Business mediums Flashcards
Sole trader - Separate Legal personality/Ownership of assets
Unincorporated, so there is no separate legal personality, the sole trader owns the assets personally.
Sole trader - Risk
Solely the trader’s risk. Employees take no liability for debts.
Sole trader - Sharing profits
Solely the trader’s profits. Employees earn a wage not a share of profits
Sole trader - Decision-making
Solely the trader’s decisions
Sole trader - Administrative burden
Do not have to publish accounts or file documentation with Companies house therefore there’s secrecy.
Sole trader - Flexibility of structure
There is not set structure although a management structure may be set up by the trader
Partnership - Separate legal personality/Ownership of assets
Unincorporated so no separate legal personality. Partners own the assets not the partnership. Joint liability for partners which is unlimited
Partnership - risk
Joint and several liability meaning all and any partner can be sued for the totality of liabilities
Partnership - Sharing profits
Shared equally unless agreed otherwise. Usual to agree that it is linked to size of investment. Therefore advisable to have a partnership agreement
Partnership - decision making
Equal votes in decision making unless agreed otherwise
Partnership - Administrative burden
Very little as for sole trader
Partnership - Flexibility of structure
The partnership act imposes a structure only if there is no agreement to the contrary. Advisable to have a partnership agreement which can create any structure the partners want
Limited Liability Partnership - Separate legal personality/Ownership of assets
Yes LLP owns assets. LLP is a separate legal entity
Limited liability partnership - Risk
Limited liability of members.
Limited liability partnership - Sharing profits
As for partnership therefore advisable to have a members agreement
Limited liability partnership - Decision making
As for partnership
Limited liability partnership - Administrative burden
Greater than for partnership as there is registration and on-going filing requirements
Limited liability partnership - Flexibility of structure
As per partnership
Limited liability partnership - Transparency/Administrative burden
Accounts and details of members need to be filed and go on a public register at companies house - no secrecy
Company - Separate legal personality/Ownership of assets
Yes, company owns asserts in its own rights
Company - risk
Limited liability of shareholders, directors protected by concept of separate legal personality.
Company - sharing of profits
Shared amongst the shareholders in proportion to the number of shares they own.
Company - decision making
Separation of power. Day to day decisions are taken by directors who have 1 vote each. Major decisions usually taken by shareholders where voting is proportionate to number of shares
Company - administrative burden
Highest burden. Highly regulated leading to registration and on-going filing requirements
Company - flexibility of structure
Reasonably rigid. Regulated by statute and articles of association
Company - Transparency/administrative burden
High level of transparency due to filing requirements.
Limited liability - definition
Shareholder’s are only liable up to the amount of their investment
Unlimited liability - Definition
Full personal liability for debts of the business
Separate legal personality - Definition
A company is considered a legal person separate from its owners and directors. It can own property and assets, sue and be sued in its own right and enter into contracts. Creditors cannot sue members or directors to pay off debts.
What influences a client’s choice of business medium
Risk, cost and transparency
Limited partnership
Provides partners with limited liability but a limited partner cannot participate in the management of the limited partnership. Whereas with limited liability you get limited liability and management control
Do you have to submit the partnership agreement on incorporation of an LLP
No
