Business Organisations

Question 1

What does it mean for a business to be a Sole Proprietorship Business?

Answer 1

1. Business is carried out by one person

2. The business is not a separate legal entity

Question 2

What does it mean for a business to be in a partnership?

Answer 2

1. More than one working together in common view of profit.
2. Jointly owning property or gross returns not necessarily partners
3. Sharing of net profits imply partnership

Question 3

Under partnership, what is considered property?

Answer 3

1. Equipment
2. Stocks in trade
3. Good will
4. Rights (Trade mark)

Question 4

Under partnership, can a partner use it for individual need unconnected to the partnership business?

Answer 4

No, if one partner misappropriates partnership property, partners may be able to sue him.

Question 5

Under partnership, are profits and losses always shared equally?

Answer 5

Yes, even if the contribution is unequal. If partners do not wish to share the profits and losses equally, they should state it explicitly in the partnership agreement.

Question 6

Under partnership, do firms have to indemnify every partner?

Answer 6

Yes, after a partner makes a purchase, firms have to reimburse the partner.

Question 7

Under partnership, if partner A contributes more than partner B, does it mean that partner B has less rights to manage the company?

Answer 7

No, every partners have equal rights to take part in the management.

Question 8

Under partnership, to make a decision for ordinary matters how many partners need to agree?

Answer 8

Majority of the partnership

Question 9

Under partnership, to change the nature of the business how many partners need to agree?

Answer 9

All of the partners.

Question 10

Under partnership, are partners entitled to remuneration for their service?

Answer 10

No, every partner is not entitled to any remuneration for their service because there is a distribution of profit. They should not assume they will also be paid a regular salary.

Question 11

Under partnership, how does a firm expel a partner?

Answer 11

No majority of members can expel a partner, even if contract allows so, likely to apply to court to dissolve the partnership.

Question 12

Under partnership, can a partner be in a competing business with the same nature?

Answer 12

Yes, with consent of the partners. However, if do not have consent, the partner will be accountable for all the profits made and derived.

Question 13

Under partnership, can a partner be in a competing business with the same nature?

Answer 13

Yes, with consent of the partners. However, if do not have consent, the partner will be accountable for all the profits made and derived.

Question 14

What is a company?

Answer 14

A company is an organisation set up pursuant to the company act.

Question 15

Under company, what does it mean to be a separate legal entity?

Answer 15

This means that:

1. The company can own property under its name.
2. The personal asset of the company/owner cannot be seized should the other be in debt.

Question 16

Under company, what are the exceptions that the debt belongs to the member?

Answer 16

1. The company is held with the intention to defraud creditors or any fraudulent purpose
2. If a person incur debt on behalf of the company without reasonable or probable expectation of the debt being settled.

Question 17

Under company, the proper person to take action to the court is the company. What are the exceptions that the minorities and members can take action to the court?

Answer 17

1. If the majority of the company committed some fraud and use its power against the minority
2. A member can commence, if the court allow it considering the company’s interest that such action should be brought.

Question 18

What does perpetual succession mean?

Answer 18

Even if directors die or become bankrupt, the company continues until liquidated.

Question 19

What are the types of company?

Answer 19

1. Limited by shares
2. Limited by guarantee
3. “Unlimited”
4. Public
5. Private

Question 20

What does it mean to be a public company?

Answer 20

1. Transfer-ability of shares is not restricted

2. There are more than 50 people

Question 21

What does it mean to be a private company?

Answer 21

1. There is restrict of transferability of shares

2. There are no more than 50 people

Question 22

How does can a private company be classified as “exempt”?

Answer 22

1. Less than 20 members

2. All shared capital are held by natural person

Question 23

What are the similarities with a partnership and limited liability partnership?

Answer 23

1. Entitled to equal share of profit
2. Indemnify each partner
3. Take part in management
4. Not entitled for remuneration
5. Decision are made by majority
   6 Accountable for any benefit for using property of LLP

Question 24

What are the similarities with a company and a limited liability partnership?

Answer 24

1. Separate entity from partners
2. Perpetual succession
3. Can sue and can be sued in its own name
4. Can acquire own and hold movable and immovable property
5. Not personally liable

Question 25

In limited liability partnership, is it true that the all members have equal rights to take part in the management regardless of how much they contribute?

Answer 25

Yes. Just like in partnership, the partners have equal rights to take part in the management.

Question 26

In limited liability, it is true that it acquire, own and hold both ________ and _________ property.

Answer 26

movable and immovable