Types of Business Flashcards
Sole Traders
- No separate legal personality.
- Unlimited liability.
- Sole trader is the owner and manager.
- Property and assets owned by sole trader.
- No accounting requirements.
- Only name and address for service must be disclosed.
- Fixed security only.
- No duties imposed by law.
- No constitution or formation formalities and termination at will.
- Income tax.
General Partnerships
- No separate legal personality.
- Unlimited liability - partners jointly and severally liable.
- Owners and mangers - partners (at least 2).
- Decision making - Majority vote (except 3 things that require unanimity) - can be varied by partnership agreement.
- Accounts produced but not published. Only names and addresses for service must be disclosed.
- Fixed security only.
- Duties under partnership agreement and fiduciary duties - not to make a secret profit.
- Terminated with immediate effect by partner giving other notice (can be oral) and dissolved by death, bankruptcy, charge or
illegality and, if entered
into for a single
undertaking, by the
termination of that
undertaking. Can be
modified by a partnership
agreement. - Constitution - some rules under PA 1890 and partnership agreement.
- No formality requirements.
- Income tax.
Limited Liability Partnerships
- Separate legal personality
- Liability - limited to amount agreed between members unless wrongful trading.
- Owners - at least 2 members. 2 must be designated members who have additional administrative duties.
- Managers - at least 2 members. 2 must be designated members.
- decision making - same as for general partnerships.
-Property and assets owned by LLP.
-Accounts are produced but not audited. Records at Companies House are available to the public. - Fixed and floating security.
- Duties under members agreement, fiduciary duties and some statutory duties.
- Termination - application to the registrar, subject to conditions (majority of members signing application)
- Constitution - LLP Regulations and LLP agreement.
- Incorporation - file IN01 form at Companies House and pay fee.
- Income tax.
Private Limited Companies
- Separate legal personality.
- Liability limited to amount unpaid on shares. May be liable to contribute if wrongdoing or breach of duties.
- Owners - shareholders at least 1.
- Managers - at least 1 director and an optional secretary.
- Day to day business decisions by majority vote at board meeting. Some decisions are reserved for shareholders at general meetings.
- Assets and property owned by the company.
- Accounts audited and published. Records at Companies House, open to public.
- Fixed and floating security.
- Managers have statutory duties under CA and IA.
- Termination - application to registrar if the company has not carried on any activity for 3 months; voluntary or compulsory liquidation.
- Constitution - Rules under Companies Act and governed by articles of association (required).
Incorporation - file form IN01, pay fee, memorandum of association and articles unless using default articles. - Corporation Tax.
Public Limited Companies
- Separate legal personality
- Liability limited to amount of unpaid shares. May be liable if contribute to wrongdoing or breach of duties.
- Owned by at least 1 shareholder.
- Managers - at least 2 directors and qualified secretary required.
- Day to day business decisions by majority vote of board at board meetings. Some decisions are reserved for shareholders at general meetings.
- Property and assets owned by company.
- Accounts audited and published. Records at Companies House are public.
- Fixed and floating security.
- Managers have statutory duties under CA and IA.
- Termination - application to the registrar if the company has not carried on any
activity for three months;
voluntary or compulsory
liquidation. - Constitution - extensive rules under CA and governed by articles of association (required).
- Incorporation - file IN01 form at Companies House, memorandum of association, articles of association unless using default articles, £50,000 minimum allotted share capital and fee.
- Corporation Tax.
Sole Traders - Restrictions on names?
No requirement to register name.
Can trade under own name or under a business name. Business name must conform to the Companies Act 2006
Not infringe trademarks.
General Partnerships - Restrictions on names?
No requirement to register name.
Can trade under own names or under a business name. Business name must conform to the Companies Act 2006
Not infringe trademarks.
Limited Liability Partnerships - Restrictions on names?
Must be registered at Companies House.
Cannot be the ‘same as’ or ‘too like’ the name of an existing company.
Must end with ‘limited liability partnership’, ‘llp’ or ‘LLP’ (or Welsh equivalents).
Cannot suggest a connection with HM Government.
Permission is required if it includes ‘sensitive’ words or expressions.
It should not be offensive.
Not infringe trademarks.
Private Limited Companies - Restrictions on names?
Must be registered at Companies House.
Cannot be the ‘same as’ or ‘too like’ the name of an existing company.
Must end with “limited” or “Ltd” (or Welsh equivalents).
It cannot suggest a connection with HM Government.
Permission is required if it includes ‘sensitive’ words or expressions.
It should not be offensive.
Not infringe trademarks.
Public Limited Companies - Restrictions on names?
Must be registered at Companies House.
Cannot be the ‘same as’ or ‘too like’ the name of an existing company.
Must add ‘PLC’ or ‘Public Limited Company’ at the end.
It cannot suggest a connection with HM Government.
Permission is required if it includes ‘sensitive’ words or expressions.
It should not be offensive.
Not infringe trademarks.
Concept of separate legal personality
The creation in law of another “person” which represents a business. That “person” is capable of many things, such as owning property and signing contracts in their own name. They can do some of the things a human being can do.
Companies and some partnerships have separate legal personality. They exist as a separate legal entity from its owners and managers.
What is the concept of limited liability?
Limited liability allows the owners of a business to limit their liability for the debts of the business to the amount they have agreed to contribute.
When can the corporate veil be pierced/
Prest v Petrodel Resources Limited and others:
When a person is under an existing legal obligation or restriction which he deliberately evades by interposing a company under his control.
Court may pierce the corporate veil for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company’s separate legal personality.
Describe a company’s memorandum of association?
A legal formality required to start a company; it has no impact on the running of the company.
What happens if the Companies Act and the articles conflict?
The Companies Act prevails.
What are the articles of association of a company?
A document that specifies the regulations for a company’s operations and defines the company’s purpose. The document lays out how tasks are to be accomplished within the organisation, including which directors can vote at board meetings.
Can directors ever be expected to contribute to the company’s funds?
Yes, if they have breached duties they owe to the company.
Where do directors get their powers to manage the day to day affairs of the company from?
The articles of association.
What is required to be sent to Companies House in order to incorporate a private company limited by shares?
A fee, memorandum of association and IN01 form.
Do not need to send the articles of association if you intend to use the model articles.
