Starting a New Business Flashcards
What is an unincorporated business?
A business that does not have its own legal identity.
What is an incorporated business?
A business that has its own legal identity.
Who should Linda sue in case of a contract breach by Niamh’s company?
Linda should take legal action against the limited company only.
What is a sole trader?
A self-employed individual running their own unincorporated business.
What is the legal status of a sole trader?
There is no distinction between the business and the owner’s personal finances or assets.
What does unlimited liability mean for a sole trader?
The sole trader is personally responsible for all business debts and liabilities.
What personal assets are at risk for a sole trader?
Home, savings, and any personal property.
What types of taxes do sole traders pay?
Income tax on trading profits and capital gains tax on capital gains.
What is a partnership?
An unincorporated business with at least 2 owners.
What is the legal position of an informal partnership?
It is legally recognized despite the lack of a written agreement.
What is a key feature of an incorporated business?
It has a separate legal personality.
What is the significance of Saloman v A Saloman & Co LTD 1897?
It established the principle of separate legal personality for companies.
Who are shareholders?
Individuals who own shares in a company.
What is the role of directors in a company?
They manage the general operations and day-to-day work of the company.
What is limited liability?
Members have a limit on their ability to contribute towards the company’s debts.
What are the advantages of incorporation?
- Separate legal personality
- Limited liability
- Security for loans
- Improved banking facilities
What are the disadvantages of incorporation?
- Ongoing formalities
- Taxation
What is the minimum capital requirement for a public limited company?
£50,000.
What is a Limited Liability Partnership (LLP)?
A business structure that combines elements of both a company and a partnership.
What is the formation requirement for an LLP?
It must be created under the LLP Act 2000.
What distinguishes an LLP from a traditional partnership?
An LLP has a distinct legal personality and limited liability for its members.
What must LLPs comply with regarding security interests?
They can grant fixed or floating charges, subject to administrative and reporting obligations.
Fill in the blank: A sole trader has _______ for all business debts.
[unlimited liability]
True or False: A partnership can only exist if there is a written agreement.
False
What is the requirement for a public limited company to offer shares?
Shares can be offered to the general public.
What is the key advantage of a company regarding the sale or transfer of ownership?
It can be done through shares, making it simpler and more straightforward.
