business forms

Question 1

what is a sole trader

Answer 1

owned by one person

Question 2

what are the pros of being a sole trader?

Answer 2

• can be set up with no formalities
• cheap and simple to run
• private
• independent
• proprietor keeps all profits

Question 3

what are the cons of being a sole trader?

Answer 3

• difficult to raise finance
• unlimited liability - owner liable for all debts
• risk to personal finances
• personal responsibility

Question 4

what is a partnership according to the Partnership Act 1980 s1?

Answer 4

the relationship which subsists between persons carrying on a business in common with a view of profit

Question 5

where may the rights and liabilities of the partners be set out?

Answer 5

in a formal deed of partnership or a written partnership agreement

Question 6

what does the Partnership Act 1980 make provisions for?

Answer 6

contribution to capital, division of profits, rights of partners to participate in management etc but all may be varied by agreement

Question 7

what are the pros of a partnership?

Answer 7

• easy to set up and run
• flexible
• share decision making
• bring in different skills and experience
• private

Question 8

what are the cons of a partnership?

Answer 8

• no separate legal existence
• unlimited liability
• changes can dissolve partnership
• problems if there are disagreements
• financing

Question 9

what is a limited liability partnership (LLP - Limited Liability Partnerships Act 2000 s2(1)

Answer 9

an LLP may be incorporated when two or more persons associated for the purpose of carrying on a lawful business subscribe their names to an incorporation document

Question 10

what is the LLP status intended for?

Answer 10

professional partnerships such as law or accountancy firms

Question 11

what do members of LLP benefit from?

Answer 11

limited liability

Question 12

what are the most common types of company?

Answer 12

private limited companies (Ltd) and public limited companies (plc)

Question 13

which act contains information about companies?

Answer 13

Companies Act 2006

Question 14

after incorporation of a company, what are separated?

Answer 14

ownership and control

Question 15

what does a company have and what is the liability of its shareholders

Answer 15

A company has a separate legal personality and the liability of its shareholders is limitedh

Question 16

how do you set up a limited liability company?

Answer 16

• register with companies house
• company information is added to the Register of Companies
• information on the register can be searched by anyone

Question 17

what are the pros of a limited liability company?

Answer 17

• separate legal personality
• limited liability
• options for investment
• credibility

Question 18

what are the cons of a limited liability company?

Answer 18

• regulatory compliance
• separation of ownership and control
• publicity of accounts and documents

Question 19

what is a private limited company (ltd)?

Answer 19

CA 2006 s4(1) - company that is not a public company
- can have one member
- must have LTD or the word limited in its name
- no minimum capital requirement
- cannot offer shares to public

Question 20

what is a public limited company (plc)?

Answer 20

CA 2006 s4(2) - a company … the memorandum of which states that it is to be a public company and the requirements of the act .. as to registration … as a public company have been complied with

Question 21

what must a plc have?

Answer 21

• at least 2 members
• the words public limited company or plc at the end of its name
• a minimum share capital of £50,000 before it can start trading

Question 22

what can a plc do?

Answer 22

may offer its shares for sale to the general public
may decide to float its shares on the stock market

Question 23

what documentation is needed to set up a limited company?

Answer 23

memorandum of association
articles of association