Different Types Of Businesses Flashcards
What are incorporated businesses
Exists as a separate legal entity from its owners
Company
What is an unincorporated business?
Businesses run by individuals, who have not set up a separate legal entity to run the business, and who have full personal liability for the debts
What are sole traders?
Someone who runs an unincorporated business on their own, as self-employed person
Who is liable through a sole trader?
The sole trader is personally liable for all the debts.
What is a partnership
Exists when 2 or more people run and own a business together. It is formed when they carry on a business in common with a view of profit
What is the default partnership agreement?
Partnership Agreement 1890
How are partnership liabilities held?
Partners will divide the profit or losses of the business between them.
How are partnership taxes shared?
Income tax is through each individual partner, based on their share of the profit of partnership.
If one of the partners is a company, may be liable for corporation tax on their share of profits.
What are Limited partnerships?
LPs - similar to partnership, in that there mist be at least one general partner who has UNLIMITED liability for the partnership debts.
Unlike a partnership, an LP is permitted to have a LIMITED partner, who’s liability is limited to the amount the initially invested in the business.
What are the requirements of an Limited partner in an LP?
They must not:
- control or manage the LP
- have the power to take binding decisions on behalf of the LP
- remove their contribution to the LP for as long as it is in business
Do Limited Partnerships have to be registered anywhere?
Yes, they must be registered with the Registrar of Companies (also acts as the registrar of LPs) before they start trading
What are the different types of companies?
Private companies limited by shares
Public companies limited by shares
What are private companies?
Company, Ltd.
Unquoted shares
What is the separate legal personality?
Salomon v Salomon : separate legal personality
Corporate veil - look behind the company and impose liability on the individuals who own or run the company.
Prest v Petrodel : Supreme Court decided that the corporate veil can ONLY be pierced when a person under existing legal obligation is subject to an existing legal restriction, which they DELIBERATELY evades/frustrates.
What is a public company?
Plc
More prestigious, raise money by offering shares to the PUBLIC, can join the stock market in the UK, or the Alternative Investment Market (AIM).
What are Limited Liability Partnerships?
LLP is a cross between partnership and limited company.
It has a separate legal personality, and it offers its owners protection for liability for the LLPs debts, like a limited company.
HOWVER< LLP is run with the informality and flexibility given by a partnership, and the partners are taxed the same as if it were a partnership.
What governs limited liability partnerships?
LLPA 2000
What are other types of business mediums that could be considered?
Companies limited by guarantee
Unlimited companies
Community interest companies
Charitable incorporated organisations
Overseas companies
Companies estbalished by act of parliament or royal charter
Joint ventures
What things must be considered when determining which business medium to use? (7)
Liability
Tax
Formalities
Publicity of information
Costs
Status
Finance
How do you form a company?
Must complete companies house form IN01, and submit it along with document of memorandum of association, and potentially te articles of association, with the applicable fee.
Who will make the application for companies?
Online, by post, or software.
Individuals. Applicants may ask solicitor, accountant, or company formation agent to apply on their behalf.
What must the certificate of incorporating state?
Under s 15 CA
The name and registered number of the company
The date of incorporation
If its a limited or unlimited company
If private or public
If the company’s registered office is in England and Wales.
What decisions must be made when a company is being set up?
Company name
Registered office
First directors
Directors residential and service addresses
Company secretary
First shareholder
Statement of capital
What are the restrictions of a company name
Must end with Ltd, or Limited.
Must not be the same as an existing company
Must not be a prohibited or restricted name (cannot be a criminal offence, swear words, connection with government department, sensitive words, certain letters or signs, more than 160 characters)
Companies can fade using differnet name from registered name - trading name or business name.
