Types Of Businesses

Question 1

What is an incorporated business

Answer 1

Exists as a separate legal entity from its owners and managers.

The owners aren’t liable for business debts.

Question 2

What is an unincorporated business?

Answer 2

Run by individuals who have not set up a separate legal entity to run the business and who have full personal liability for the debts of the business.

Question 3

What are sole traders

Answer 3

Someone who runs an unincorporated business on their own as a self-employed person.

They are liable for all debts of the business - their business assets and personal assets are all treated the same for legal purposes.

Question 4

What are partnerships?

Answer 4

A partnership is an unincorporated business involving two or more people carrying on a business in common with a view of profit.

Question 5

What are limited partnerships?

Answer 5

There must be at least 1 general partner who has unlimited liability for the partnership debts.

Can also have a limited partnership whose liability is limited to the amount they initially invested in the business.

Question 6

What is the role of a director?

Answer 6

They run the company.

Question 7

What are shareholders of the company?

Answer 7

Individuals who provide the money in return for shares, to allow the company to operate.

Can also be referred to as members.

Question 8

What are the requirements for a public company?

Answer 8

(A) constitution must state that it is a public company.

(B) the words ‘public limited company’ or ‘plc’ must be included at the end of the company’s name.

(C) company’s owners must invest a specified minimum amount of money for use by the company.

Question 9

What are limited liability partnerships?

Answer 9

A cross between a partnership and a limited company.
It has a separate legal personality distinct from its owners.
Offers protection from liability of debts.
Partners are taxed as if the business were a partnership rather than a company.

Question 10

Community interest companies

Answer 10

A form of limited liability company intended for businesses that wish to use their profits and assets for the public good and not for private profit.

Question 11

Companies limited by guarantee

Answer 11

Used for organisations that are not seeking to make a profit, such as a professional society.

Instead of buying shares, the shareholders guarantee the company’s debts up to a specified amount, usually £1.

Question 12

Unlimited companies

Answer 12

Rare in practice because most people who are happy to run a business with unlimited liability for its debts will choose to run it as a sole trader or partnership.

Question 13

Charitable incorporated organisations

Answer 13

Provides the advantages of a corporate structure, such as reduced risk of personal liability.

Question 14

Overseas companies

Answer 14

All overseas companies that set up a branch or any other place of business in the UK must register selected details of the establishment within 1 month of their opening.

Question 15

Companies established by Act of Parliament or Royal charter

Answer 15

Often to establish railways and public utilities in the UK

Question 16

Joint ventures

Answer 16

A commercial enterprise undertaken jointly by two or more parties.
The parties retain their own identity but generally pool their resources for a specific purpose e.g. google and nasa developing google earth together.

Question 17

What is the process of forming a company?

Answer 17

Applicant must complete companies house form INO1 and submit it along with a document called a memorandum of association and possibly the company’s articles of association to company’s house with the applicable fee.

Question 18

When forming a company, how are applications sent and made?

Answer 18

Applications can be made online, by post or though suitable enabled software provided by companies house.

Many applicants ask their solicitor, accountant or a company formation agent to apply on their behalf.

Question 19

Shelf companies

Answer 19

Companies for clients to use at short notice.

Usually set up with two directors and two shareholders.