Business law and Practice Unit 1 Flashcards
What is a sole trader?
A business owned and operated by a single individual who pays tax as a self-employed person.
Sole traders are personally liable for all debts incurred by the business.
Define partnerships in business law.
When two or more people are carrying on a business in common with a view of profit.
Governed by the Partnership Act 1890 unless otherwise agreed.
What does the Partnership Act 1890 provide?
A default partnership agreement unless partners enter into a separate agreement disapplying its provisions.
This act outlines the rights and responsibilities of partners.
How are partners taxed?
Partners are taxed separately as self-employed persons paying income tax on their share of profits.
Each partner reports their income on personal tax returns.
What is a limited partnership?
A partnership that must have one unlimited liability partner and allows for limited liability partners under specific conditions.
Governed by the Limited Partnership Act 1907.
What conditions must a limited liability partner meet?
Must not control or manage the limited partnership, have power to make binding decisions, or remove their contribution.
These restrictions ensure the limited liability status is maintained.
What are the requirements for a public company?
- Constitution must state it is a public company
- Must include ‘public limited company’ or equivalent in the name
- Owners must invest a specified minimum amount (£50k)
Each allotted share must be paid up to at least a quarter of its nominated value.
Why are public companies more regulated than private companies?
Because they can offer shares to the public.
This involves greater transparency and compliance with regulations.
What is the process for forming a limited liability partnership (LLP)?
Formed by filing documents with the registrar of companies and paying an applicable fee.
The registrar will issue a certificate of incorporation, marking the LLP’s existence.
What is required to form a company?
Complete Companies House form INO1 along with a memorandum of association and possibly articles of association.
A fee must be paid for the application.
How can an applicant make a company formation application?
Online, through post, or via software provided by Companies House.
Applicants may seek assistance from solicitors or accountants.
What does the registrar issue upon successful incorporation?
A certificate of incorporation.
This certificate is the formal recognition of the company’s existence.
Fill in the blank: A public company can apply to join the _______.
UK stock market.
True or False: Unlisted public companies can offer shares to the public.
True.
However, this process is more complicated for unlisted companies.
