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Business Law & Practice > Intro > Flashcards

Intro Flashcards

1
Q

List the most common forms of business ownership

A
  • sole traders
  • General partnerships
  • companies
  • limited liability partnerships (LLPs)
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2
Q

List the two broad categories of businesses

A
  • incorporated
  • unincorporated
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3
Q

Sole Traders - main characteristics

A

-Self employed
- Most simple, cheap & easy to run
-The sole trader makes all the decisions about the management of the business and it’s future plans.
-The sole trader both owns & runs the business. ( May employ people but they run the business)
- lighter regulation regime
- No registration requirements (except with HMRC for tax purposes)
- personal liability for the business’ debts and obligations
- pay income tax on the profits of the trade (vis self assessment scheme) & will also pay national insurance contribution

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4
Q

Sole traders advantages

A
  • Easy to set up & operate
  • Cheaper to set up & operate
  • No filing requirements to file accounts (other than tax returns)
  • Higher flexibility and the business can run as they wish
  • Complete responsibility ( Get to keep all the profit)
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5
Q

Sole traders disadvantages

A
  • Unlimited liability
  • No separate legal personality
  • succession issues (if they want to sell the business, they must find someone to sell it to. It doesn’t automatically go anywhere.
  • complete responsibility - For business & debts of the business
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6
Q

General partnerships & LLP (legal definition)

A

“Two or more people carrying on a business in common with a view to profit)
PA 1890, s1
(Cannot be set up by an individual or by a non-profit organisation)

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7
Q

General partnerships - characteristics

A
  • Unincorporated
  • No formal registration, Governed by Partnership Act 1890
  • Advisable to have a partnership agreement (Partnership ran on basis of contract which May be written or oral)
  • Partnership is not a separate legal entity from it’s partners
  • Unlimited (personal) liability (Liability is joint and several among the partners, allowing a creditor to pursue the full amount of the debt from any individual within the partnership or all of them).
  • No max number of people needed to create a partnership
  • Partners are both owners and managers (Both principle & agent, they share the decision making & ownership of assets)
  • Each partner pays income tax on their share of the profit
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8
Q

General partnerships - Advantages

A
  • organisational flexibility
  • No filing requirements or requirement to file accounts (other than tax returns)
  • A partnership agreement is a private document
  • Cheaper to set up and operate than a company
  • Better for facilitating investment than a sole trader-ship. (Partners often ‘buy into ‘ a partnership thereby introducing capital
  • Partners share the work of the business & share liabilities
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9
Q

General partnerships - disadvantages

A
  • unlimited liability (personal assets may be at risk)
  • No separate legal personality
  • Partners may create liabilities for other partners & the firm
  • partners share in the profits of the firm so shares are reduced.
  • unless agreed otherwise partnership my automatically dissolve on the happening of certain events (death, bankruptcy etc) (if you don’t want this to happen must make a provision in partnership agreement stating that the deceased or retired partner will be bought or by the remaining partners).
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10
Q

Companies - Characteristics

A
  • Incorporated
  • A Separate legal entity from the people that own and run it (has its own corporate personality)
  • Limited liability
  • There’s a separation of ownership & control
  • Directors run the day to day business on behalf of shareholders
  • Shareholders own the company (May be the same people as directors but not always)
  • Company pays corporation tax
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11
Q

List the two types of Public companies we will focus on

A
  • Public limited company (Plc) - Limited, public and has a share capital
  • Private company limited by shares (Ltd)- Limited, Private and has a share capital
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12
Q

Companies - Advantages

A
  • Limited Liability
  • Separate legal personality
  • Tax advantages for companies
  • can offer shares so can attract external investment
  • Can offer a “floating charge”
  • Prestige
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13
Q

Companies - disadvantages

A

-More heavily regulated than sole traders and partnerships
- Less flexibility
- More costly to set up and run
- Ongoing filing requirements at company house / loss of privacy

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14
Q

LLPs - Characteristics

A
  • Incorporated
  • hybrid between a partnership and a limited company
  • Governed by LLP act (2000)
  • Must register at company House
  • limited liability & separate legal personality
  • Flexibility in terms of internal affairs (Similar to a partnership an LLP agreement must be in place and this is a private agreement that doesn’t have to be put onto companies house)
  • Individual Members Must register with HMRC as self employed and pay tax
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15
Q

LLP - Advantages

A
  • Limited liability
  • Separate legal personality
  • Organisational flexibility
  • LLP agreement is a private document
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16
Q

LLP - Disadvantages

A
  • Accounting and filing requirements at companies house
  • May be more expensive to set up and run than a partnership
17
Q

How to spot different types of business names?

