Business and Structures Flashcards
Q: What are the four main types of business structure in the UK?
A: Sole trader, partnership, limited company, and LLP.
Term: Limited Company
Definition: A business with a separate legal identity from its owners.
Q: What’s a key financial liability difference between sole traders and limited companies?
A: Sole traders have unlimited liability; limited company directors do not.
Term: Shareholder
Definition: An owner of a share in a limited company.
Q: What is business risk?
A: The risk that a business may not achieve its objectives due to internal or external factors.
Term: Key Person Insurance
Definition: A policy taken out by a business on a vital employee to cover financial loss if they die or fall ill.
Q: What’s the purpose of a cross-option agreement?
A: Ensures business shares can be transferred on death while maintaining control and fair value.
Term: Business Continuity Planning
Definition: Strategies to ensure operations continue during unexpected disruptions.
Q: What is professional indemnity insurance?
A: Cover for legal costs and compensation if a business gives poor advice or service.
Term: Relevant Life Plan
Definition: Life cover for an employee paid by the business — tax-efficient and outside the estate.
Q: What is a memorandum of association?
A: A legal statement signed by all initial shareholders agreeing to form the company.
Term: Articles of Association
Definition: The written rules about running the company agreed by the shareholders and directors.
Q: What is director’s fiduciary duty?
A: A legal obligation to act in the best interests of the company.
Term: Partnership Agreement
Definition: A legal document detailing how a partnership operates and profit is shared.
Q: What’s a limited liability partnership (LLP)?
A: A hybrid business structure offering flexibility of a partnership with liability protection.
