Topic 2: Introduction To Business Law And Practice Flashcards
(59 cards)
What are the main legal forms of business covered?
Sole trader, Partnership, Limited liability partnership, Private and unlisted public companies
These forms of business have distinct legal characteristics.
What key features are analyzed for different business models?
Costs, Risk, Structure, Formalities, Privacy, Finance, Tax
These features help assess the viability and implications of each business model.
What is the cost implication of a sole trader business model?
No set up costs
A sole trader can start trading immediately without any formal costs.
What is the liability of a sole trader?
Unlimited personal liability
Personal assets can be sold to meet business debts.
What is the organizational structure of a sole trader?
No formal structure
A sole trader is not a separate legal entity.
What is a key characteristic of partnerships?
Unlimited joint or joint and several liability
Partners may need to sell personal assets to cover partnership debts.
What is a significant feature of a Limited Liability Partnership (LLP)?
Limited liability for all partners
Liability is limited to the amount agreed in the partnership agreement.
How is an LLP structured legally?
Separate legal personality
An LLP can borrow in its own name and create floating charges.
What is a defining characteristic of companies?
Separate legal entity
Companies are distinct from their owners, offering limited liability.
What is the tax treatment for sole traders?
Profits taxed as individual income
Gains are subject to capital gains tax.
How are partnerships taxed?
Tax transparent, partners taxed on individual shares
Partners pay tax on their share of profits and gains.
What is the tax treatment for Limited Liability Partnerships (LLPs)?
Treated like a partnership for tax purposes
Partners are taxed as individuals on their share of profits.
What do companies pay on their profits?
Corporation tax
Companies are liable for tax on their taxable total profits.
What distinguishes private companies from public companies?
Private companies cannot offer shares to the public
Public companies can raise funds by offering shares to the public.
What is a requirement for public companies regarding their name?
Must end with Public Limited Company/Plc
This designation indicates the company’s status.
What is the minimum number of directors required for a public company?
Two directors
This is stipulated under company law.
What is the minimum share capital for public companies?
Minimum of £50,000
This amount is required before trading can commence.
What is the significance of separate legal personality in company law?
A company has its own existence and personality from the date of incorporation
This ensures continuity even with changes in ownership.
What are the two key principles of company law?
Separate legal personality, Limited liability
These principles make companies attractive for investors.
What is the requirement for a private company regarding annual general meetings?
Not required, but can hold if desired
This offers flexibility in governance.
Fill in the blank: A company must be a ______ before it applies to have its shares listed on a stock exchange.
public company
This is a prerequisite for listing.
True or False: Private companies are prohibited from offering shares to the public.
True
This restriction is outlined in company law.
What is the date from which a company has its own existence and personality?
From the date of incorporation (date of issue of certificate of incorporation).
What does limited liability refer to in the context of a company?
Shareholders’ liability for the company’s debts is limited to the amount they paid (or agreed to pay) for their shares.
