Types of Business & Related Regulation Flashcards
What is a pre-incorporation contract?
A contract entered into by the individual owner/s of the business before the date of incorporation - meaning that the owner is personally liable because the corporation technically does not exist yet.
What should be avoided in a sole trader’s business name? (5)
1 - Offensive language
2 - ‘Sensitive’ words or phrases
3 - Anything that unduly suggests a relationship with government or local authorities without permission
4 - ‘Ltd’, ‘Limited’, ‘Plc’ or any other potentially misleading status
5 - Anything identical to an existing trademarked business
When and how must a sole trader register with HMRC?
The sole trader must register online by 5th October after the tax year during which it began trading. It must provide its NI NUMBER, KEY CONTACTS, REGISTRATION DATE, and UTR (if applicable)
What tax/accounting records must a sole trader keep and for how long? (6 + 1)
1 - All incomes and expeditures - manual or digital
2 - Interest, dividends, or any other miscellaneous income received
3 - Amounts paid to pension schemes
4 - Gift aid payments
5 - Child benefit received
6 - Student loan details
All records must be kept for 5 years and 10 months from the end of the tax year.
In what ways does setting up and regulating a partnership differ from a sole trader? (2)
1 - Partnerships must complete an annual self-assessment tax return, but SO MUST the individual partners
2 - Partnerships must follow the rules of the ‘Partnership Act 1890’ AS WELL AS any partnership agreement
If no partnership agreement is in place, how are profits and losses divided?
Equally between the partners in accordance with the Partnership Act 1890.
Is a limited company obliged to trade under the same name it is registered under?
No - it can use a different ‘business name’
Which government body must prospective limited companies register with?
Companies House
How many individuals and of what designation are required to incorporate a company?
One director and one shareholder who can be the same person.
What is an ‘off-the-shelf’ company?
Companies already registered with Companies House and incorporated but have NEVER TRADED. They can be purchased and are available to use immediately.
What is the difference between ‘ordinary shares’ and ‘preference shares’?
While ordinary shares entitle the holder to VOTING RIGHTS and dividends based on company performance, preference shares have no voting rights and will be paid at a fixed percentage BEFORE any ordinary shares are paid out.
Is a limited company bound to follow an externally set year-end accounting date?
No, the owners can choose its own. However, 31st March is a common year end date is it falls in line with the financial year.
Is the confirmation statement to Companies House part of the annual accounts?
No, they are completely separate.
How long does law generally dictate companies maintain their records for?
At least six years.
