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R01 > Chapter 3 - Legal Concepts And Considerations > Flashcards

Chapter 3 - Legal Concepts And Considerations Flashcards

1
Q

What are the 3 categories of legal status for a company?

A

1) Sole Trader
2) Partnership
3) Limited Company

Page 119

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2
Q

How are Sole Traders taxed?

A
  • Income Tax via Self Assessment (on profits)

Paid over 3 dates and based on previous tax year’s income tax bill:

19/20
Jan 2020
July 2020
Jan 2021

  • Capital Gains on sale of business assets

19/20
Jan 2021

  • Class 2 & Class 4 NICs
2 = Self Assesment
4 = Through POA System

Page 119/120

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3
Q

How are LLP’s similar to Limited companies?

A

1) It’s own legal entity
2) Same registration process: Companies House
3) Same accounting process: Companies House
4) No personal liability on the partners

Page 121

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4
Q

How are LLP’s similar to traditional Partnerships?

A

1) All aspects of taxation
2) Partners are self-employed

Page 121

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5
Q

How are companies taxed?

A

Companies pay corporation tax on their profits, including gains plus NICs

Page 122

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6
Q

What are some additional rules for PLCs?

A

1) At least 2 Directors and 2 Shareholders
2) Company Secretary must exist
3) AGM of shareholders
4) Must have offered at least 25% of it’s ordinary share capital for sale to the public

Page 122

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7
Q

What are the 2 key pieces of legislation to be aware of with regards to Bankruptcy?

A
  • The Insolvency Act 1986
  • The Enterprise Act 2002

Page 125

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8
Q

What are the conditions that must be fulfilled before a petition to court can be submitted?

A
  • Creditor is owed at least £5,000
  • A “Demand for Payment” has not been met within 3 weeks (21 days)

Page 126

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9
Q

What is the role of an “Official Receiver”?

A
  • Takes control of the debtor’s property
  • Gathers details of all the debtors assets and liabilities
  • Decides if a Trustee in Bankruptcy should be appointed

Page 126

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10
Q

What assets do NOT pass to the Trustee in Bankruptcy?

A
  • Tools of the trade
  • Clothing
  • Bedding
  • Vehicle (if required for the business)

Page 126

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11
Q

What is the main role of the Trustee in Bankruptcy?

A

To sell the debtors assets and distribute the funds raised the the creditors, using a set order.

They will review the debtor’s financial situation annually

Page 126

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12
Q

What is the order in which creditors are paid?

A

1) Bankruptcy Costs
2) Preferential Creditors
3) Unsecured Creditors

Page 126

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13
Q

What is a IVA/CVA?

A

Creditors will accept an agreed lower amount (75% of creditors must agree) to avoid the drawn out saga of bankruptcy/insolvency

Page 127

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14
Q

What is Administration?

A

An Administrator is appointed when the company is deemed saveable, to run the company as a going concern.

Page 127

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15
Q

What is the main stages of Liquidation?

A

1) Appoint a Liquidator
2) Identify creditors
3) Approve claims
4) Pay claims in priority order

Page 128

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16
Q

In what order are creditors paid?

A

1) Secured creditors
2) Liquidator and associated
3) Preferential creditors
4) Unsecured creditors
5) Interest on all loans

Page 128

17
Q

What is a Legal Offer vs Legal Acceptance?

A

Legal Offer - completion and submission of the proposal or application form

Legal Acceptance - applicant agrees to be bound by the contract terms and conditions by giving consideration

Page 130

18
Q

What are the 3 main conditions for a contract to binding?

A

1) Offer
2) Acceptance
3) Intention

Page 129

19
Q

What is “Consideration” in contract law?

A

Anything of value, which each party must agree to exchange if the contract is to be valid. If only one party offers consideration, the agreement is not a legal and binding contract

In essence, both parties must stand to gain or lose something

Page 130

20
Q

What is a material fact?

A

Any piece of information that would affect a Life Office’s assessment of risk.

Terms and Conditions would include “material facts” on how the policy works

Page 130

21
Q

What are the 4 main steps carried out after the death of an individual?

A

1) Prove the Will
2) Complete the HMRC accounts
3) Receive probate
4) Distribute estate

Page 142

22
Q

What are the 3 ways to revoke a Will?

A

1) Writing a new will
2) Deliberately destroying a Will
3) Marriage/Civil Partnership

Page 143

23
Q

What is the role of a Legal Personal Representative(s)?

A

Consolidate all debts and taxes of the now deceased individual. Also responsible for distributing the estate according to the deceased individual’s Will (if applicable)

Page 145

24
Q

What makes a Will valid?

A
  • Must be in writing
  • Signed by the Testator
  • Must be witnessed by 2 or more people (attestation)

Page 143

25
Q

What are the “3 Certainties” in relation to a Trust?

A

Words - Trust must be intended
Subject Matter - Asset in Trust must clearly be specified
Objects - The beneficiaries must be certain

Page 161

R01 (4 decks)

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