Different Legal Forms of Business Flashcards
Which of the following business structures does NOT have a separate legal personality?
A) Sole trader
B) Limited liability partnership (LLP)
C) Private limited company
D) Public limited company
A) Sole trader
Which of the following statements about general partnerships is TRUE?
A) A partnership must be registered at Companies House.
B) Partners have limited liability for partnership debts.
C) A partnership exists even if there was no intention to form one.
D) Partnerships must file annual accounts publicly.
C) A partnership exists even if there was no intention to form one. (s1(1) PA 1890)
What is the key risk of being a sole trader?
A) High setup costs
B) Unlimited personal liability
C) Complex regulatory requirements
D) Requirement to file accounts publicly
B) Unlimited personal liability
Which of the following must be registered at Companies House?
A) General partnership
B) Sole trader
C) Limited partnership
D) Limited liability partnership (LLP)
C) Limited partnership & D) LLP (both must be registered)
Alice and Bob start a business selling handmade furniture. They do not sign an agreement, but they share profits equally and jointly lease a workshop. What legal structure do they have?
A) A sole trader business
B) A limited company
C) A partnership
D) A limited liability partnership (LLP)
C) A partnership
(A partnership can exist even without a formal agreement – s1(1) PA 1890.)
Catherine is a limited partner in a Limited Partnership (LP). She invests £50,000 but later starts managing the business. What happens to her liability?
A) Her liability remains limited to £50,000.
B) She is now fully liable for the business’s debts.
C) She must register as a general partner to continue managing.
D) She can manage up to a certain extent before losing limited liability.
B) She is now fully liable for the business’s debts.
(Limited partners lose limited status if they start managing.)
A partner in a traditional partnership wants to leave. The partnership has no written agreement. What applies?
A) The partner must remain until a unanimous vote is held.
B) The partner must provide reasonable notice before leaving.
C) The partner can leave immediately without notice.
D) The remaining partners must compensate them for losses.
B) The partner must provide reasonable notice before leaving. (PA 1890 default rule)
X and Y are partners in a general partnership. Without consulting Y, X takes out a business loan. The business later fails. Who is liable for the debt?
A) Only X, because Y did not agree to the loan.
B) Both X and Y, because partners have joint liability for debts.
C) Only Y, as X acted without authority.
D) Neither, as partnerships have limited liability.
B) Both X and Y, because partners have joint liability for debts. (PA 1890 – Joint liability in contract, joint & several in tort.)
An LLP does not have a written Members’ Agreement. Which of the following applies by default?
A) Members cannot participate in management.
B) Members share profits equally.
C) Members must seek approval before leaving.
D) Members must file financial records every month.
B) Members share profits equally. (Default rule under LLP Regs 2001.)
A sole trader wants to limit their liability but retain full control. Which business model is best?
A) General Partnership
B) Limited Liability Partnership (LLP)
C) Limited Partnership (LP)
D) They must register as a limited company.
D) They must register as a limited company. (LLPs require at least two members.)
