Chapter 20: Business Organisation

Question 1

legal personality

Answer 1

means to be capable of having legal rights and duties within a certain legal systems (enter contracts, sue, be sued)

Question 2

characteristics of a corporation

Answer 2

1. creation by operation of law
2. one or many members
3. its own legal personality
4. company which is legally liable

Question 3

limited liability

Answer 3

liability that does not exceed the amount invested

Question 4

unincorporated association

Answer 4

an organisation without any legal personality distinct from its members

Question 5

partnership

Answer 5

no legal existence distinct from its members, all partners are personally liable

Question 6

sleeping partnership

Answer 6

only involvement is providing capital and taking a share of the profits

Question 7

dissolving the partnership (6)

Answer 7

1. lapse of time
2. sole purpose of the partnership is achieved
3. death or bankruptcy of a partner
4. illegality
5. notice from a partner
6. court order

Question 8

Purposed of the registration process (4)

Answer 8

1. check financially viable
2. provide a public record
3. guard against fraud
4. enable continuing supervision

Question 9

public company (3)

Answer 9

1. limited by shares
2. plc after name
3. limited liability

Question 10

private company (2)

Answer 10

1. ltd after name

2. shareholding usually limited to people who participate in the business

Question 11

holding and subsidiary companies

Answer 11

holding company will control the subsidiary companies (holding company has majority voting within the subsidiary companies)

Question 12

veil of incorporation

Answer 12

prevents the members from being held responsible for the companies liabilities

Question 13

liability may be limited by…. (2)

Answer 13

1. shares

2. guarantee

Question 14

liability limited by shares

Answer 14

shareholders are only liable for the amount with which they purchase shares

Question 15

liability limited by guarantee

Answer 15

(minority of companies use this method) educational or charitable organisations
companies members is limited to the amount which they have agreed to contribute

Question 16

company may be legally liable

Answer 16

1. criminal offences
2. tort
3. breaches of contract

Question 17

two forms of liquidation

Answer 17

1. compulsory liquidation: by court order

2. voluntary liquidation: members control

Question 18

advantages of incorporation (6)

Answer 18

1. limited liability of investors
2. transferability of shares
3. tax
4. separate property rights
5. raising capital
6. continuity