Types Of Business Flashcards
Sole trader
No formalities On death or retirement business ceases Alone but may have employees Unlimited liability - personal liability Pay income tax on profits Sole right to make decisions Owns all assets
What is a Partnership according to S1 PA1890
Two or more people run and own a business together with a view to making a profit
Which act governs partnerships
Partnership act 1890
Hallmarks of a partnership
Unlimited liability - personal- joint and serveral
Pay income tax on profits
Buy out on death or retirement or it ceases
No formalities
Share decisions
Share ownership of assets
Share profits and losses
No new partners without consent
Don’t inherit debt, take it with you but can disregard if all Ps agree
Need consent of all Ps to change name
Limited partnership leg
limited partnership Act 1907
Requirements of a Limited Partnership
1 unlimited and 1 limited partner
Limited to what they put in
No management, no binding decisions, cannot remove contribution or become unlimited
Form to register a limited partnership and leg requiring registration
Form LP5
Register with register of companies under S8 LPA before trading
When does a limited partnership come into existence
Date of registration certificate
Meaning of unincorporated business
No separate legal personality
Meaning of incorporated business
Legal entity separate from owners
Another name for a joint venture
Contractual co-operation
What is a joint venture
Two or more parties run business on basis of co-operation agreement
Meaning of unlimited company
Finances can be public because they have unlimited personal liability
Defined in S3(4) CA
Leg definition of limited company
S3(1) CA liability of members is limited by constitution
Two ways to limit liability in limited company
Shares
Guarantee
What does it mean if a company is limited by guarantee
members agree to pay a specific sum to creditors in event company is wound up
What does it mean if a company is limited by shares
Liability of members is limited to amount they agreed to pay for their shares
Two types of company limited by shares
Private company and public company
Leg definition of a private company limited by shares
S755 CA - cannot raise money from public by issuing shares
Only needs one director
What is a public company limited by shares
A company with share capital which complied with CA to enable it to register as such. Can raise money from public
Must have two directors
Constitution must state it is public
Must have PLC in name
Owners must invest a specified amount of money for use by the company
Requirements of a company
Corporation tax (not IT or CGT)
Comply with CA 2006
Register documents with registrar of companies
Separate legal personality
Differences between partnership and joint venture?
partnership between people but JV between companies or people
JV limited in scope and duration for a particular project but partnership for a business long term
Partnership is co-owning a business with a view to make a profit but aim in JV may not be to make profit; it could be for research or to combine resources.
How to end a partnership made by deed
Notice in writing and signed
When does a partnership come to an end?
If entered into for a fixed period of time or for a fixed project then it will dissolve when these come to an end. Otherwise on notice or death and bankruptcy unless an agreement otherwise.
How to tell if someone is a partner of the partnership
this is a matter of intention. they are a partner if they intended to create a partnership.
How much involvement must a partner have to be classified as a partner of the partnership?
There is no minimum threshold (can be silent, no participate in profits or receive a fixed sum) - still a partner if they intend it
What are capital profits?
Money made off the back of the money already out into the business
What are income profits?
Any money made from the actual business activities
Is a partner entitled to interest on their contributions?
If they made a payment beyond the amount of capital which he agreed to subscribe, he is entitled to interest at 5% per annum from the date of the payment
How to vary the rights and duties of partners
Consent of all the partners- this can be express or inferred from a course of dealing
What happens to a partnership on death or bankruptcy
Dissolves unless agreement otherwise
What happens to a partners liability for debts when they die
Estate is liable for the debts subject to prior payment of other debts
Can a retiring partner be discharged from liability of the partnerships debts?
Yes. Need agreement between retiring partner and firm as newly constituted and creditors. This agreement may be express or ibferred from course of dealings between the creditors and the firm as newly constituted.
Why put a notice in the London Gazette and remove the partner’s name from the stationary when they leave?
to ensure that people dealing with the firm no longer have any rights against the leaving partner
Where are the statutory books kept
Registered office, SAIL, central record at CH
How long to keep minutes of board meetings and GM and record of outcome of written res
10 years at office or SAIL
What kind of account records must all companies keep
Adaquate
Ds responsibilities regarding accounts
Ensure accounts are provided for every financial year
Ensure accounts provide true and fair account of state of company
Prepare account for each financial year to accompany account
Do all companies need to provide a D report to accompany accounts
All except small and micro entities
What is a small company
Balance sheet not more than £5.1m a year
Turn over not more than £10.2m
No more than 50 employees
What is a micro entity
Balance sheet not more than £316,000
Turn over not more than 632,000
No more than 10 employees
Who must D circulate accounts report and auditors report to
All S
Debenture holders
Anyone entitled to notice of GM
Which companies must file accounts and Ds report at CH
All apart from small and micro entities
When must accounts and Ds report be filed at CH
9 months from end of account period for private companies
6 months for public companies
3 months for newly incorporated companies
Which companies must file confirmation statement
Every limited company and LLP
Or offence
How long to file confirmation statement
Within 14 days from the company’s confirmation date which is the anniversary of its incorporation
What is a confirmation statement
It gives CH a yearly snapshot of the management and ownership of the business
