BLP: Introduction Flashcards
(32 cards)
What are the main advantages of a sole trader business model?
No formal setup costs, complete privacy, and simple decision-making; the sole trader can start trading immediately
What is the key risk of operating as a sole trader?
Unlimited personal liability; personal assets can be used to satisfy business debts
How is a sole trader taxed on profits?
Profits are treated as the individual’s taxable income for income tax purposes (and any capital gains are taxed as personal gains)
How is a partnership taxed on profits?
Partnerships are tax-transparent: each partner is taxed individually on their share of profits and any chargeable gains
What is one advantage of a Limited Liability Partnership (LLP) compared to a general partnership?
Members have limited liability, protecting their personal assets beyond the amount they agree to contribute under the LLP agreement
What formalities must an LLP complete that a general partnership does not?
LLPs must register at Companies House and file annual accounts plus other statutory information
What distinguishes a private company limited by shares from a public company?
Private companies cannot offer shares to the public and use the suffix “Ltd,” whereas public companies can list shares on an exchange and must use “Plc”
What is the minimum share capital requirement for a public company?
£50,000 of allotted share capital with at least 25% paid up
When does a company acquire separate legal personality?
On incorporation, when the certificate of incorporation is issued
What case established the principle of separate legal personality?
Salomon v A. Salomon & Co Ltd [1897] AC 22
What does limited liability mean for company shareholders?
Shareholders’ liability for company debts is limited to any unpaid amount on their shares
Under what circumstance can the corporate veil be pierced?
If the company is a façade or sham used to evade legal obligations or perpetrate a fraud
What are the three fundamental elements required for a simple contract?
Offer and acceptance, intention to create legal relations, and consideration
What is the objective test when determining if agreement has been reached?
Look at parties’ conduct and communications to see what a reasonable person would interpret their intentions to be
Define ‘offer’ in contract law.
An expression of willingness to contract on specified terms, intended to become binding upon acceptance
What is ‘consideration’ in contract law?
Something of value exchanged by both parties, serving as the price for which a promise is bought
What distinguishes express terms from implied terms?
Express terms are explicitly agreed by the parties; implied terms are introduced by law or fact to fill gaps and give effect to unexpressed intentions
Give one example of when a term may be implied in fact.
By trade custom or course of dealing where both parties implicitly understood the term
What are the four ways a contract can be discharged?
Performance, agreement, breach (repudiation), and frustration
What is ‘frustration’ in contract law?
When an unforeseen event makes performance impossible or radically different, automatically discharging obligations
Distinguish a condition from a warranty.
A condition is a fundamental term whose breach allows repudiation; a warranty is a lesser term whose breach gives rise to damages only
What is an innominate term?
A term not clearly classified as condition or warranty; the remedy depends on the seriousness of the breach’s consequences
What is ‘agency’ in contract law?
A relationship where an agent is authorized to form contracts on behalf of a principal, binding the principal to third parties
What is actual authority?
Authority explicitly granted by the principal to the agent, either in writing or orally
