1 - Business Meduims

Question 1

What 3 Business Meduims have Seperate Legal Personality and so Limited Liability

Answer 1

1. Limited Liability Partnerships
2. Private Limited Companies
3. Public Limited Companies

Question 2

When can the Veil of Incoporation be Pierced?

Answer 2

1. Concealment (Sham or Facade)
2. Evasion (Fraud)

Question 3

What can partners be liable for (with their limited liability)?

Answer 3

Partners are limited to their capital contributions

Question 4

What are members of companies limited to with limited liability?

Answer 4

Shares - They are liable to their shares and the value they hold (Ie if they bought £4,000 of shares, they will lose this.

If part paid share, they may be ordered to pay the outstanding amount

Guarantee - They will lose what they have guaranteed

Question 5

What is a Memorandum?

Answer 5

A required document to form a company, but more of a formality merely showing an intention to create a company and who its subscribers are

Question 6

How many shares must be brought by subscribes to incorporate a company?

Answer 6

Private Companies - Subscribers must buy at least one share

Public Companies - £50,000 Share value must be paid, at least a quarter of which must be paid upfront

Question 7

What are the Articles of Association?

Answer 7

The principle element of the company’s constitution, laying out the rules of the company’s operation

Question 8

When can the Articles of Association be altered?

Answer 8

In General Meetings with Special Resolution (75% + Agreement) from Shareholders and Directors

Question 9

What is Shareholders’ Reserve Power? (Model Articles)

Answer 9

The Shareholders may use special resolution (75% agreement) to direct the directors to, or refrain them from, specified action

Question 10

How do Directors Make Decisions?

Answer 10

Majority Vote

Question 11

Can Directors vote when there is a conflict of interest?

Answer 11

In most cases, the Director’s vote not counted where conflict

Question 12

Who is required to create a private company?

Answer 12

1 Director

1 Share Holder

Question 13

Who is Required to Create a Public Company?

Answer 13

2 Directors

1 Secretary

£50,000 Allotted Share Capital

Question 14

Does a General Partnership Require Formal Incorporation?

Answer 14

No

Can even be by act or oral

‘Carrying on a business in common with a view of profit’

Question 15

How are General Partnerships Terminated?

Answer 15

Terminated upon partners communicating notice

or

Dissolved by 1. Death, 2. Bankruptcy, 3. Undertaking entered into is complete

Question 16

Is a Partnership Agreement Required for Partnerships?

Answer 16

No, in its absence the Limited Liability Partnership Act will provide default rules

Question 17

How are Limited Liability Partnerships set up?

Answer 17

Must be filed at companies house, paying a small fee

Question 18

How can Limited Liability Partnerships be Terminated?

Answer 18

An Application to the Register (Companies House) to Strike off - Only if signed by all Partners

Question 19

How can Companies be terminated?

Answer 19

1. Application to Register (if the company has not operated within 3 months)
2. Liquidation (Voluntary or Compulsory)

Question 20

What is the difference between fixed and floating Security?

Answer 20

Fixed - The asset that has been borrowed against cannot be sold without lenders’ authorization.

Floating - Can be sold

Fixed charges are higher in the hierarchy than floating charges in cases of business insolvency and creditor payment.

Question 21

What Mediums are allowed both fixed and floating charges?

Answer 21

LLP and Companies

Question 22

Do LLPs have to audit and publish accounts on Companies House?

Answer 22

Yes, like companies.

Question 23

What will Prevail if the Articles of Association Clash with the Companies Act?

Answer 23

The Companies Act will always prevail over the Articles of Association. However, many provisions within the Companies Act allow for the Articles to alter the Companies Act. For Example:

		CA 2006 section 77 - Change of name
			(1)A company may change its name—
				(a)by special resolution (see section 78), or (b)by other means provided for by the company's articles (see section 79).

Question 24

Which Business Meduims can be set up without the business owners realising?

Answer 24

Sole Traders and Partnership

Question 25

In a General Partnerships, can all partners be liable for 1 partners negligence?

Answer 25

Yes Partners jointly and severally liable. This means that any one, any combination, or all of the partners can be sued for the entire amount.

Question 26

What business meduims can be terminated simply by giving notice to other members (or in single member entity - making the decision to terminate)?

Answer 26

Sole Traders and General Partnerships

Question 27

Who is LLP attractive to?

Answer 27

Attractive to professional firms who wish to benefit from limited liability but do not have a separation between managers and owners.

Question 28

Who is a General Partnership attractive too?

Answer 28

Small Groups who trust each other, view each other as equal, and have less need of structure and regulation.

Question 29

Who are Companies Attractive too?

Answer 29

Those who wish for Limited Liability and a split between ownership and management.

Question 30

Does a LLP Partners pay income tax or coporation tax?

Answer 30

Income Tax

Question 31

What are the Articles of Association?

Answer 31

A document that specifies the regulations for a company's operations and defines the company's purpose. The document lays out how tasks are to be accomplished within the organization, including which directors can vote at board meetings.

Question 32

Can Directors be personally liable for a companies debt because of their own wrongdoings as a director?

Answer 32

Yes

Question 33

What must be sent to companies house in order to incorpoate a private company?

Answer 33

1. A fee 2. Memorandum of Association 3. IN01 Form