Types of Practice Flashcards
1
Q
Sole Practitioner - name 2 facts
A
- sole practitioners are directly responsible for all matters within the practice
- entitled to all profits and has all responsibility for the business debts and any damages against them for breach of tort or contract
2
Q
Advantage of Sole Practitioner (4)
A
- autonomy at work
- less formalities to setting up - keeps costs low and profits high
- ability to make immediate decisions without the need for consultations with other parties
- all profit retained by Sole Practitioner
3
Q
Disadvantages of Sole Practitioner (4)
A
- high risk
- difficult to keep up with changes in practice
- if business fails, all debts have to be met by the Sole Practitioner’s personal assets
- sources of finance harder to find than larger businesses
4
Q
Partnership - name 3 facts including the relevant act definition
A
- defined in Partnership Act 1980 as ‘the relationship which subsists between 2 or more persons carrying on business in common with a view to profit.’
- a collection of individuals sharing risk, responsibility, profit and loss
- each partner is liable for all obligations and debts of the practice
5
Q
Advantages of Partnerships (5)
A
- fee formalities to set up
- better financial resources
- shared responsibility and profits
- good opportunities for expansion through collective resources
- employees share profits by bonuses
6
Q
Disadvantages of Partnership (3)
A
- unlimited liability
- one troublesome partner can impact on the others
- partnerships can from by intent and from behaviour between parties even when no formal deed of partnership exists - individuals sharing profits and facilities may not be aware that they are operating as a formal partnership which can have legal consequences
7
Q
Limited Liability Company (LLC) - name 6 facts
Note: private limited companies: ‘Ltd’
public limited companies: ‘Plc’
A
- separate legal entity that can only be formed under the rules laid down by the Companies Act 2006
- run by board of directors who carry no liability for the actions of the Company
- the company will not be liable for the actions of any shareholder, however all employees owe a duty of care to the company itself
- company and accounts must be filed with The Registrar of Companies
- Architects can be sued in tort as individual Directors
- no limit to the number of directors although if there are less than 2 for a period of over 6 months that member member can incur personal liability
8
Q
Advantages of LLC (4)
A
- protection of personal assets
- tax advantages
- flexibility
- no restrictions on number of members
9
Q
Disadvantages of LLC (2)
A
- company finances are in the public domain
- there can be an administrative burden
10
Q
Limited Liability Partnership (LLP)
Name 7 facts
A
- a corporate body responsible for its liabilities and assets
- a separate legal entity from members / owners
- combines aspects of Partnership and LLC
- an LLP is liable for all its debts to the extent of its assets
- there is no limit on the number of members
- company members are liable if they are fraudulent or negligent in their dealings
- members are jointly and severally liable in the normal course of business, however members are not PERSONALLY liable for the partnership
11
Q
Advantages of LLP (4)
A
- the LLP is liable for its debts and other obligations but it’s members are not liable for debts of the partnership
- no restrictions on number of LLP members
- registration with Companies House protects the company name by law and prevents anyone else trading with the same name
- death or resignation of director does not affect the company structure
12
Q
Disadvantages of LLP (4)
A
- can be an administrative burden
- can be complex and costly to start up
- accounts must be prepared in accordance with accounting standards which must be audited
- for a company with a turnover exceeding £350,000, company accounts must be submitted every year - higher cost for accounts & auditing
