What is a company’s constitution?

A

It consists of the memorandum of association, articles of association, certificate of incorporation, current statement of capital, court orders and legislation, shareholders’ resolutions, and certain agreements involving shareholders.

154
Q

What are articles of association?

A

They are the rules that company officers must follow when running their companies.

155
Q

What is the purpose of articles of association?

A

To act as a form of internal rulebook and part of the constitution of a company.

156
Q

What information do articles of association contain?

A

Rules on voting, shareholders, and other company matters.

157
Q

What are model articles of association?

A

The standard articles a company can use.

158
Q

Who prescribes the model articles of association?

A

The companies (Model Articles) Regulations 2008.

159
Q

What happens if a company does not prescribe its own articles?

A

The model articles will apply by default.

160
Q

What is the memorandum of association?

A

A document that sets out the company’s name, registered office, and objects.

161
Q

What is the certificate of incorporation?

A

A document that confirms the company’s legal existence.

162
Q

What is the current statement of capital?

A

A document that shows the company’s share capital and shareholders.

163
Q

What can alter a company’s constitution?

A

Court orders, legislation, and shareholders’ resolutions.

164
Q

What are shareholders’ resolutions?

A

Decisions made by the shareholders that affect the company’s constitution.

165
Q

What are certain agreements involving shareholders?

A

Agreements that have an impact on the company’s constitution and involve shareholders.

166
Q

What is a Memorandum of Association?

A

Legal statement signed by initial shareholders to form the company.

167
Q

What is the purpose of a Memorandum of Association?

A

To indicate the subscribers’ wish to form a company and become shareholders.

168
Q

What is the role of a Memorandum of Association in a company?

A

In the past, it had a wider role in the company’s constitution.

169
Q

What is the significance of reading the memorandum for older companies?

A

It may contain rules that still apply to the company.

170
Q

What are articles in relation to a company?

A

Company rule book that addresses specific matters.

171
Q

What are some examples of matters addressed in the articles?

A

Notice for board meetings, minimum number of directors for a valid board meeting, power of board to reject a shareholder, circumstances when a director cannot vote.

172
Q

What is the purpose of signing the memorandum?

A

To indicate the subscribers’ agreement to become shareholders and take at least one share each.

173
Q

What are model articles?

A

Standard set of articles provided for private and public companies.

174
Q

When are model articles applied?

A

By default if an applicant does not provide their own articles.

175
Q

Can companies choose to adopt the model articles?

A

Yes, to avoid drafting their own from scratch.

176
Q

Can companies disapply certain articles from the model articles?

A

Yes, if it is not in the interest of their business.

177
Q

What is Table A Article?

A

Set of articles incorporated based on the CA 1985 for companies before October 2009.

178
Q

When did the CA 2006 come into force?

A

October 1, 2009.

179
Q

What is the difference between the Memorandum of Association and Table A Article?

A

Companies incorporated after October 2009 have the Memorandum of Association, while those before have Table A Article.

180
Q

Can companies have different rules depending on which set of articles they have adopted?

A

Yes, there may be differences between the two sets of articles.

181
Q

What is an example of a difference between the Memorandum of Association and Table A Article?

A

MA requires 14 clear days’ notice for a general meeting, while Table A requires 21 days’ notice.

182
Q

How can the articles be amended?

A

By way of special resolution passed by a majority of at least 75% of shareholders.

183
Q

What must a company do when amending its articles?

A

File a copy of the amended articles at Companies House within 15 days.

184
Q

When must a company file a copy of the special resolution to amend the articles?

A

Within 15 days after it is passed.

185
Q

What are voluntary provisions?

A

Provisions that apply unless excluded by the company’s articles.

186
Q

What are mandatory provisions?

A

Provisions that cannot be excluded by the company’s articles.

187
Q

What are the three options for submitting a company’s proposed articles?

A

Adopt Model Articles in entirety, adopt Model Articles with amendments, or supply bespoke articles.

188
Q

What must the applicant indicate on the IN01 form?

A

Whether they are adopting Model Articles or have drafted their own articles.

189
Q

What must be submitted if the applicant has drafted their own articles?

