Business

Question 1

What are the benefits of a limited company?

Answer 1

• limited liability
• separate legal entity
• SH liability limited to amount paid for shares
• easier to raise finance as appear more secure, can grant floating charges

Question 2

What are the drawbacks of a limited company?

Answer 2

• filing requirements with CH
• must have 1 director, 2 if public, statutory rules for directors
• more formalities

Question 3

What are the benefits of a general partnership?

Answer 3

• no formalities to form
• managed by partners
• no legal requirements to keep records etc

Question 4

What are the drawbacks of a general partnership?

Answer 4

• unlimited personal liability, jointly and severally liable
• partner cannot transfer ownership without unanimous consent
• cannot create floating charge

Question 5

What are the benefits of a limited partnership?

Answer 5

• limited partner has limited liability to their contrition, cannot manage
• general partner has unlimited personal liability; they manage the partnership

Question 6

What are the drawbacks of a limited partnership?

Answer 6

• unlimited liability for general partner
• partners cannot transfer ownership without unanimous consent
• cannot create floating charge

Question 7

What are the benefits of a limited liability partnership?

Answer 7

• partners not personally liable beyond investment
• managed by partners
• can create floating charge

Question 8

What are the drawbacks of a limited liability partnership?

Answer 8

• cannot transfer ownership without unanimous consent
• filing requirements at companies house

Question 9

What are the benefits of a sole trader?

Answer 9

• no formalities
• flexible, owner manages
• can sell at will
• no filing requirements

Question 10

What are the drawbacks of a sole trader?

Answer 10

• unlimited liability
• cannot create floating charge

Question 11

How are general partnerships formed?

Answer 11

The Partnership Act 1980
- 2 or more persons
- carrying on business in common
- with intention to make profit

Can be companies or natural persons.
No formalities required. No need for partnership agreement or filings at CH

No limit on number of partners

Question 12

What can be evidence of a general partnership?

Answer 12

Under PA1980, Reciept of share of profits is prima facie evidence of partnership but doesn’t apply if:
- reciept is repayment of a debt,
- is payment of employee or
- is an annuity on account of a partners share

Agreement regarding losses is not prima facie evidence

Contribution not required

Question 14

What default rules does the Partnership Act provide for general partnerships?

Answer 14

• authority of partners to bring the firm
• liabilty of partners is joint and several
• liabilities of incoming and outgoing partners
• holding out
• partnership property
• division of capital, profits and losses (equal)
• no right to distribution before dissolution except where agreed
• right assignable
• partnership books
• interest
• remuneration (not entitled)