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Law Certificate > Chapter 6 - Types of trade > Flashcards

Chapter 6 - Types of trade Flashcards

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1
Q

legal status of a sole trader

A

Business is a separate accounting entity, but is not legally distinct from the person who owns it

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2
Q

what are the following advantages of
- no formal set up procedures
- Independence and self-accountability
- Personal supervision
All profits accuse to owner

A

sole trader

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3
Q

what are the following disadvantages of
- If get into debt personal wealth may be lost
- Expansion usually only possible by ploughing profits as further capital
- Highly dependent on individual (hard during holiday/sickness)
- Death of proprietor may mean have to sell to pay tax / family members don’t want
- Individual may only have one skill
- small size, lack of diversification, absence of economies of scale, problems raising finance

A

sole rader

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4
Q

Partnership definition

A

relationship which subsists between persons carrying on a business in common with a view of profit

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5
Q

When does a partnership begin

A

when the partners agree to conduct their business activity together

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6
Q

t/f
if the purpose of the common endeavour is to gain business experience, there is no partnership

A

True

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7
Q

T/F
‘Limited company’ and ‘registered company’ can only be applied to registered company

A

True

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8
Q

In the absence of any partnership agreement, how are profits and losses split

A

equally - if agreement states how profits are split but not losses assume losses split the same

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9
Q

Parternship Act - how is the partnership managed

A

every partner is entitled to take part in managing the firms business, ordinary management decisions can be made by a majority of partners

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10
Q

partnership act - how are changes in business agreed

A

any decision must be unanimous

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11
Q

Partnership Act T/F
the firm must indemnify any partner against the liabilities incurred in the ordinary and proper conduct of the partnership business or doing anything necessarily done for the preservation of the partnership property or business

A

True

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12
Q

Are partners entitled to remuneration for acting in the partnership business

A

No

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13
Q

When may the partnership agreement be varied

A

with the consent of all the partners

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14
Q

Where must records and accounts be kept

A

main place of business - must be open to inspection by all partners

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15
Q

When is interest on capital paid

A

None apart from by agreement - partner can get 5% advances beyond original capital

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16
Q

When can new partners be introduced

A

with unanimous consent of existing partners

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17
Q

When can partner be expelled

A

by a majority of votes within the partnership

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18
Q

How long does authority of partners continue after dissolution

A

so far as it is necessary to wind up the partnership affairs and complete transactions already begun.

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19
Q

Do partners owe a fiduciary duty to the partnership

A

Yes

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20
Q

T/F
partners are jointly and severally liable for the acts of their fellow partners in so far as they bind the firm

A

True

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21
Q

How do partners have authority to find the firm

A

based on agency - authority may be actual (express/implied) or apparent

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22
Q

When will partners not be bound by other partners acts

A

if they have no authority to act for the firm in that particular matter and
the person with whom they are dealing either knows they have no authority or does not believe them to be a partner

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23
Q

T/F
Where a parter pledges the credit of the firm for a purpose which has no connection with the firm’s ordinary business, the firm will not be bound unless they have actual express authority to do so

A

True

24
Q

T/F
if any restriction is placed on a partner’s authority to bind the firm, no act done in contravention of that restriction is binding on the firm where the third party has notice of the restriction

A

True

25
Q

T/F
when a partner retires they remain liable for any outstanding debts incurred while they were a partner, unless the creditor has agreed to release them from liability. and debts incurred after if the creditor knew them to be a partner and received no notice of retirement

A

True

26
Q

Is a partnership dissolved in the following instance
Death/bankruptcy of partner

A

Yes

27
Q

Is a partnership dissolved in the following instance
Expiry of fixed term partnership

A

Yes

28
Q

Is a partnership dissolved in the following instance
Completion / termination of single joint venture

A

Yes

29
Q

Is a partnership dissolved in the following instance
Subsequent illegality

A

Yes

30
Q

Is a partnership dissolved in the following instance
Notice given by a partner if it is a partnership of indefinite duratio

A

Yes

31
Q

Is a partnership dissolved in the following instance
Order of the court

A

Yes

32
Q

What are members of the LLP

A

Agents

33
Q

Advantages of LLP

A

Limited liability - not personally liable

34
Q

What does a limited partnership require

A

at least one general partner who has control of management of the business and whose liability must be unlimited. other partners are not entitled to participate in management and liability is limited to the amount of capital invested

35
Q

Is there a registration fee for setting up an LLP

A

Yes

36
Q

what must be included on the incorporation document

A

name of lip
location of registered office
address of registered office
name and address of members of LLP
name of two designated members

37
Q

Role of designated members

A

filing notices with registrar and register of people with significant interest
singing and filing partnership accounts
appointing auditors

38
Q

Must an LLP comply with
Maintain register of charges and to register charges with registrar

A

Yes

39
Q

Must an LLP comply with
Notify registrar of changes to membership designated members or registered office

A

True

40
Q

Must an LLP comply with
Provide names of LLP on correspondence and outside place of business

A

Yes

41
Q

Must an LLP comply with
Deliver confirmation statement to registrar

A

Yes

42
Q

T/F
Members of LLP are rehired to prepare a report along same lines as directors report

A

False

43
Q

How is an LLP dissolved/terminated

A

by agreement of the members unanimously

44
Q

Options when LLP becomes insolvent

A

propose voluntary arrangement, apply to put business into administration or resolve to go into voluntary or compulsory liquidation

45
Q

Y/N
LLP set up
an incorporation document signed by at least two subscribers must be sent to the registrar of companies

A

Yes

46
Q

Y/N
LLP set up
Name and address of at least one designated member must be given

A

No - two designated members required

47
Q

Y/N
LLP set up
Details of assets of LLP must be given on registration

A

No

48
Q

Y/N
LLP set up
A statement detailing the level of contribution that will be required from past and present members in the event of winding up must be included

A

No

49
Q

Right of partners
To be involved in decision making

A

Yes

50
Q

Right of partners
To share in profits

A

Yes

51
Q

Right of partners
To examine accounts

A

Yes

52
Q

Right of partners
to insist on openness and honesty

A

Yes

53
Q

Right of partners
To veto new parters

A

Yes

54
Q

Right of partners
To be indemnified by fellow parters

A

Yes

55
Q

What is partnership property

A

assets beneficially owned by the partners. it does not have to be in equal shares

56
Q

A parter is an agent of the firm and binds the partnership by their acts in the partnership business provided…

A

the third party doesn’t know they lack actual authority and knows or believes them to be a partner

57
Q

What must an LLP deliver to the registrar annually

A

Audited accounts and confirmation statements

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