compnay law

Question 1

what are the advantages of being a sole trader?

Answer 1

Full control over decision-making

Easy and inexpensive to set up

All profits go to the owner

Less regulatory requirements

Question 2

what are the disadvantages of being a sole trader?

Answer 2

Unlimited liability (personal assets at risk)

Limited access to capital

Business continuity depends on the owner

Question 3

Adv of partnerships

Answer 3

Shared financial investment and risk

Combined skills and expertise

Relatively easy to establish

Less regulatory burden than a company

Question 4

disadvanttages of a partnership

Answer 4

Unlimited liability in general partnerships (unless LLP)

Potential for conflicts between partners

Shared profits

Difficult to transfer ownership

Question 5

Advantages of a company structure

Answer 5

Limited liability (separate legal personality)

Easier to raise capital

Business continuity (not dependent on individuals)

Credibility and professional perception

Question 6

disadvantages of a company

Answer 6

More regulatory requirements (Companies Act 2006)

More costly to set up and maintain

Public disclosure of financial information (for public companies)

Potential for conflict between directors and shareholders

Question 7

How does the ‘Risk/Opportunity’ lens apply to business structures?

Answer 7

Sole traders: High risk (personal liability) but high control and flexibility.

Partnerships: Shared risk but potential for disputes.

Companies: Lower personal risk (limited liability) but more regulatory oversight.

Question 8

What is the concept of separate legal personality?

Answer 8

A company is a distinct legal entity separate from its owners and managers.

Case law example: Salomon v Salomon (established separate legal personality principle).

Question 9

What is the significance of limited liability?

Answer 9

Shareholders’ personal assets are protected; they only lose their investment.

Encourages entrepreneurship and investment.

Risk: Can lead to reckless trading (e.g., wrongful or fraudulent trading).

Question 10

What are the duties of company directors?

Answer 10

Act in good faith and in the best interests of the company.

Avoid conflicts of interest.

Exercise reasonable care, skill, and diligence.

Promote the success of the company (s.172 Companies Act 2006).