Chapter 1 - Flashcards
What are the two main type of business medium ?
Limited liability concept
Unlimited liability concept
Which are the two unincorporated businesses ?
Sole traders
Partnerships
Which are the incorporated businesses ?
Limited companies (private and public )
Limited liability partnerships
Does the incorporated business has its own legal entity ?
Yes
Does The the incorporated business have its own legal entity ?
No
Incorporated business does it need to be registered either companies house ?
Yes
Is there a distinction in the unincorporated business between the business and its owners ?
No
Can legal action be taken against incorporated business Ltd ?
Yes
What is a sole trader ?
Someone who is self employed and owns and runs their own unincorporated business
Can the sole traders have employees?
Yes but they are the sole owner of their business
Can sole traders be involved in trade business or profession ?
Yes
What are the advantages of a sole trader ?
It keeps management and ownership simple
Need to register either VAT and HMRC
No costs of forming a company
Separation of ownership
What are the disadvantages of sole traders ?
Have unlimited liability ( they are responsible for everything)
Another bad disadvantage of sole traders?
They can go bankrupt
On what type of tax do sole traders pay trading profits ?
They pay income tax
On What type of tax do sole traders pay capital gains?
On capital gains tax
What other tax advice do sole traders get ?
They get advice On deciding on business medium
What happens if you have modest funds ? Is it advisable to invest in a business ?
No, it is advisable to operate as a sole trader
Do sole traders need to register with HMRC ?
Yes
How many types can be the incorporated business ?
Two: can be public or private
By what can incorporated business be limited by ?
They can be limited by shares or guarantee
What makes the incorporated business different from the unincorporated ?
The creation of a legal process and documents
Do you need to fill in at the companies house for incorporated business ?
Yes
What can the incorporated business be involved with ?
Can be involved in any trade, business, profession
In what case it became legal for a company to become a separate legal entity?
In the Salmon vs Salomon Co Ltd 1897
In what case did the court disregard this principle of the consimt being a separate legal entity ?
Prest vs Petrodel Resorces limited and others 2013
What can this separate legal entity do ?
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)
What means perpetual succession ?
Can continue indefinitely
How else are members called ?
Shareholders
Who are the shareholders, what do they do ?
They wrestle members of the company who own shares in the company
Who have the powered in the incorporated business on a daily basis ?
Directors - they run the company
What are the advantages of incorporated business ?
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
What means limited liability ?
It means limited by shares and by guarantee
What is guarantee ?
Non profit entities
What means limited by shares ?
The liability (responsibility) of shareholders is limited to any amount unpaid in their shares
What means limited by guarantee ?
The liability (responsibility) of shareholders is limited to any amount they promise to pay in the event that the company is wound up ( finishes)
How do you get out of a company that is finished (wound up )?
You pay for your shares and then you no longer have any liability
What if the shareholders pays partly for the its shares when the company is finished ? Are you still liable ?
Yes, if the payment has not been made, or made partially, then you’ll be liable for the balance
Is the incorporated business recognised internationally?
Yes
What can the incorporated business grant ?
Can grant floating charges and fixed charges
Can expenses be expensed on the business in the incorporated business ?
Yes
Does incorporated business gets tax advice ?
Yes, when deciding a medium
What are the two big advantages of incorporated business ?
It’s a separate legal entity and has limited liability
What are the 5 disadvantages of incorporated business ?
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
