Business types Flashcards
Sole traders
Unlimited liability
No requirement to incorporate at CH. Only an intention to carry on the business for profit.
- Shareholders pay income tax.
General partnership
Similar to sole trader, but two or more people.
No requirement to incorporate at CH. Only an intention to carry on the business for profit.
- Shareholders pay income tax.
Limited partnership
- Must be at least one partner with unlimited liability, and one limited partner.
- The limited partner may not be involved in the management of the company or else they too will become unlimitedly liable.
- Registration at CH is necessary.
- The limited partner is only able to lose what the contributed. Can’t be pursued for more.
- Shareholders pay income tax.
Limited Liability Partnership
- Upside: limited liability and less formalities than starting up company.
- Equal say in decisions (unless partnership agreement says otherwise).
- Registration at CH is necessary.
- Separate legal entity so can exist perpetually.
- At least 2 partners.
- Equal share of profits.
- Cease to be member by giving reasonable notice to other members and to CH.
- Shareholders pay income tax.
- Easier to raise $$ bc lenders trust this more bc PLC can grant floating charge over assets.
Private Limited Company
- Registration at CH is necessary.
- Can make it either by purchasing a shelf company or filing docs at CH.
- Corporation tax and shareholders pay income tax on their dividends.
- Easier to raise $$ bc lenders trust this more bc PLC can grant floating charge over assets.
- Management decisions taken by directors, voting by simple majority show of hands and major decisions by shareholders.
- Directors could outvote owner in management decisions so to avoid this she will need to update the company’s articles. At shareholder level, the size of the owner’s shares will give her control over major decisions.
How can shareholders remove directors?
Through a simple majority vote. But it can’t be done by written resolution, only irl to let them state their defence.
How much notice must be given to remove a director?
28 days before the meeting.
How can a meeting of board of directors be called?
By any director, with reasonable notice.
Who needs to declare interest?
Directors, not shareholders. Or else vote won’t count.
What kind of vote does it require for board resolution?
Majority vote.
What type of companies can put floating charges?
LLP and PLC.
What agreement can change the terms of how the people work in the company?
Partnership agreement or in a PLC, partnership agreement or shareholder agreement.
Who can call shareholders general meetings??
Directors can call them whenever they want. Shareholders only if they have 5% + capital.
When is a partnership bound?
(1) If the partner has actual authority to do smth i.e. it’s written in the partnership agreement.
(2) If the third party knew that. This test could be i.e. would one think that a lawyer would be buying a jacuzzi?
What happens if a partnership is bound to a debt? Who can the Creditor go for?
- creditors can pursue any one of them
- after creditor gets the $$ from whoever they choose, that partner can pursue the other partners for the $$ back.
