Business Mediums Flashcards
What is a principal feature of incorporated businesses?
The owners of that business are not liable for business debts.
What is the most common form of an incorporated business?
Limited companies
What is a sole trader?
Someone who owns and runs an unincorporated business on their own as a self-employed person.
They bare profits and losses themselves.
Often have employees.
A partnership is formed where…
Two or more people are carrying on a business with a common view of profit’
Is a standard partnership a separate legal entity?
No
What is a private company limited by shares?
A company in the UK formed by registering certain documents with the registrar of companies in accordance with the companies act.
Main advantage is that it is a separate legal personality - the shareholders are not liable for the companies debts and their liability is limited to the amount they initially invested.
What are the three criteria for a company to be a public company?
1) The constitution must state it is a public company;
2) The words public limited company or abbreviation PLC (or welsh equivalent for Welsh companies) must be included at the end of the company’s name; and
3) The company’s owners must invest a specified minimum amount of money for use by the company. this means the allotted share capital of the company must be at least the ‘authorised minimum’ currently sitting at £500,000 (s 761 and 763 CA 2006). each allotted share must also be paid up to at least a quarter of its nominal value, plus the whole of any premium on it.
Explain the features of an LLP.
- LLPs are formed under LLP Act 2000.
- Likened to a cross between a regular partnership and a private limited company.
- It has a separate legal personality distinct from its owners, and offers its owners protection from the debts of the LLP.
- Partners are taxed as if the business were a partnership rather than a company.
Explain the filings needed for a re-registration as a public limited company.
1) The special resolution approving the re-registration;
2) Form RR01 , which includes a statement of compliance;
3) The fee for re-registration
4) The revised articles;
5) Copy of the balance sheet and a written statement from company auditors, and a valuation report based on any shares hat have been allotted for non-cash consideration between date of balance sheet and date of the passing of the special resolution.
Can directors approve service contracts?
Directors can approve service contracts during the course of board meetings, however service contracts for fixed terms of over 2 years, they must be approved by ordinary resolution.
In the event of a limited company going insolvent, explain the liability of:
a) Shareholders (whose shares are fully paid up);
b) Shareholders (whose shares are partially paid up)
a) Shareholders whose shares are full paid up will not be liable for any of the business debts, they merely lose the money they originally invested.
b) Shareholders whose shares are partially paid up are liable to pay the remaining amount on their shares, but are not liable for anything further.
True or False: It is possible (in a limited partnership) to be involved both in management and limited liability as a member.
False.
To retain limited liability status in a limited partnership, a partner cannot be involved in management and simultaneously enjoy limited liability. An LLP would probably be better in this situation.
