1. Practice Questions Flashcards
In a partnership, what happens if a partner leaves without a formal agreement in place?
-the partnership is automatically dissolved
What is the minimum allotted share capital required to form a PLC?
£50,000
What is a key requirement for a private limited company?
-must end with ‘limited’
What are the main sources of finance for a business?
-debt and equity
What type of resolution requires a 75% majority vote in a company’s general meeting?
-special resolution
In an LLP, what is the extent of a member’s liability?
-limited to their investment
When are debentures issued?
-a way of securing long term loans or borrowing
-usually a flat rate of interest
Do you need a company secretary if there is more than 1 director in a private limited company?
-no, it’s not required
What is a primary difference between traditional partnerships and companies?
-companies pay corporation tax on profits
What are debentures?
-raising shares to companies and government issue bonds
What entities don’t have to pay direct tax?
-sole traders and companies
How much do guarantors need to pay on the date of incorporation of a company?
-nothing until the company has a debt
What do memorandum of associations set out?
-form shows that the members wish to form the company
What does the article of association set out?
-roles, responsibilities and powers of directors
What are designated members legally responsible to do?
-appoint external auditors if needed
-signing financial statements
What are the main reasons why someone would want to use a pre-incorporation contract?
-to ensure the promotor is reimbursed for the expenses incurred to create the company
How are profits distributed to the owners of companies?
-directors choose whether to pay dividends to the owners
