The UK Business Banking Sector

Question 1

What is a bank?

Answer 1

A bank is a financial establishment that uses money deposited by customers for investment, pays out when required, makes loans at interest, facilitates payments and exchanges currency

Question 2

What are banks activities divided into?

Answer 2

Retail banking
Business banking 
Corporate banking
Large corporate and global banking 
Private banking
Investment banking

Question 3

What’s a small business defined as?

Answer 3

<50 employees
AND
(Annual turnover sub €10m
OR
Balance sheet sub €10m)

Question 4

What’s a medium business defined as?

Answer 4

<250 employees 
AND
(Annual turnover sub €50m
OR
Balance sheet sub €43m)

Question 5

What’s a micro business defined as?

Answer 5

<10 employees
AND
(Annual turnover sub €2m
OR
Balance sheet sub €2m)

Question 6

What different business structures are there?

Answer 6

Sole traders 
Partnerships
Private limited companies
Public limited companies 
Limited liability partnerships (LLPs)
Other non-personal accounts, including charities and not-for-profit orgs

Question 7

Advantages of sole trader

Answer 7

Independent and responsible for their own decisions
Easy to set up
All profits go to owner
No annual returns are required

Question 8

Disadvantages of sole trader

Answer 8

Owner is personally liable for all debts
Pay tax on what the business makes, not what they take out
Difficult getting credit from certain suppliers as little info in public domain
Problems arise if owner is ill or absent
Owner dies then the business dies

Question 9

Advantages of a partnership

Answer 9

Easy to set up
Partners taxed as individuals not as a business entity
Partners share cost of setting up business

Question 10

Disadvantages of partnership

Answer 10

Partners are personally liable for partnership debts
Repayment of debt is on a joint and several basis
Complications can arise in the event of serious disagreement or untimely death of partner

Question 11

Key documents for limited companies

Answer 11

Certificate of Incorporation
Memorandum of Association
Articles of Association

Question 12

Penalties for late filing of annual returns less than a month

Answer 12

£150 private Ltd.

£750 public Ltd.

Question 13

Penalties for late filing of annual returns

1 month- 3 months

Answer 13

£375 private Ltd.

£1500 public Ltd.

Question 14

Penalties for late filing of annual returns

3 months - 6 months

Answer 14

£750 private Ltd.

£3000 public Ltd.

Question 15

Penalties for late filing of annual returns

6 months

Answer 15

£1500 private Ltd.

£7500 public Ltd.

Question 16

Penalties for late filing of tax returns

1 day

Answer 16

£100

Question 17

Penalties for late filing of tax returns

3 months

Answer 17

£200

Question 18

Penalties for late filing of tax returns

6 months

Answer 18

HMRC will estimate corporation tax due and add a penalty of 10%

Question 19

Penalties for late filing of tax returns

12 months

Answer 19

Another 10% of any unpaid tax

Question 20

Advantages of limited companies

Answer 20

Limited liability
Sperate legal entity - the company may exist beyond the life of its members
Taxation - only taxes on profits

Question 21

Disadvantages of limited companies

Answer 21

Financial audited accounts - more complex and restrictive rules governing the accounts
Restricted capital raising

Question 22

Advantages of limited liability partnerships

Answer 22

LLP former establishes limited liability for its members
Members are taxed as individuals
LLP continues in the event of death of a member

Question 23

Disadvantages of LLP

Answer 23

LLP is more formal and costly to run
Complications can arise in event of a serious disagreement
Info about the business is on the public domain