Unit 1 - Business Mediums Flashcards
What is separate legal personality?
As long as a company is legally incorporated, it must be treated like any other independent person with rights and liabiltiies.
What is limited liability?
Where shareholders and directors are legally responsible for the debts only up to the value of their shares.
What are the key characteristics of a sole trader in respect of profits and debts?
An individual will own the business and benefit from any profits.
They are personally liable for all the debts of the business.
What are the key characteristics of a general partnership?
Definition
Management
Profits/debts
Two or more persons running and owning a business with the view of a profit.
They may customise their rules via a Partnership Agreement.
Partners keep all profits and incur any losses jointly and severally.
What are the characteristics of a private limited company?
Limited liability
Separate legal personality
Governed by the Companies Act 2006
Owners = shareholders
Managers = directors
What are the characteristics of a Limited Liability Partnership?
Hybrid between general partnerships and companies.
Owned and run by partners but taxed in the same way as companies
Limited liability
Separate legal personality
What are the characteristics of a public limited company?
Limited liability
Separate legal personality
Governed by Companies Act 2006
Have the ability to offer their shares to the public
What are the key differences between a private and public company?
Owners must invest a minimum amount.
Allotted shares must be a minimum of £50,000
What must be submitted to incorporate a company? (5)
Form IN01
Memorandum of association
Articles of association
Appropriate fee
Confirm how many shares the company wishes to have on registration
These should be submitted to Companies House who will in turn provide a certificate of incorporation.
When does a company come into existence?
Upon the certificate of incorporation being issued.
When must a company register with HMRC for corporation tax?
Online applications are registered automatically.
Applications made by post or third party software must be within three months of starting business.
What happens if Companies House rejects the company’s name?
They may choose a new name if the company does not do so within 28 days.
How many directors must a company have?
Every company must have at least one
Public companies must have at least two.
What information should be provided about the shareholders upon incorporation?
Names, addresses and statement of capital for the company’s first shareholders should be included.
What is a statement of capital?
The number of shares for each type and their nominal value.
There will also be confirmation on prescribed particulars.
What are the nominal value of shares?
‘Par value’. If shares are allotted for £1, the nominal value will be £1.
This is different from market value.
What are prescribed particulars on a statement of capital?
The rights of the shareholders on:
- What share of dividends they receive
- Whether they can exchange/redeem
- Whether they can vote
- How many votes their shares entitle them to
What are the articles of association?
The company’s rule book which is often modelled on the Model Articles, though amends can be made.
What is the memorandum of association?
A statement from the subscribers wishing to form a company and agreeing to take a share each.
It must be signed by the subscribers and be set out in the prescribed form.
How can the articles of association be amended?
By a special resolution which should be filed within 15 days of the articles taking effect.
What is a person with significant control?
Where someone holds over 25% of the shares in the company
OR
Over 25% of the voting rights in the company
OR
Holds the right to appoint or remove a majority of the board of directors of the company
What additional document is needed before a public company can begin trading?
A trading certificate to show they can trade, borrow and meet the allotted requirements.
How can a private company convert to a public company?
What must they file at Companies House?
Pass a special resolution to amend the name and articles.
File the resolution, fee, revised articles and balance sheet/written statement at Companies House.
What is a shelf company?
A company which has already been set up and will be ‘left on the shelf’ until a client needs a company set up quickly.
