U6 Ch.24 Ownership Structures

Question 1

Limited liability

Answer 1

Owners of a business are not personally liable for business debts if the business fails. They are only responsible for the amount they invested in the business. Their personal assets cannot be taken to repay debt

Question 2

CRO

Answer 2

Companies Registration Office

Question 3

Continuity of existence

Answer 3

a business that has its own legal entity will continue to exist when owner dies or retires

Question 4

Sole Trader definition

Answer 4

Business owned and run by one person who has sole responsibility for the business

Question 5

Sole Trader features

Answer 5

1. Formation: register as self-employed with revenue. If you want business name, must be registered with CRO
2. Liability: Unlimited
3. Finance: hard to obtain, uses personal savings and loans
4. Control: complete control + makes all decisions
5. Tax: self-assessment income tax (20%/40%)
6. Dissolution: no continuity of existence, up to owner to shut down

Question 6

Partnership definition

Answer 6

Business with between 2 and 20 partners who agree to run business together

Question 7

Partnership features

Answer 7

1. Formation: register with revenue and name with CRO. Partners do not have a separate legal entity (can sue and be sued in own name). Needs deed of partnership
2. Liability: Unlimited. Collectively responsible for each other’s debts
3. Finance: larger amounts than sole trader. New partners can bring extra finance
4. Control: shared. Could be difference of opinions
5. Tax: each partner does self-assessment income tax (20%/40%)
6. Dissolution: no continuity of existence. If partner leaves, partnership ends and members wishing to continue must draw up new deed of partnership

Question 8

Private Limited Company definition

Answer 8

Business organisation owned by one or more shareholders. Created when one or more investors(shareholders) agree to form business

Question 9

Deed of partnership

Answer 9

(partnership agreement) drawn up by solicitor and outlines
1. Each partners role in running business
2. How profits will be shared
3. Procedure for admitting new partners
4. Salary for each partner

Question 10

Types of Limited Company under Companies Act. 2014

Answer 10

1. Company Limited by shares
2. DAC
3. CLG
4. UC

Question 11

Constitution

Answer 11

Document outlines info such as:
1. Company name
2. Statement that company is a private limited company limited by shares
3. Any other regulations business wishes to include

Question 12

Memorandum of Association

Answer 12

Used to form company, includes:
1. Company name
2. Objectives of company
3. type of liability held by shareholders

Question 13

Articles of Association

Answer 13

Document outlines rules and regulations for running a company. Includes procedures for:
1. Organising general meetings
2. Voting at general meetings
3. company closure

Question 14

Company limited by shares features

Answer 14

Name: Ltd. after name
Shareholders: 1 - 149
Governing Document: Constitution
Liability: limited
AGM: doesn’t need to hold
Activity: Any commercial activity
Example: Longridge Bakery Ltd.

Question 15

DAC features

Answer 15

Name: DAC(Designated Activity Company) after name
Shareholders: 1 - 149
Governing Document: Memorandum of Association, Articles of Association
Liability: limited
AGM: mandatory
Activity: specific commercial activity (e.g. bank)
Example: Scotiabank DAC

Question 16

CLG features

Answer 16

Name: CLG(Company Limited by Guarantee) after name
Shareholders: 1 - unlimited
Governing Document: Memorandum of Association, Articles of Association
Liability: limited
AGM: mandatory
Activity: sports and charity organisations
Example: Donegal Local Development Company CLG

Question 17

UC features

Answer 17

Name: UC(Unlimited Company) after name
Shareholders: 1 - unlimited
Governing Document: Memorandum of Association, Articles of Association
Liability: unlimited
AGM: mandatory if more than two shareholders
Activity: commercial activity whose financial info owners want to keep confidential
Example: Dunnes Stores Unlimited Company

Question 18

Private Limited Company features

Answer 18

1. Formation: Register with CRO and revenue. Directors send Form A1 and relevant governing Documents to CRO with a fee. CRO examines and sends Certificate of Incorporation. Seperate Legal Entity
2. Liability: Limited
3. Finance: selling shares, larger loans and grants
4. Control: shareholders appoint board of directors and a CEO or MD. Vote at meetings with one share is equal to one vote. Control based on percentage of share ownership
5. Tax: Corporation tax of 15%. Dividends paid to shareholders depending on number of shares owned
6. Dissolution: continuity of existence. Shares can be sold or passed on to other person. Can be wound up by agreement of shareholders or by court in event of bankruptcy.

