business models Flashcards
what is a sole trader
A sole proprietor is simply an individual carrying on some form of business activity on his own account
how to register sole trader business
register himself with HM Revenue & Customs (HMRC) as self-employed.
Sole proprietorships are not generally subject to the Companies Act 2006 (CA 2006), so do not need to file accounts at Companies House and are subject to much less regulation than companies.
complete own tax return so need to keep clear and accurate records of tax
cons to sole trader
cannot provide shares in company
cannot admit new partners
harder to obtain loans
liability Is fully personal and unlimited
higher insurance
pros to a sole trader
full entitlement to all profit and assets
what is a partnership
Two or more persons who wish to carry on business together cannot do so as a sole proprietorship for obvious reasons.
ordinary partnership defined under Section 1(1) of the Partnership Act 1890
the relation which subsists between persons carrying on a business in common with a view to profit’.
The ability of a partner to bind the partnership
s.5 PA 1890
United Bank of Kuwait v Hammoud [1988] 1 W.L.R. 1051 - This case concerned the liability of a borrower’s solicitor to the lender who was not separately represented. The solicitor failed to advise that a mere deposit of title deeds would not create effective security by reason of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
The court held that the solicitor ought to have been aware of that case, but in any event, ought to have realised that a deposit of title deeds (at the very least, arguably) no longer created effective security.
- Overlap with the law of agent – actual and apparent authority.
Section 10 of the PA 1890
provides that the partnership and each partner is vicariously liable for the wrongful acts or omissions of another partner, providing that the partner was acting within his authority, or that the act or omission was done whilst in the ordinary course of the firm’s business.
Can a non-partner be liable?
S.24 PA 1890.
can still be liable if you have left the company but the partnership is still using your name. also when an issue has occurred whilst being a partner to the company but is now not a partner anymore.
S.28 PA 1890
render true accounts & reveal all relevant information.
S.29 PA 1890
do not use partnership property.
S.30 PA 1890
non-compete against the partnership
types of partnerships
the ordinary partnership (usually referred to simply as a ‘partnership’)
the limited partnership, which is a form of partnership that can be formed under the Limited Partnerships Act 1907 (limited partnerships are extremely rare)
the limited liability partnership
differences between public and private company
public:
As of December 2019, there were 5,478 public companies registered in the UK (0.1 per cent of the total number of companies)
Must have a share capital
Must be limited. It is impossible to create an unlimited public company
Can offer to sell its shares to the public at large
Can list its shares (although the majority do not)
Must have an allotted share capital of at least £50,000
Two
plc
Must appoint a company secretary
private:
As of December 2019, there were 4 million private companies registered in the UK (99.9 per cent of the total number of companies)
No share capital required, but the vast majority do have a share capital
Can be limited or unlimited, although the vast majority are limited
Cannot offer to sell its shares to the public at large
Cannot list its shares
No minimum capital requirement
One
Ltd
Need not appoint a company secretary, but may do so if it chooses