A

A copy of the drafted articles.

190
Q

What is a person with significant control?

A

A person/body that holds more than 25% of shares, voting rights, or the right to appoint/remove a majority of the board of directors.

191
Q

What is the definition of control deemed significant?

A

Holding more than 25% of shares, voting rights, or the right to appoint/remove a majority of the board of directors.

192
Q

What are the three thresholds for holding shares/voting rights?

A

More than 25% but not more than 50%, more than 50% but less than 75%, or 75% or more.

193
Q

What do the thresholds reflect?

A

The percentage of shares needed to block or pass resolutions.

194
Q

What power does a person with 25% to 50% of shares have?

A

Can block special resolutions and may be able to block ordinary resolutions.

195
Q

What power does a person with 50% to 75% of shares have?

A

Can both block and pass ordinary resolutions, but cannot pass special resolutions.

196
Q

What power does a person with 75% or more of shares have?

A

Can pass special resolutions alone and block both ordinary and special resolutions.

197
Q

What must a company do once it has been incorporated?

A

Keep a register of persons with significant control.

198
Q

What must the applicant do after inserting all required information on the IN01 form?

A

Complete the statement of compliance in Part 9.

199
Q

What does the statement of compliance confirm?

A

That the requirements of the CA 2006 as to registration have been complied with.

200
Q

What happens when the application is made accurately?

A

Companies House issues a certificate of incorporation.

201
Q

When does a company officially exist as a separate legal person?

A

When the certificate of incorporation is issued.

202
Q

What must an applicant do to register as a public company?

A

Comply with the requirements of a public company.

203
Q

What must be the form of the articles for a public company?

A

Suitable for a public company.

204
Q

What are the Model Articles?

A

Default articles for public companies.

205
Q

When will the Model Articles apply?

A

If no bespoke or amended articles are provided.

206
Q

What does the certificate of incorporation prove?

A

Company’s existence and status as a public company.

207
Q

What is a trading certificate?

A

Proof that a company can trade and borrow.

208
Q

Where is the application for a trading certificate made?

A

Companies House on form SH50.

209
Q

What are the requirements for converting to a public company?

A

Special resolution, name and articles alteration, meeting share capital requirements.

210
Q

Is a trading certificate required for re-registering as a public company?

A

No, share capital requirements are sufficient.

211
Q

What documents must be filed for re-registration?

A

Special resolution, application form, fee, revised articles, balance sheet, auditors’ statement.

212
Q

What additional document is required for re-registration?

A

Valuation report on shares allotted for non-cash consideration.

213
Q

What is the purpose of the certificate of re-registration?

A

To confirm incorporation as a public company.

214
Q

What is the purpose of the statement of compliance?

A

To confirm compliance with re-registration requirements.

215
Q

What is the purpose of the balance sheet?

A

To provide financial information about the company.

216
Q

What is the purpose of the auditors’ statement?

A

To confirm the accuracy of the balance sheet.

217
Q

What is the purpose of the valuation report?

A

To assess the value of shares allotted for non-cash consideration.

218
Q

What is the form of a public company’s name?

A

Must include ‘public’ or ‘plc’.

219
Q

What is the purpose of altering the articles?

A

To make them suitable for a public company.

220
Q

What is the purpose of satisfying share capital requirements?

A

To meet the necessary capital for a public company.

221
Q

What is the purpose of the re-registration application?

A

To request the change of company status.

222
Q

What is the purpose of the fee for re-registration?

A

To cover the cost of the re-registration process.

223
Q

What is a certificate of incorporation?

A

Proof of company’s existence and public status.

224
Q

What is the purpose of a shelf company?

A

To provide a pre-set up company for quick use.

225
Q

Who creates shelf companies?

A

Law firms, company formation agents, and law stationers.

226
Q

How many directors and shareholders does a shelf company usually have?

A

Two directors and two shareholders.

227
Q

What is the share structure of a shelf company?

A

Each shareholder owns one ordinary £1 share.

228
Q

Why are shelf companies used?

A

To save time and cost in company registration.

229
Q

Who are the initial subscribers of a shelf company?

A

Employees of the law firm.