A
  1. Public limited company (PLC)
  2. Private company limited by shares (Ltd)
  3. LLPs (LLP or Limited liability partnership)
  4. Sole traders (Tends to just be the name of the sole trader)
  5. Partnership ( Tends to be partners name ‘steptoe & son’ )
18
Q

Incorporated characteristics

A
  • Must undergo a formal registration process before they can legally exist
  • incorporated businesses are legal entities which have an existence separate from that of their owners
  • Plc, Ltd, LLP
19
Q

Unincorporated characteristics

A
  • few or no administrative steps to be taken to be formed under the law.
  • usually treated as being the same as it’s owners with no separate legal status.
20
Q

Public company - characteristics

A
  • The constitution must state that it’s public
  • must have plc at the end of the companies name
  • owners of the company must invest a specified minimum amount of money for use by the company
  • Can raise money from members of the public by joining stock market if not on stock market then (unlisted)
  • Must have at least two directors
21
Q

Name the two main stock markets in the Uk

A
  • Aim (Alternative investment market)
  • London stock exchange’s main market
22
Q

Main market characteristics

A
  • principle stock market for publicly- traded companies
  • Generally only large public companies can apply to join the main market
  • Company must be admitted to the Financial conduct authority (FCA) official list, so is (Listed).
23
Q

AIM - characteristics

A
  • AIM is targeted at smaller, ambitious public companies looking to grow in size.
  • Also appeals to overseas companies
  • AIM companies are subject to additional regulations in the form of AIM rules drafted by the London Stock Exchange.
  • FCA also oversees regulation of companies quoted on AIM.
24
Q

Reasons to avoid giving a company similar name to another company

A
  1. Your company won’t have its own distinctive brand
  2. To avoid a claim of intellectual property infringement (registered trademark infringement or Passing off)
25
Q

How to check to avoid intellectual property infringement

A
  • Registered trademark search at IPO (Intellectual property office)
  • Google search
  • Yellow pages
  • Companies House name search
26
Q

How to protect a chosen company name?

A
  • Register a trademark
  • Register a domain name
    -Incorporate a company with that name to prevent others doing so
27
Q

What is passing off?

A
  • Passing off is a Tort ( a civil wrong)
  • passing off is benefiting from another’s goods or services
  • Even if a business has not registered a trademark, it may have built up substantial goodwill and have unregistered trademarks
28
Q

Requirements for passing off

A
  • Goodwill in the business
  • Misrepresentation (Putting themselves forward to look like another business)
  • Damage as a result of the passing off
29
Q

What is the Relevance of Reckitt & Coleman v Borden (1990)?

A

A case about passing off - R&C made Jif a lemon juice product. Borden created a very similar looking product. R&C said it was passing off & judge agreed.
The squeeze lemon was distinctive packaging and shoppers would be confused.

30
Q

What Rules does the companies Act 2006 & The company, limited liability partnership and Business Names Regulations 2014 contain?

A

Rules in regards to sole traders and partnerships business names . Sole traders and partnerships don’t have to register their name anywhere but do have to comply with Companies Act and 2014 regulations.

Sole traders and partnerships need to think about whether the company name is permitted, restricted or prohibited.
They also need to think about whether the name is subject to disclosure requirements under the CA 2006 ( even if permitted)

31
Q

Automatically Permitted names for Sole traders & partnerships

A

If the business is carried under a name which consists of the sole trader or all of the partners’ names plus permitted additions. (S1192 Companies Act 2006)

32
Q

List the permitted additions for Sole traders and partnerships business names.

A
  • Forenames or initials
  • Addition of ‘a’
  • A statement that business is being carried on in succession to the business of a formerly owner
33
Q

Prohibited and Restricted words

A
  • Name suggesting connection with government. e.g “her majesty…” (approval required)
  • sensitive words. e.g “health service…”
    (approval required)
  • Misleading names. e.g “Bank…” (either approval or outright prohibition)
34
Q

What are the disclosure requirements in s1202 and 1204 of companies Act 2006?

A

If the business is carried out under a name that is not automatically permitted, it is required to comply with disclosure requirements:
- Must state the name of each partner and address for service on various documents (business letters, invoices etc)
- Must display this information at all business premises

35
Q

Companies and LLPs choice of name requirements

A
  • Must register name at companies house
  • private company (ltd)
  • public company (plc)
  • LLP (LLP)
  • No identical names can be registered
36
Q

Companies and LLPs- ignored words
(Doesn’t count as repeated) in

A
  • “The”
    -“WWW”
  • LLP, Ltd & plc
    -punctuation
  • and & “&”
  • at & “@“
37
Q

Companies and LLPs disclosure requirements

A

CA 2006 & 2015 regulations impose:
- Registered name must appear on all documents
- place of registration (country), registered number & registered office address on all documents
- Display companies name at registered office & other places of business

Business Law & Practice (4 decks)

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