1. setting up a business

Question 1

What do you need to do before engaging new clients?

Answer 1

1. CONFLICTS CHECK
2. SEND ENGAGEMENT/CLIENT CARE/RETAINER LETTER
3. BACKGROUND CHECKS including Money Laundering Check
4. Request MONEY ON ACCOUNT (if worried about client’s creditworthiness)
5. OPEN FILE (so you have a file number to record time)
6. Consider if you need ANOTHER MEETING

Question 2

Why CONFLICTS CHECK?

Answer 2

o(3.1)

CHECK IF firm is acting for:

• another party with whom the prospective client is in dispute
• or another party which might give rise to conflict?

Question 3

What is in the ENGAGEMENT LETTER?

Answer 3

Details in writing of various things

• complaints handling procedure
• name of principal
• scope of work/expectations
• time scale
• how fees are calculated (hourly fees/fee estimate)
• costs (incl. party/party if lit)

SRA CODE: Chapter 1 client care

Question 4

what BACKGROUND CHECKS?

Answer 4

1. MONEY LAUNDERING CHECK (to comply with Money Laundering Regulations 2007)
   - if you suspect an issue, speak with designated money laundering officer of your firm
2. IDENTITY CHECK
3. CREDIT CHECK

Question 5

What is a business plan for?

Answer 5

• contains key information so investors can decide whether to invest
• investor ensures business is financially sound (so it’ll get its money back)

Question 6

what is in a business plan?

Answer 6

1. appendix
2. history/background
3. mission statement/objectives
4. product/services
5. market information
6. resources employed
7. management
8. financial info
9. summary and action plan
10. ways of generating profit
11. target market, comp in market
12. assets avaliable
13. sources of finance
14. personal guarantee?

Question 7

Concern: ownership?

Answer 7

1 for each except

• partnership
• LLP

Question 8

Concern: finance raising

Answer 8

hardest to easiest

sole trader
partnership
LLP
Ltd
PLC

Question 9

Concern: immediate trading

Answer 9

no set up:

• sole trader
• partnership

registration:

• LLP
• Ltd
• PLC (and listing)

Question 10

concern: privacy

Answer 10

least to most disclosure:

ST
Partnership
LLP
Ltd 
Plc

Question 11

concern: limited liability

Answer 11

unlimited:
ST
Partnership

limited:
LLP (only agreed amount)
Ltd
Plc

Question 12

concern: tax

Answer 12

tax transparent:

• ST
• Partnership

Question 13

concern: start up costs

Answer 13

PLC requires £50,000 share capital

Question 14

partnerships - evidence of it

Answer 14

• profit sharing

- agreement to share loss and profits

Question 15

partnerships - not evidence of it

Answer 15

• loan of money by one to another

- person not held out to be partner

Question 16

clauses to include

Answer 16

1. % of profits/cap
2. salary
3. decision
4. leaving partnership voluntarily
5. partnership prop
6. removing partner
7. liability for debts
8. variation of Partnership agreement

Question 17

public vs. private companies - key differences

Answer 17

• name
• SH
• directors
• CS req?
• certificate req to commence trade
• min share capital
• offer shares to public
• method of payment, min amount payable for SC
• AGMs
• WR
• Financial assistance
• purchase own shares out of capital

Question 18

certificates required before commencement of trading - private vs. public

Answer 18

both: certificate of incorporation

also plc:
- trading certificate issued by registrar showing company’s allotted SC is not less than minimum

Question 19

min share capital - private vs public

Answer 19

ltd: one share
plc: min £50,000

Question 20

method of payment and min amount payable for share cap - ltd vs plc

Answer 20

ltd:
- no restriction on method of payment and
- shares can be issued without immediate payment

plc:

• payment in cash only or where consideration has been independently valued
• 25% of nominal value must be paid on allotment + whole of any premium