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(APD) Business Law and Practice > 1. Different Types of Business > Flashcards

1. Different Types of Business Flashcards

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1
Q

What is a sole trader

A

A business that is not legally separate from its sole owner

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2
Q

Are any formalities needed to incorporate a sole trader business?

A

No

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3
Q

Does a sole trader need to be registered at HMRC for tax purposes?

A

Yes

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4
Q

What type of liability does the owner of a sole trader business have?

A

Unlimited Personal liability (for all its debts NOT limited liability)

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5
Q

Who owns the assets of the business in a sole trader business?

A

Sole trader

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6
Q

What are the 2 ways a Partnership will be governed?

A

Either (a) Partnership Agreement OR IF NONE (b) Partnership Act 1890 (PA 1890)

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7
Q

What is a Partnership?

A

Where 2 or more people are ‘carrying on a business with a view of making profit’

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8
Q

Does a Partnership have a distinct legal personality?

A

No

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9
Q

Are any formalities needed to make a Partnership?

A

No (∴ Partnership can be made unintentionally)

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10
Q

What is recommended for partners in a Partnership to enter into?

A

Partnership Agreement

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11
Q

How are partners in a Partnership liable?

A

Unlimited Personally liable - jointly and severally liable (NOT limited liability)

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12
Q

What is a Limited Liability Partnership (LLP)?

A

Cross between a company and a partnership

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13
Q

Does an LLP have a separate legal personality?

A

Yes

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14
Q

What type of liability does an LLP have?

A

Limited

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15
Q

What does limited liability mean?

A

Owner(s) of the business are only liable to extent of their investment / initial capital contribution in the company

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16
Q

Does an LLP have any formalities? If so, what are they?

A

Register at Companies House

17
Q

Does death, bankruptcy or the departure of a member affect the business?

A

No (separate legal personality)

18
Q

What are the two possible ways an LLP will be governed?

A

(1) Partnership Agreement OR IF NOT MADE (2) Limited Liability Partnerships Regulations 2001

19
Q

What is a Limited Company?

A

Business with a separate legal personality

20
Q

What type of liability does a shareholder(s) in a Limited Company limited by shares have? What does this mean?

A

Limited liability - extent of shareholder liability is any unpaid, nominal value of their shares

21
Q

Does a Limited Company have a separate legal personality?

A

Yes

22
Q

What are the two key features of Limited Companies?

A

(1) Separate legal personality
(2) Limited liability for members / shareholders

23
Q

Where must a Limited Company be registered?

A

Companies House

24
Q

What does a business being a ‘separate legal personality’ mean?

A

People who own and run the company are separate from the company itself

25
Q

A Limited Company is a ‘separate legal personality’. What are 3 examples of what this means a company is able to?

A

(1) Own property
(2) Enter into contracts
(3) Be party to legal proceedings

26
Q

Of the 4 main business types (1) Sole trader (2) Partnerships (3) LLPs and (4) Limited Companies, who can grant floating and / or fixed charges?

A

Fixed charges only:
(1) Sole trader
(2) Partnership

Both fixed and floating charges:
(1) LLPs
(2) Limited Companies

27
Q

What 2 business types are incorporated?

A

(1) Limited Companies
(2) LLPs

28
Q

What are 3 advantages of incorporation?

A

(1) Limited liability
(2) Separate legal personality
(3) Grant fixed AND floating charges

29
Q

What are 2 major disadvantages of incorporation?

A

(1) Complexity and cost of forming company
(2) Regulatory compliance - e.g. with CA 2006

30
Q

What are the 2 types of limited company?

A

(1) Private limited company
(2) Public limited company

31
Q

What ways can (1) Private limited company
(2) Public limited company, be limited by?

A

(1) Private - Shares OR guarantee
(2) Public - Shares

32
Q

For a Public limited company (a) What is the minimum share capital requirement? (b) What is minimum % of shares that must be paid up?

A

(a) £50,000
(b) 25%

33
Q

For a Private limited company (a) What is the minimum share capital requirement? (b) What is minimum % of nominal value of the share that must be paid up?

A

None

34
Q

What is the minimum number of directors for (1) Private limited company (2) Public limited company?

A

(1) Private - 1
(2) Public - 2

35
Q

Is a company secretary required for (1) Private limited company (2) Public limited company?

A

(1) Private - NO
(2) Public - YES

36
Q

What are the 3 requirements for a company to be ‘public’?

A

(1) Constitution states it’s a ‘public company’
(2) Words ‘public limited company’ or ‘plc’ at end of company name
(3) Minimum share capital of £50,000 and 25% of the nominal value of each share must be paid up

37
Q

What is the key difference between a private and public company in terms of who they can offer shares to?

A

Public - offer shares to the public
Private - CANNOT offer shares to the public

(APD) Business Law and Practice (11 decks)

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