Business Types And Formation

Question 1

What are the types of business media?

Answer 1

Incorporated and unincorporated

Question 2

What are the three main business types?

Answer 2

Sole trader, partnerships, companies

Question 3

What are the three types of partnership?

Answer 3

General partnership, limited partnership and limited liability partnership

Question 4

What are the two types of companies?

Answer 4

Limited companies and PLC’s

Question 5

What is a sole trader?

Answer 5

Unincorporated business, natural person, in business on their own account, self employed( makes decisions on the management and the future plans), personally takes all profit but carries all the risk, no formalities for setting up/disbanding

Question 6

What are the regulations like for a sole trader?

Answer 6

No registration requirements ( other than trade/business specific and all registration relating to employees, health and safety, etc)
Pay income tax on the profits
Personal liability for the business debts

Question 7

What is a general partnership defined as?

Answer 7

Two or more people carrying on a business in common with a view of profit

Question 8

What is a general partnership?

Answer 8

Unincorporated business
No formal registration
Should have partnership agreement to regulate management/ activity

Question 9

How is a partnership set up?

Answer 9

Relationship created by written agreement or by conduct(definition), no registration, register for VAT of income exceeds £83k, keep partnership accounts for tax purposes

Question 10

What are the reasons for the dissolution of a partnership?

Answer 10

Agreed mechanism(fixed term, single venture)
Notice,
Death or bankruptcy,
Court order

Question 11

What are the formalities of a general partnership?

Answer 11

Share decision making, share ownership of assets, pay income tax on individual share of the profits, if the partners don’t specify otherwise, the partnership act provides default provisions

Question 12

For a general partnership what is the liability of the partners?

Answer 12

Partnership is not a separate entity from its partners, risk of bankruptcy(personal liability),

Question 13

What is a limited partnership?

Answer 13

Active partners remain fully liable, sleeping partners are only liable for the amount of capital invested, has to have LP in the name, incorporated business

Question 14

How is a limited partnership created?

Answer 14

Created by registration , therefore creates a legal corporation, an artificial person having legal personality

Question 15

What is a limited liability partnership?

Answer 15

Must end with LLP, treated as a partnership for tax purposes, individual members must register as self employed

Question 16

What are the 2 types of company?

Answer 16

Private limited company and public limited company

Question 17

Explain the case related it legal personality

Answer 17

Salomon v Salomon
Boot factory ran a sole trader, he decides to incorporate the business, sold boot factory for £39k, company got into financial difficulty, he was repaid £10k, other creditors didn’t get repaid, they were annoyed, HELD company had been created properly, so he was entitled to get repaid

Question 18

What is the definition of a public company?

Answer 18

A company limited by shares or limited by guarantee and having a share capital whose certificate of incorporation states that it is a public company and in relation to which the requirements of this act, or the former companies acts, as to registration or re-registration as a public company have been complied with on or after the relevant date

Question 19

What is a private company?

Answer 19

No minimum share capital, may not offer shares to the public, no min/max number of shareholders, must have one director

Question 20

What is a public company?

Answer 20

May sell shares to public, 25% of the share capital must be paid up, may be listed on the stock exchange, must have a minimum of two directors, must have a company secretary

Question 21

What are the options for forming a company?

Answer 21

Start from scratch, acquire a shelf company and then make the necessary changes(name)

Question 22

What are the effects of incorporating a company?

Answer 22

Can own property, is liable for its own debt, can sue/be sued, can enter contracts, can borrow, the members of the company benefit from limited liability

Question 23

What is a trademark?

Answer 23

Protects the ownership of distinguishing marks used to advertise goods or services

Question 24

What are the requirements to register a trademark?

Answer 24

Must be distinctive, can’t be offensive, can’t be too similar, register lasts 10 years

Question 25

What is a patent?

Answer 25

Gives the inventor a monopoly over its exploitation, to register it must be new, inventive step, capable of industrial application, can’t be offensive, lasts for 20years, can sell/gift it to others so they can use it

Question 26

What is copyright?

Answer 26

Protects ownership of original literary, artistic, dramatic work recorded in any tangible form, lasts up to 70 years, can grant a license