1.1. Unincorporated & Incorporated Entities Flashcards
Definition of a corporation…
A legal entity that is owned by its shareholders.
Shareholders have limited liability in the corporation (limited to the amount of money invested).
Can be sued and sue, pay corporation tax and merge with other corporations.
Limited companies…
Ltd. (private):
- Established and owned by at least one shareholder who has limited liability.
- Shareholder has voting rights and gets a voice on how the company is run.
- Day-to-day management is nominally separated from the ownership.
- Directors have a responsibility to ensure accounting information is up to date.
- Can issue shares to anyone, with the permission of the owner, up to the value of £50,000.
Plc. (public):
- Must have at least two directors and a qualified company secretary, who all have limited liability.
- Owned by shareholders, who have limited liability.
- Must have issued shares over £50,000.
Limited liability partnership…
Two or more legal entities with a view to profit.
The partners have limited liability.
Profits are distributed to the partners for them to pay individual income tax on.
Co-operatives…
A mutual membership organisation that is run for the benefit of its members. They make a profit but there is a focus on how that profit is made.
The members in a co-op are those closest to the business, such as customers and suppliers.
Profits are distributed amongst members.
Community interest company (CIC)…
A social enterprise that serves public interests.
A CIC must submit a community interest statement to ensure they meet the requirements.
Assets are normally locked (through a statutory asset lock) to ensure they are protected for public use.
Usually caps on dividend payments to ensure equity can be raised but prevents exploitation.
Community benefit society…
Similar to a co-op but the profits are not distributed among the members (they are distributed to the community).
Charitable incorporated organisation…
An incorporated organisation that operates for charitable purposes.
Building society…
A mutual financial institution that focuses on mortgage lending and borrowing.
Savers provide funds for borrowers.
Credit union…
A co-operative financial institution.
Members pay into the institution and are able to use financial services.
Any income generated by the union goes towards funding projects that benefit society and the members.
Friendly society…
A mutual organisation that provides financial assistance to its members during times of hardship.
May also provide life insurance.
Sole trader…
The owner of the business has sole responsibility for it, with unlimited liability.
Minimal regulations, no memorandum, articles of association and no financial statements.
Any income has to be personally taxed.
Limited ability to raise capital and borrow money.
Partnership…
The same for a limited liability partnership but the partners have unlimited liability and are responsible for debt and contracts it enters.
Limited partnership…
Comprises two type of partner:
1. General partner who have the responsibility and greater control in business management.
2. Limited partner who have less control over the business and have limited liability.
Trusts…
A legal device used to hold assets on behalf of people or organisations.
No legal identity and managed by trustees.
Unincorporated associations…
Such as sports clubs.
A group of people come together for a specific reason.
There is no legal entity, instead a committee operates, whereby each member has liability over debts and contractual obligations.
Have limited ability to raise capital and borrow money.
