Advantages and disadvantages of the different types of business structures Flashcards
What is the governing statute(s) of a partnership?
Partnership agreement
But if no PA, then Partnership Act 1890 will apply
What is the governing statute(s) of a Limited Liability Partnership?
- Limited Liability
Partnerships Act 2000
(‘LLPA’) - Limited Liability Partnership
Regulations 2001 (‘the
Regs’) - Companies Act 2006
What is the governing statute(s) of a Limited Liability of a Company Limited by Shares?
- Companies Act 2006
(‘CA’) - Insolvency Act 1986
- Company Directors
Disqualification Act 1986 - Model Articles
What is the liability of investors in a partnership? Is it an advantage or disadvantage?
Will be stated in partnership agreement;
If no PA -will be governed by the Partnership Act 1890 -which states partners will have joint and several liability to third parties- this means their liability will be unlimited.
Disadvantage.
What does joint and several liability mean?
When multiple parties can be held liable for the same event or act.
What is the liability of investors in a limited liability partnership?
Is it an advantage or disadvantage?
Individual members are not personally liable
They are only liable to the extent of what was agreed in their LLP agreement.
Thus, liability is limited.
ADVANTAGE.
What is the liability of investors in a company limited by shares?
Is it an advantage or disadvantage?
Liability limited only to the amount of their shares, and any shares still unpaid - s3(2) CA 2006
ADVANTAGE.
What is the legal status of a partnership?
Is it an advantage or disadvantage?
Partners together constitute the partnership.
Partnership has no separate legal personality; partners are personally liable.
DISADVANTAGE.
What is the legal status of a limited liability partnership.
Is it an advantage or disadvantage?
The LLP has its own legal personality, separate from the owners.
Therefore it can own property, sue and be sued. Liability is therefore limited to the LLP and does not extend to partners.
ADVANTAGE.
What is the legal status of a company?
Is it an advantage or disadvantage?
The company has its own legal personality and is a separate legal entity from the members. Therefore liability is limited to the company.
ADVANTAGE.
How many persons need to be involved in setting up a partnership?
Minimum of 2 persons (Source?)
How many persons need to be involved in setting up a limited liability partnership?
Minimum of 2 persons
If business carries on for over 6 months after the LLP is down to 1 member, that member becomes severally liable for debts incurred after that 6 month grace period (limited liability benefit is lost).
How many persons needs to be involved in setting up a company?
Minimum of 1 person s7 CA2006.
What documents are required and how much must be paid to start up a partnership?
No documents or fees are necessary - although
highly recommended to have partnership agreement.
What documents are required and how much must be paid to start up a limited liability partnership?
- Certificate of incorporation s. 15 CA 2006
- Registration fee
- Printing of LLP stationery
(memorandum and articles of association not required - but drawing upLLP agreement is highly recommended )
Do partnerships need to disclose anything to the public?
No disclosure required.
Do limited liability partnerships need to disclose anything to the public?
Need to Disclosure to Registrar:
1) Registered office - ss. 2(c)
and (d) LLPA
2) Accounts - Reg 3 of the
Regs
3) Details of members - s2(e)
LLPA
4) Identity and details of ‘designated members’ (i.e. members with key admin responsibilities) - s2(f) LLPA
Do companies need to disclose anything to the public?
Disclosure to Registrar of:
1) Registered office - ss. 9
(5) and 855 CA 2006
2) Accounts - s441 CA
2006
3) Information on directors,
members and capital - ss.
854-856A CA 2006
4) Certain resolution of the
members - s29 CA 2006
5) Charges over the
company’s assets - s859A
CA 2006
6) Company name - s82
CA 2006
Are there any ongoing expenses needed to maintain a partnership?
None
What financial documents must be reported in a company?
Audited accounts prepared
annually
Annual Return filed annually
What financial documents must be reported in a company?
Audited accounts prepared
annually
Annual return filed
annually
Are there any formalities governing the management structure of a partnership?
Is it an advantage or disadvantage?
The management structure is governed by:
Partnership agreement.
ADVANTAGE.
Are there any formalities governing the management structure of a limited liability partnership?
Is it an advantage or disadvantage?
The management structure is governed by:
Very few formalities - need to look at specific partnership agreement.
ADVANTAGE
Are there any formalities governing the management structure of a company?
Is it an advantage or disadvantage?
The management structure of a company is governed by:
Meetings of directors and
Shareholders meetings
Company’s articles
Model Articles (MA) =
default articles for
companies incorporated on/
after 1 October 2009
DISADVANTAGE
