Definitions

Question 1

Company

Answer 1

Legal entity/personality, created by registration with the State. It requires humans to manage it (Directors) and it needs persons to provide the funding/capital (members who usually own shares - shareholders)

Question 2

Sole Trader

Answer 2

A person who is the exclusive owner of a business, entitled to keep all profits after tax but liable for all losses. The business and individual are one, if the individual dies the business ceases

Question 3

Perpetual Succession

Answer 3

The continued existence of a corporation until it is legally dissolved

Question 4

Partnership

Answer 4

Formed when two or more persons ‘carry on a business in common with a view to a profit’ (s 1 Partnership Act 1890)

Not a legal entity separate from the partners. It enabled businesses to expand but each partner is potentially jointly and severally liable for all the debts and liabilities of the business carried on by the partnership.

Question 5

Stock

Answer 5

a share in the ownership of a country, as you acquire more stock your ownership stake in the company grows

Question 6

Incorporation

Answer 6

Process of constituting a company or organisation as a legal corporation

Question 7

Constitute

Answer 7

to give legal form to an institution ie a company

Question 8

directors

Answer 8

the constitution so they are responsible for managing the company. Legally they are agents of the company who is their principal

Question 9

Members

Answer 9

Those persons can be real (flesh and blood individuals) or legal entities
The persons who are made into a corporate body by the Companies Act in force at the time of registration

Question 10

Shareholders

Answer 10

• members of a company with shares
• investors in the company
• become shareholders either upon registration or later on
• all shareholders are members; not all members are shareholders

Question 11

Share capital

Answer 11

money invested by way of shares which forms the basis of financing the business. This funding of the business may be supplemented by loans from typically a bank

Question 12

body Corporate

Answer 12

organisation such as a company that is considered to have its own legal rights and responsibilities

Question 13

limited companies

Answer 13

“limited company” if the liability of its members is limited by
its constitution. It may be limited by shares or limited by guarantee

If the liability of members is limited to the amount, if any, unpaid on the shares held by them, the company is “limited by shares”

If their liability is limited to such amount as the members undertake to contribute to the assets of the company in the event of its being wound up, the company is “limited by guarantee”

Question 14

Private Company

Answer 14

it is not permitted to offer shares to the public by issuing a prospectus (s 755 CA)

Question 15

Public limited companies

Answer 15

• can advertise to public for investment in its shares by way of a prospectus therefore only kind of company that can be listed on a Stock Exchange
  
  • must have a Secretary
  • authorised minimum share capital £50,000 of which one quarter has been fully paid up (s763 CA)
    needs trading certificate from Registrar of Companies before can start trading

Question 16

prospectus

Answer 16

a formal document required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering to the public.