limited companies

Question 1

what are examples of an unlimited companies?

Answer 1

partnerships and soletraders

Question 2

what is an unlimited company?

Answer 2

means that anyone involved is liable for debts

Question 3

why are unlimited companies high risk

Answer 3

no ring fence around personal and business assets (may have to sell personal items to meet debts)

Question 4

why are unlimited companies attractive to suppliers?

Answer 4

no risk to them, will always be paid

Question 5

what is the difference between LC and P?

Answer 5

LC are an artificial legal person in that they are separate form those who own or mananfe it

Question 6

in a LC how is capital divided?

Answer 6

into units called shares

anyone can buy to become a member

Question 7

what is meant by a LC having a perpetual life?

Answer 7

if a shareholder dies then the business carries on

Question 8

what is meant by limited liability>

Answer 8

shareholder only loses the amount in which they invested excluding any personal assets

Question 9

why is limited company unattractive to suppliers?

Answer 9

less likely to be aid back in the events of crash

Question 10

what is difference between LC and P in terms of formation?

Answer 10

it is more formal

Question 11

what has to happen to form a LC?

Answer 11

have to apply
application must include company name, where company registered, names of directors, public or private

cheap and easy, can do online

Question 12

what else must be included in the application of formation?

Answer 12

• memorandum of association
• articles of association
• statement of capital

Question 13

what are the types of application documents?

Answer 13

• memorandum of association
• articles of association
• statement of capital

Question 14

what is the memorandum of association

Answer 14

application document
- statement by those forming comply that they wish to do so and will each take at least one share

say they want to do it

Question 15

what is the articles of association?

Answer 15

application document

• internal rules on relationship between company and stakeholders (partnership agreement)
• polices regarding directors

(mechanics of organisation)

Question 16

what is the statement of capital?

Answer 16

• no. shares company wishes to issue
• nominal no. of shares
• rights attached to shares
• amount of capital already have

Question 17

what are the two types of limited companies?

Answer 17

private (small) and public (big)

Question 18

what are the characteristics of a public LC>

Answer 18

• offer shares to general public
• big
• only start trading with min £50,000 capital
• at least 2 shareholders
• ust hold annual general meeting AGM

Question 19

how much capital is needed for a public LC?

Answer 19

50,000

Question 20

what is an AGM?

Answer 20

annual general meeting

all shareholder invited form a public LC

Question 21

what are the characteristics of a private LC

Answer 21

• small
• can’t offer shares to public just networks
• usually has an owner-director
• 1 or ore shareholders

Question 22

what are the advantages of being a limited company?

Answer 22

• substantial capital can be raised
• LC has own legal identity, separate to peoples assets
• delegation of management function
  (step back and appoint management team)
• limited liability
• perpetual succesion

Question 23

what are the disadvantages of a LC?

Answer 23

• subject to strict legal control, adhere laws (companies act 2006)
• publicity, no secrets, cant hide competitive advantage
• delegation to a few may be detrimental (management team may run it in they favour)

Question 24

how is a LC run?

Answer 24

separate manager and owners (compared to partnerships

running of company delegated to mangers

Question 25

how are manager elected?

Answer 25

by shareholders at AGM

Question 26

what are the managers responsibilities?

Answer 26

- keeping proper book and amounts | - providing shareholders with fincinacial state to address fiincanial performance and psotoion firm

Question 27

what is an annual report?

Answer 27

something management team punish to report back to shareholders formal communication tool - usually 100 + pages - important in PRincludes statements

Question 28

what are the sections in the annual report?

Answer 28

- CEO letter - chairmans letter - financial statements

Question 29

what is the chairmans letter/

Answer 29

widely read describes how organisation is going they are independent of company

Question 30

what finical statements are included in annual report?

Answer 30

``` as a minimum SOFP income statement of change sin equity statement of cash flow ```

Question 31

what is the statement of change in equity

Answer 31

- similar to appropriation account - specific to limited companied - understand changes in capital and reserves that took place) - shows the changes in equity over time by presenting the movement of reserves

Question 32

what are dividends?

Answer 32

sum of money paid regularly to its share holders

Question 33

when do shareholders get a say in how much dividends is given?

Answer 33

at the AGM | final approval

Question 34

what is available for dividends?

Answer 34

revenue reserves

Question 35

what is a reserve?

Answer 35

a sum of money appropriated for a purpose usually equity money held in company for unforeseen contingencies to deal with something they haven't considered

Question 36

what is not available for dividends

Answer 36

share capital | capital reserves

Question 37

what is equity made up of?

Answer 37

capital or reserves

Question 38

what are the type of reserves?

Answer 38

revenue or capital

Question 39

what are capital reserves?

Answer 39

- reserve created out of capital profit - used to meet capital loss - longer term projects

Question 40

what are revenue reserves

Answer 40

- created out of revenue profit - available for shareholders for dividend payments - help strengthen financial position

Question 41

what is the strategic report?

Answer 41

- newest part of annual report - companies act 2006 - focus on long term plans - identify risks - issues included such as environment

Question 42

what is the auditors report?

Answer 42

- indeendnat assemenet by certified accountants - offers a professional opinion on whether accounts give a fair view of state of affairs of the company - have responsiibitly to report what managers are doing in company to owners

Question 43

why might auditors report not be correct?

Answer 43

- only look at some parts | - not 100% is looked at

Question 44

where did corporate governance come form?

Answer 44

born from financial scandals

Question 45

what is corporate governance?

Answer 45

it is a system in which organisations are governed and controlled every organisation that is a limited company must adhere to corporate governance code 2016 must have a section on it in annual report based on strong moral principles