wrong answers to mocks

Question 1

what documents form part of a company’s constitution?

Answer 1

1. memorandum of association
2. articles of association,
3. certificate of incorporation
4. current statement of capital
5. shareholder resolutions and agreements
6. court orders and
7. legislation which affects the companys consitution

Question 2

business mediums

Answer 2

1. in a trading business, having limited liability for the debts of the business is an + because of the risk of paying for materials and then not being paid for the manufactured goods and being in debt.
2. in a partnership, the liability of partners is unlimited.
3. companies. or LLP can grant floating charges.
4. company has higher status than an llp

Question 3

issue and transfer of shares

Answer 3

• shares are alotted at a nominal value or par value which is the original value of the shares

Question 4

LLP set up

Answer 4

filing requirements to incorporate an LLp:

• FORM LL 1N01 and the applicable fee

Question 5

limited partnership

Answer 5

in order to retain limited liability status - limited partners cannot participate in the management of the limited partnership.

Question 6

joint ventrue

Answer 6

cn be a purely contractural arrangement, it can also be run through a business medium such as company limited by shares, limited partnership, limited liability partner or a general partnership.

Question 7

limited liability partnership

Answer 7

provides benefit of limited liability with management control.

some financial information will need to be made public.

must have at least 2 members on incorporation.

HOW are profits taxed?

• an llp is treated as if the members were carrying on the business in partnership and as a result its members will have to pay income tax on their profits made by the LlP. (not made by the LLP itself).

Question 8

what must be included in the memorandum of association?

Answer 8

will state that the partners wish to form the company and have agreed to subscribe for the sahres.

consists of only a statement that the subscribers wish to form a company. all it does is provide what has been described as a historical snapshot that reflects the situation of the company at the time that it was created.

Question 9

written resolution lapse date

Answer 9

28 days. beginning with the date of circulation.

Question 10

derivative claims

Answer 10

• permission to continue a derivative claim must be refused if the court is satisfied where the act or omission giving rise to the cause of action has been ratified by the company.
• there is no minimum shareholding requirement to bring a derivative claim.
• the court must take into account whether the shareholder is brining the claim in good faith.

Question 11

ratification

Answer 11

• ## requires an ordinary resolution of the shareholders which must be passed without counting the shares of the director whose actions are being ratified.

Question 12

spts - person connected to the director

Answer 12

connected persons include the following members of a directors family
- their husband wife or civil partner, or a partner with whom they have an enduring relationship, children and step children.

wider family such as brothers, sisters, or grandparents are not connected persons.

• grandparents who live with a director are specifically excluded.

Question 13

shadow directors is someone who has given instructions to a company director and the director is accustomed to act in accordance with those instructions.

Question 14

qualifications

Answer 14

a person who is subject to a disqualification order contravenes the order if he is involved in the promotion, formation or management of a company without leave of the court.

Question 15

dividends

Answer 15

for a dividend payment to be a lawful distribution there must be sufficient profits available for distribution. the balance sheet and loss reserve

a company does not need to make a trading profit in the accounting period to which the dividend relates.

the actual dividend need not be funded from cash reserves - the company might realise some of its fixed or other curren assets to raise funds.

-

Question 16

security

Answer 16

legal mortgage = highest form of security and should be sought in the first instance by the bank.

Question 17

buyback of shares

Answer 17

a buyback using capital requires an ordinary resolution of the shareholders to approve tehe buyback contract and a special resolution to approve the payment out of capital.

Question 18

trading profit

Answer 18

shown at the end of the profit and loss account

bills are shown on an accrual on the balance sheet because it has been recieved but not yet paid.

Question 19

bank security

Answer 19

banks often require that current assets exceed current liabilities to a certain amount inorder to try and ensure that the company remains solvent during the term, and therefore will be more likley to be paid out.

Question 20

private companies with only one class of shares

Question 21

tax examples: a partnership has been trading for three years. it draws up annual accounts to 31st may in each year. a person joints a partnership on 1st aug 2021

Answer 21

what is the basis of assessment for income tax of the person in the tax year in which they joined the partnership?
- their share of the profits from 1st aug to 5th april 2022 - 1st aug (when they joined)

Question 22

A woman has run her business as a sole trader. The assets of the business comprise freehold property, debtors, cash, stock in trade, goodwill, and fixed and moveable plant and machinery.

The woman transfers the debtors, stock in trade, goodwill and the fixed and moveable plant and machinery, valued at £300,0000, to a newly incorporated company. In exchange, she receives consideration of 1,000 ordinary shares of £1 each in the company (worth £200,000), and £100,000 of the consideration is left outstanding on loan. The company then rents the premises from the woman.

will roll over relif on incorporation automatically apply to any of the gain made on the transfer of the womans business to the company?

Answer 22

no because the business was not transferred with all of its assets

• roll over relief on incorporation will only apply if the business is transferred as a going concern with all of its assetrs other than cash.

Question 23

A man sets up business as a sole trader and makes a trading loss of £45,000 in his first year of trading. However, forecasts for the future are good and he expects to make a £30,000 profit in his second year of trading. Profits are expected to grow substantially in future years. The sole trader has received rental income this year and last of £8,000 per annum. Prior to setting up as a sole trader, the man was employed as a marketing manager with earnings as set out below. His income over the last four tax years and projected income for future tax years is as follows:-

Tax year

New business

Rental income

Salary

Total income

Tax year three years before tax year of loss

0

18,500

18,500

Tax year two years before tax year of loss

0

19,000

19,000

Tax year before tax year of loss

7,800

20,000

27,800

This tax year

(45,000)

7,800

0

7,800

Next tax year (projected)

30,000

7,800

0

37,800

which of the following best descrives the loss reliefs available to the sole trader

Answer 23

the sole trader could use carry across/ carry back relief to reduce total income in this tax year and the tax year before the loss and then carry the remaining loss forward against first subsequent profits from the same trade

• the sole

Question 24

residential land - vat

Answer 24

residential land is exempt from vat and so is not chargeable for vat

vat is charged on any supply of goods and services in the uk where it is a taxable supply made by a taxable person in the course of furtherance of any business carried on by him.

the vat is charged on the valuable of the supply itself.

residential land is exempt from vat.

Question 25

taxable persons

Answer 25

only a taxable eprson is able to recliam input tax.

• a taxable person is one who is registered for vat or required to do so at the time of the supply.
  £85,000 for compulsory first registration.

Question 26

tax on loans

Answer 26

when a company lends money to a participator in a close company (a company controlled by no more than 5 shareholders, or where all the shareholders are also directors) - provided that the loan is amde to a participator other than in the ordinary course of the companys business and that loan is over 15,000 the company must may corporation tax at a rate of 32.5 - this will be repaid to the company if the loan is later repaid or written off.