business forms Flashcards
what is a sole trader
owned by one person
what are the pros of being a sole trader?
- can be set up with no formalities
- cheap and simple to run
- private
- independent
- proprietor keeps all profits
what are the cons of being a sole trader?
- difficult to raise finance
- unlimited liability - owner liable for all debts
- risk to personal finances
- personal responsibility
what is a partnership according to the Partnership Act 1980 s1?
the relationship which subsists between persons carrying on a business in common with a view of profit
where may the rights and liabilities of the partners be set out?
in a formal deed of partnership or a written partnership agreement
what does the Partnership Act 1980 make provisions for?
contribution to capital, division of profits, rights of partners to participate in management etc but all may be varied by agreement
what are the pros of a partnership?
- easy to set up and run
- flexible
- share decision making
- bring in different skills and experience
- private
what are the cons of a partnership?
- no separate legal existence
- unlimited liability
- changes can dissolve partnership
- problems if there are disagreements
- financing
what is a limited liability partnership (LLP - Limited Liability Partnerships Act 2000 s2(1)
an LLP may be incorporated when two or more persons associated for the purpose of carrying on a lawful business subscribe their names to an incorporation document
what is the LLP status intended for?
professional partnerships such as law or accountancy firms
what do members of LLP benefit from?
limited liability
what are the most common types of company?
private limited companies (Ltd) and public limited companies (plc)
which act contains information about companies?
Companies Act 2006
after incorporation of a company, what are separated?
ownership and control
what does a company have and what is the liability of its shareholders
A company has a separate legal personality and the liability of its shareholders is limitedh
how do you set up a limited liability company?
- register with companies house
- company information is added to the Register of Companies
- information on the register can be searched by anyone
what are the pros of a limited liability company?
- separate legal personality
- limited liability
- options for investment
- credibility
what are the cons of a limited liability company?
- regulatory compliance
- separation of ownership and control
- publicity of accounts and documents
what is a private limited company (ltd)?
CA 2006 s4(1) - company that is not a public company
- can have one member
- must have LTD or the word limited in its name
- no minimum capital requirement
- cannot offer shares to public
what is a public limited company (plc)?
CA 2006 s4(2) - a company … the memorandum of which states that it is to be a public company and the requirements of the act .. as to registration … as a public company have been complied with
what must a plc have?
- at least 2 members
- the words public limited company or plc at the end of its name
- a minimum share capital of £50,000 before it can start trading
what can a plc do?
may offer its shares for sale to the general public
may decide to float its shares on the stock market
what documentation is needed to set up a limited company?
memorandum of association
articles of association