Question 19

Form A1

Answer 19

Application to become a private limited company

Question 20

Co-operative definition

Answer 20

Owned and controlled by 7 to an unlimited number of members rather than shareholders. Run in democratic manner and operates for benefit of its members. Each member has equal say in running.

Question 21

Registry of Friendly Societies

Answer 21

part of CRO. Responsible for registering co-operatives and ensuring that they meet their statutory obligations.

Question 22

Worker Co-operative

Answer 22

Owned and managed by people who work in the business

Question 23

Financial Co-operative

Answer 23

Owned and run by members who have a common bond, e.g. where they live. Members save together and lend to each other at low interest. E.g. Credit Unions

Question 24

Producer Co-operative

Answer 24

Often found in agri-business sector. Group of producers join and set up own processing facility.

Question 25

Consumer Co-operative

Answer 25

Owned and managed by consumers. Offer better choice and lower prices to consmers.

Question 26

Co-operative features

Answer 26

1. Formation: at least 7 members. register with the Registry of Friendly Societies and Revenue. Different Types 2. Liability: Limited 3. Finance: selling shares, which can be purchased by members 4. Control: members own and control. Appoint management committee for day-to-day. One vote per member so no incentive to invest more capital. 5. Tax: Corporation tax of 15%. Profits shared between members in form of a dividen 6. Dissolution: continuity of existence. Can be dissolved by agreement or by a court order due to bankruptcy

Question 27

MD

Answer 27

Managing Director

Question 28

State-owned Enterprise definition

Answer 28

Set up and run by government. Also referred to as semi-state or state-sponsored bodies

Question 29

State-owned Enterprise features

Answer 29

1. Formation: passing an Act of the Oireachtas or government registers company with CRO and government is shareholder 2. Liability: Limited 3. Finance: supplied by the government 4. Control: relevant government minister appoints board of directors. Board appoints CEO 5. Tax: Any profits go to government or are reinvested 6. Dissolution: continuity of existence. Government can sell(privatisation) or government can wind up business.

Question 30

State-owned Enterprises Advantages and Disadvantages

Answer 30

Advantages: 1. Provide Employment 2. Provide Essential Services 3. Income for the Government Disadvantages: 1. Lack of profit motive 2. Cost government money (most don't profit)

Question 31

Public Limited Company Definition

Answer 31

Business organisation whose shares can be bought and sold by general public. Opens risk of hostile takeover as competition can buy majority stake.

Question 32

Public Limited Company Features

Answer 32

1. Formation: Difficult set-up. business seeks a stock exchange listing. Must have good trading history and meet rules in Companies Act. 2014 2. Liability: Limited 3. Finance: large amount from shares. much easier to borrow. 4. Control: board of directors appointed by shareholders at AGM who appoint CEO 5. Tax: Corporation tax at 15% 6. Dissolution: continuity of existence. Dissolved by bankruptcy or court order

Question 33

Companies Act. 2014 Rules for joining stock exchange

Answer 33

1. Name must end in plc. 2. Constitution of two document (Memorandum of Association + Articles of Association) 3. Needs at least shareholders with no maximum 4. Needs at least two directors 5. Must issue prospectus setting out company's history

Question 34

Changing Organisational Structure Reasons and Implications

Answer 34

1. Raise Finance easier. Private limited companies access finance easier due to limited liability lowering risks for financial institutions. 2. Reduce risk. Limited liability or separate legal entity 3. Expand easier. Limited companies can expand more easily due to the increased size 4. Access to more skills and knowledge. Partnership will allow greater decisions by working together 5. Benefit from lower taxes. Corporation tax lower than self-assessment income tax. 6. Ensure Continuity of Existence 7. Change control.

Question 35

Benefits of Indigenous Firms to the Irish Economy

Answer 35

1. Loyalty to local area and their employees. protects jobs in local economy 2. Profits redistributed in Ireland. Money spent in Irish economy helps Irish citizens 3. Encourages others. Successful Indigenous firms can encourage local people to do the same 4. Improved balance of payments. Many produce goods that are exported 5. Increased Tax revenue for government