230
Q

What are the post-incorporation steps for a shelf company?

A

Steps to prepare the company for operation.

231
Q

What is the role of a chairperson in a company?

A

To lead board meetings and have a casting vote.

232
Q

What is the purpose of having a bank account for a company?

A

To manage company’s finances and authorize payments.

233
Q

Is having a bank account mandatory for a company?

A

No, but it is necessary.

234
Q

Who decides the authorized spend limit for a company?

A

The board of directors.

235
Q

What is a bank mandate?

A

A document authorizing individuals to make payments on behalf of the company.

236
Q

Do companies need a company seal?

A

No, but some choose to have one.

237
Q

Why do companies choose to have a company seal?

A

To make their documents look more official.

238
Q

How can a company adopt a company seal?

A

By passing a board resolution.

239
Q

What is the role of a company seal?

A

To add authenticity to company documents.

240
Q

What is the purpose of a company seal?

A

To make company documents look more official.

241
Q

What is the advantage of using a shelf company?

A

Saves time and cost compared to same-day registration.

242
Q

What is the purpose of a company seal?

A

To execute a document.

243
Q

What is required when a company seal is used to execute a document?

A

The document must also be signed by an authorised person in the presence of a witness.

244
Q

Can a company choose to disapply the requirement of having a witness for a company seal?

A

Yes, they can insert their own provisions regarding the use of a company seal.

245
Q

How can a company change its name?

A

By a special resolution of the shareholders or by other means provided in the company’s articles.

246
Q

What form needs to be filed at Companies House to change a company’s name?

A

Form NM01, along with a copy of the special resolution and the applicable fee.

247
Q

Can a company operate using a business name?

A

Yes, but the board needs to agree on the name by board resolution.

248
Q

What happens when a company changes its name?

A

Companies House issues a new certificate of incorporation.

249
Q

What is the accounting reference date?

A

The date up to which a company must prepare its annual accounts.

250
Q

What is the default accounting reference date for a newly incorporated company?

A

The last day of the month in which the company was incorporated.

251
Q

How can a company change its accounting reference date?

A

By passing a board resolution and completing form AA01 to file at Companies House.

252
Q

Can the accounting reference period be extended for more than 18 months?

A

No, it cannot be extended beyond 18 months.

253
Q

When can the accounting reference period be extended?

A

At least five years after the end of an earlier extended accounting reference period.

254
Q

What is the requirement for all companies regarding annual accounts?

A

They must prepare annual accounts.

255
Q

What is the requirement for all companies regarding appointment of an auditor?

A

They must appoint an auditor.

256
Q

What are service contracts?

A

Contracts for directors’ employment.

257
Q

What should be included in a director’s employment contract?

A

Terms, duties, salary, notice period, etc.

258
Q

When does a service contract require shareholder approval?

A

If it is for a guaranteed term of more than two years.

259
Q

What happens when a new company is registered with Companies House?

A

HMRC is automatically notified.

260
Q

What does HMRC send to the registered office address of a new company?

A

An introductory pack regarding tax affairs.

261
Q

What is included in the introductory pack from HMRC?

A

A form to initiate corporation tax registration.

262
Q

What should directors do to deduct income tax from salaries?

A

Register the company with HMRC under the PAYE scheme.

263
Q

How can directors register the company for PAYE and National Insurance?

A

Online via the UK government’s website.

264
Q

Are directors considered employees?

A

Yes.

265
Q

Which businesses must register for value added tax (VAT)?

A

Most businesses, except those with a very small turnover.

266
Q

What happens when a company registers for VAT?

A

It is allocated a VAT number.

267
Q

Who approves the applications for tax registration?

A

The directors at the first board meeting.

268
Q

What is the Streamlined Company Registration Service?

A

A service that allows new companies to register and apply for tax registration simultaneously.

269
Q

Who decides on insurance policies for the company?

A

The board of directors.

270
Q

Where are shareholders’ agreements held?

A

Not at a board meeting, but involve shareholders instead of directors.

271
Q

What is a shareholder agreement?

A

A legally binding agreement between shareholders of a company.

FLK 1 - Business Practice (5 decks)

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