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SQE 1 > Chapter 1 - > Flashcards

Chapter 1 - Flashcards

1
Q

What are the two main type of business medium ?

A

Limited liability concept
Unlimited liability concept

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2
Q

Which are the two unincorporated businesses ?

A

Sole traders
Partnerships

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3
Q

Which are the incorporated businesses ?

A

Limited companies (private and public )
Limited liability partnerships

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4
Q

Does the incorporated business has its own legal entity ?

A

Yes

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5
Q

Does The the incorporated business have its own legal entity ?

A

No

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6
Q

Incorporated business does it need to be registered either companies house ?

A

Yes

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7
Q

Is there a distinction in the unincorporated business between the business and its owners ?

A

No

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8
Q

Can legal action be taken against incorporated business Ltd ?

A

Yes

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9
Q

What is a sole trader ?

A

Someone who is self employed and owns and runs their own unincorporated business

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10
Q

Can the sole traders have employees?

A

Yes but they are the sole owner of their business

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11
Q

Can sole traders be involved in trade business or profession ?

A

Yes

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12
Q

What are the advantages of a sole trader ?

A

It keeps management and ownership simple
Need to register either VAT and HMRC
No costs of forming a company
Separation of ownership

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13
Q

What are the disadvantages of sole traders ?

A

Have unlimited liability ( they are responsible for everything)

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14
Q

Another bad disadvantage of sole traders?

A

They can go bankrupt

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15
Q

On what type of tax do sole traders pay trading profits ?

A

They pay income tax

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16
Q

On What type of tax do sole traders pay capital gains?

A

On capital gains tax

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17
Q

What other tax advice do sole traders get ?

A

They get advice On deciding on business medium

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18
Q

What happens if you have modest funds ? Is it advisable to invest in a business ?

A

No, it is advisable to operate as a sole trader

19
Q

Do sole traders need to register with HMRC ?

A

Yes

20
Q

How many types can be the incorporated business ?

A

Two: can be public or private

21
Q

By what can incorporated business be limited by ?

A

They can be limited by shares or guarantee

22
Q

What makes the incorporated business different from the unincorporated ?

A

The creation of a legal process and documents

23
Q

Do you need to fill in at the companies house for incorporated business ?

A

Yes

24
Q

What can the incorporated business be involved with ?

A

Can be involved in any trade, business, profession

25
Q

In what case it became legal for a company to become a separate legal entity?

A

In the Salmon vs Salomon Co Ltd 1897

26
Q

In what case did the court disregard this principle of the consimt being a separate legal entity ?

A

Prest vs Petrodel Resorces limited and others 2013

27
Q

What can this separate legal entity do ?

A

Can enter into contracts
It can own property
Be a party to legal proceedings (can be sued)
It can have perpetual succession ( can continue indefinitely)

28
Q

What means perpetual succession ?

A

Can continue indefinitely

29
Q

How else are members called ?

A

Shareholders

30
Q

Who are the shareholders, what do they do ?

A

They wrestle members of the company who own shares in the company

31
Q

Who have the powered in the incorporated business on a daily basis ?

A

Directors - they run the company

32
Q

What are the advantages of incorporated business ?

A

1.Separation of ownership and management
2. The sake/transfer of a company interest is straightforward done via transfer of share as an alternative to the transfer of the assets
3. Limited liability

33
Q

What means limited liability ?

A

It means limited by shares and by guarantee

34
Q

What is guarantee ?

A

Non profit entities

35
Q

What means limited by shares ?

A

The liability (responsibility) of shareholders is limited to any amount unpaid in their shares

36
Q

What means limited by guarantee ?

A

The liability (responsibility) of shareholders is limited to any amount they promise to pay in the event that the company is wound up ( finishes)

37
Q

How do you get out of a company that is finished (wound up )?

A

You pay for your shares and then you no longer have any liability

38
Q

What if the shareholders pays partly for the its shares when the company is finished ? Are you still liable ?

A

Yes, if the payment has not been made, or made partially, then you’ll be liable for the balance

39
Q

Is the incorporated business recognised internationally?

A

Yes

40
Q

What can the incorporated business grant ?

A

Can grant floating charges and fixed charges

41
Q

Can expenses be expensed on the business in the incorporated business ?

A

Yes

42
Q

Does incorporated business gets tax advice ?

A

Yes, when deciding a medium

43
Q

What are the two big advantages of incorporated business ?

A

It’s a separate legal entity and has limited liability

44
Q

What are the 5 disadvantages of incorporated business ?

A

1.Involves ongoing formalities for decision making, and filing disclosure requirements
2. Has legal expenses
3. It’s an administrative burden
4. Info kept at companies house becomes public
5.pay corporation tax on both income profits and capital gains

SQE 1 (12 decks)

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