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Business and Employment Law > 2: Sole Traders > Flashcards

2: Sole Traders Flashcards

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1
Q

Where would a sole trader get their start up money from?

A
  • loans/gifts from family
  • government/local authority grants
  • subsidised start-up loans
  • borrow from bank
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2
Q

Why is a loan better than an overdraft for a sole trader?

A

Overdraft has a high interest and the bank can require repayment at any time.

Although you will need to go through some checks with a loan, they are more secure.

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3
Q

What kind of thing would a bank require for a business loan?

A

A credible business plan, showing anticipated income and expenditure from the business.

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4
Q

What will the lender of a business loan most likely look to for a security for the loan?

A

The largest asset, usually the home. They could have a second mortgage, or get permission from the first mortgagee to move it up in priority.

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5
Q

What must be considered closely when a business owner grants a second mortgage on a house that is jointly owned?

A

Undue influence - the bank must make sure the partner receives independent advice before agreeing to the mortgage.

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6
Q

What are the two taxes that a sole trader must consider?

A

Income Tax
Value Added Tax (VAT)

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7
Q

What is the threshold for earnings before having to do a self-assessment?

A

£1,000 - anyone earning over that must do a tax return.

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8
Q

What is paid through self-assessment?

A

Income tax and National Insurance

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9
Q

How long does a new business have to register for self-assessment?

A

3 months from starting.

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10
Q

What does PAYE stand for?

A

Pay As You Earn

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11
Q

How many times a year do you pay tax for self-assessment and why?

A

2 times a year.
1st: an estimate based on your tax liability for last year
2nd: balancing payment.

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12
Q

What is the current VAT threshold?

A

£85,000

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13
Q

What accounts would an accountant prepare for a sole trader?

A

Annual accounts, consisting of a profit and loss account and a balance sheet.

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14
Q

What is a balance sheet?

A

Shows the value of a business’ assets and liabilities at the end of the year.

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15
Q

Does a sole trader need a business bank account?

A

No, but it could be useful.

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16
Q

What is a mandate?

A

A form prepared by the bank, which sets out the legal terms governing the use of the account and identify the sole signatory on the account.

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17
Q

What kind of insurance must be taken out if a business employs staff?

A

Employer’s liability insurance, which covers possibly liability for injuries caused to employees at work.

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18
Q

What three types of insurance should be considered for a sole trader?

A

Employer’s liability insurance
Buildings insurance
Occupier’s liability insurance

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19
Q

If your business name is similar to a registered trade mark, what other factor is likely to mean that you will be prevented from using your chosen name?

A

The more similar the field of business in which the registered trade mark is used.

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20
Q

Where can you check business names?

A

The online trade marks registered, maintained by the UK Intellectual Property Office.

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21
Q

What is the law of ‘passing off’?

A

The common law tort of passing off means that a business can prevent another trader from misrepresenting their identity and confusing customers as a result.

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22
Q

In ‘passing off’, how is goodwill invovled?

A

It arises automatically if a business has goodwill in its reputation (e.g. the name/products/packaging/logo are recognised by its customers and they buy from it because they recognise it).

23
Q

Will a trade mark search guarantee that your name is fine to use?

A

No, due to the law of ‘passing off’, your name may be too similar to another business carrying out similar business.

24
Q

Can a sole trader use their own name, even if it is the same as someone else?

A

Yes, as long as it is in good faith.

25
Q

Which legislation include the statutory rules on business names? Provide sections.

A

Companies Act 2006

s1192: Name is fine, incl. initials
s1193: Government
s1194: Geography/Profession
s1198: Misleading description

26
Q

What are the statutory rules on restricted and prohibited business names?

A

s1192: Rules don’t apply to individual trading under their surname/forename/initials.

s1193: cannot be connected with the government or local authority.

s1194: cannot be connected with a geographical area (e.g. United Kingdom, British, Sheffield) or regulated profession( e.g. Charity, Police, Nursing)

s1198: cannot be a name that gives a misleading indication of the nature of the business, so it would be harmful to the public (e.g. Cheap Loans For All, unless it is true)

27
Q

What is the UK and EU data protection legislation?

A

Data Protection Act 2018 (DPA 2018), which largely implements the provisions of the EU’s General Data Protection Regulation (GDPR)

28
Q

In DPA 2018, what is ‘personal data’?

A

Personal data is any information relating to an identified or identifiable natural person.

29
Q

What is the natural person to who the data relates called?

A

The data subject.

30
Q

Can data on companies be personal data?

A

No, as a company isn’t a natural person. However, info on the directors or shareholders can be personal data.

