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.
What can a companys registered office be?
Must register it, s 86, and insert the address in the IN01.
Will be the address which correspondence from companies house will be send. Will be public ally available.
What is required to change the companys registered office?
A board resolution.
Why must first directors be decided when applying to companies house?
Applicant needs to decide who the company’s directors will be, and include their name and DOB on the IN01.
Every company must have at least 1 director who is a natural person.
What are the companys first shareholders called?
Subscribers
What information of the companys first shareholders need to be entered on the IN01?
Name, address and details of shareholding.
What must teh IN01 include about the statement of capital?
Need to provide information about the shares (statement of capital).
This includes:
- number of shares of each type the company has and total nominal value
- names and addresses of all shareholders
What consists in the companys constitution?
Company memorandum of association
Articles of association
Certificate of incorporation
Current statement of capital
Copies of any court orders and legislation which alter the companies constitution
Shareholders resolutions affecting the constitution and certain agreements involving shareholders.
What is Table A for companies incorporated before 2009?
This is instead of the model articles.
They can modernise their articles, by adopting articles or amended version of the articles.
How does a company amend the articles?
Special resolution (s21(1) CA)
At least 75% majority shareholders must be passed.
Must file copy of amended articles to companies house, within 15 DAYS of them taking effect.
How long does a company have to file the amended articles of association?
15 days
Who are people with significant control? PSC?
Holds more than 25% of shares
Holds more than 25% voting rights
Holds the right to appoint/remove a majority of the board f directors
Why is PSC needed to be given to companies house?
They have great influence, therefore must be public information.
How do you convert from a private company to a public company?
Must pass a special reoslution approving the re-registration of the company, altering the companys name and articles, so they are suitable for public company.
What must be filed at the companies house, when a private company is turning public?
Special resolution
Applciation for re-registration, RR01
Fee for re-registration
Revised articles
A balance sheet and written statement from auditors, and valuation report on any shares which have been allotted for non-cash consideration.
What are shelf companies?
Company which has already been set up, with 2 directors and 2 shareholders, each who ones one ordinary £1 share, which I is formed and left on the shelf at the law firm, until a client needs a company quickly.
What are post-incorporation steps for a company? (13)
Chairperson
Bank account
Company seal
Changing company name
Accounting reference date
Auditor
Service contracts
Tax registrations
Corporation tax
PAYE and National Insruance
VAT
Insruance
Shareholder agreement
