WS1+2 MCQ Flashcards
Two individuals want to start a business together and are keen to limit their liability. They are both going to be active in the running of the business. They do not want to spend a lot of money in the set up of the business, but they need the ability to raise some finance in the future in the business name.
Which of the following would be the best vehicle for their business?
A) A private limited company
B) A sole trader
C) A limited liability partnership
D) A partnership
E) A public limited company
A) a private limited company
Correct
This option has the ability to raise finance and limit the personal liability of the individuals.
You act for a partnership which is made up of 8 partners. There is no written partnership agreement. Profits have always been shared equally between the partners.
Three years ago, the partners all agreed to take out a loan to renovate their main office. The partners all contributed equally to repaying the loan. Unfortunately, the partnership has not been profitable, and they have recently defaulted on the loan repayments.
One of the partners is about to retire. No documentation has been drafted to confirm the details of her retirement. Can the partner who is about to retire be liable for repaying any of the loan?
A) No, because there is no written partnership agreement therefore under the default provisions of the Partnership Act 1890, only the current partners will be jointly liable for debts of the partnership.
B) No, because the partners have not entered into a written partnership agreement which deals with liability on retirement therefore once the partner retires, she is no longer a partner and therefore has no liability for any debts of the partnership.
C) Yes, because there is no written partnership agreement therefore under the default provisions of the Partnership Act 1890, all those persons who were partners at the time that the loan agreement was entered into will be jointly liable for repaying the loan regardless of retirement.
D) No, because there is no written partnership agreement therefore under the default provisions of the Partnership Act 1890, only the current partners will be jointly and severally liable for debts of the partnership.
E) Yes, because there is no written partnership agreement therefore under the default provisions of the Partnership Act 1890, all those persons who were partners at the time that the loan agreement was entered into will be be jointly and severally liable for repaying the loan regardless of retirement.
C)
Yes, because there is no written partnership agreement therefore under the default provisions of the Partnership Act 1890, all those persons who were partners at the time that the loan agreement was entered into will be jointly liable for repaying the loan regardless of retirement.
Correct
Under the Partnership Act 1890 every partner is jointly liable for contractual debts and a partner will still be liable even though they have retired.
A company entered into a contract with an office equipment supplier to purchase 3 projectors. The contract was signed by the sole director on behalf of the company. The director and his wife are the shareholders of the company. The supplier delivered the projectors as agreed but the company failed to pay the purchase price.
Which statement best describes what legal action the supplier can take?
A) The supplier can sue the company for the purchase price.
B) The supplier can sue the sole director for the purchase price.
C) The supplier can sue the company and the shareholders for the purchase price.
D) The supplier can sue the company and the director for the purchase price.
E) The supplier can sue the shareholders for the purchase price.
A) The supplier can sue the company for the purchase price.
CORRECT:
The doctrine of separate legal liability means that the company is liable for its own debts.
Two individuals (A and B) want to incorporate a private limited company as soon as possible. A and B propose to each take 50% of the shares and become directors of the company. A is negotiating a supply agreement, on behalf of the not yet incorporated company with a company (C) to take effect once the company is incorporated. If A were to sign the agreement with C now, before the company is incorporated, who would be liable under the agreement?
A) Nobody, the contract would be void
B) A and B
C) A, B and the not yet incorporated company
D) The not yet incorporated company, once it is incorporated.
E) A
E) A
CORRECT:
Under s 51(1) Companies Act 2006, the person signing the purported agreement between the unincorporated company and C would be personally liable.