31
Q

In DPA 2018, what is meant by ‘processing’ personal data?

A

Processing personal data is defined as any operation performed on it, e.g. collecting, recording, organising, storing, erasure, or disclosure.

32
Q

What is the person called who determines the purposes for which personal data is processed and how it is processed?

A

The controller.

33
Q

Does collecting personal data or storing it count as processing?

A

Yes, it does.

34
Q

What are the 5 principles that DPA 2018 requires to be complied with when personal data is processed?

A

Personal data must be:

  1. processed lawfully, fairly and transparently;
  2. collected for specified, explicit and legitimate purposes;
  3. relevant and limited to what is necessary;
  4. kept in a form which permits identification of the data subject for
  5. no longer than is necessary; and processed securely.
35
Q

Could there be a problem transferring data to another country?

A

Yes, because their countries’ data protection standards may be less rigorous that under DPA or GDPR.

36
Q

How many of the 5 conditions from DPA 2018 must apply in order to process personal data?

A

Only 1 need apply.

37
Q

What are the 5 conditions for processing personal data?

A
  1. explicit consent from data subject for at least one specific purpose
  2. necessary in order to perform (or for the DS to enter into) a contract to which the data subject is party.
  3. necessary by a legal obligation which applies to the controller.
  4. necessary in order to protect someone’s vital interests
  5. necessary for someone’s legitimate interests, except where those are overridden by the data subject’s interests or fundamental rights.
38
Q

What is classed as ‘sensitive personal data’?

A

Race
Ethnic origin
Political opinions
Religious or philosophical beliefs
Genetic or biometric data
Health data

39
Q

What are the rules around sensitive personal data?

A

Processing sensitive personal data is generally prohibited, unless the data subject has given explicit consent or if it is necessary for the controller to exercise their rights and perform employment law obligations (e.g. employees).

40
Q

What is meant by ‘explicit consent’?

A

It is not sufficient for a controller’s website to say “unless you tick this box, you consent to us using your data for marketing purposes” – because this means that the customer’s data can be used even though they have not expressly agreed to its use.

41
Q

What rights does the data subject have?

A
  1. the right to be provided with certain information when their data is collected
  2. the right to obtain confirmation as to whether personal data relating to them is held, and a right of access to such data;
  3. the right to have inaccurate personal data corrected;
  4. the right to have personal data erased, except in certain situations where the controller may still need the data;
  5. the right to restrict processing in certain specified circumstances;
  6. the right to be provided with a copy of the personal data relating to them; and
  7. the right to object to automated decision-making using their data, including for marketing purposes and also profiling, for example by algorithms.
42
Q

Where would the data subject’s rights be laid out?

A

In a privacy notice, a privacy statement or a data protection notice.

43
Q

Where must a business owner register if they process personal data?

A

They must register as a data ‘controller’ with the Information Commissioner’s Office.

44
Q

When would a business owner not have to register as a controller of personal data?

A

Where they store personal data:

  1. For purposes of staff administration;
  2. For advertising, marketing and public relations purposes;
  3. For the purpose of accounts and records;
  4. For not-for-profit purposes; or
  5. For purposes relating to personal, family or household affairs.
45
Q

What will a business owner need to do if they want to change the use of a property, e.g. a home to a shop?

A

They will need planning permission, usually if it involved a change in the character of the property.

46
Q

What requires an environmental permit?

A

Activities which are likely to produce potentially harmful substances, or recycling waste, or flood risk activities close to rivers or sea defences.

47
Q

What are designs protected by?

A

Design rights - registered or unregistered.

Registering a design gives the registered owner the exclusive right to use that design for products of that type.

An unregistered design is infringed by someone who copies it.

48
Q

What are technical inventions protected by?

A

A patent, although the process of registering a patent is very expensive and it only lasts for a small number of years.

49
Q

How long does a patent last for?

A

20 years.

50
Q

What is creative output protected by?

A

Copyright, including literary works, dramatic works, musical works, artistic works, recorded or published works. Even computer code.

51
Q

What are the two most common infringements of copyright?

A

Copying the work.
Communication to the public (e.g. online).

52
Q

What legislation deals with exclusion of liability in contracts between businesses and consumers?

A

Consumer Rights Act 2015.

53
Q

What legislation deals with exclusion of liability in contracts between businesses and other businesses?

A

Unfair Contract Terms Act 1977.

54
Q

What is the purpose of terms and conditions?

A

To minimise the company’s liability to their customer and also regulate the terms on which they are paid.

Business and Employment Law (16 decks)

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