Commercial Law - Business Forms
8 important questions on Commercial Law - Business Forms
What are different types of Business Organisation?
- Sole Traders
- Partnerships
- Private Company Limited By Shares
- Designated activity company
- Public Limited Company
- Company Limited by Guarantee (charities, management co's)
- Unlimited Companies
- Limited Company
What is a Sole Trader?
Advantages and Disadvantages of being Sole trader
- Totally in charge.
- Take all the profits minus costs and taxes at high rate of income.
- Don't have to prepare financial statements.
Disadvantages
- Also in change or supply money.
- Personally liable for all debts.
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What is a Partnership?
What are six requirements for a valid partnership?
- Consensual relationship between 2 or more people.
- Subsist between persons.
- Carry on a business. However no all partners do not need to be actively carrying on the business.
- Will include running a farm but mere ownership of property is not a business. A single venture may constitute a business.
- Intention to make a profit
- Work in common.
Advantages and disadvantages of Partnership
- Share capital costs and profits
- Another individual to gain expertise from and share workload.
- Share business expenses.
Disadvantages
- If my partner was to leave business or die, I am left responsible for the entire amount of debt. Joint and several liability.
Advantages for setting up a company.
- You dont pay tax at the higher tax rate, its corporate tax rate.
- Shareholders will not be liable for debts.
- Give jobs to individuals and contribute to the economy.
- If a director or shareholder dies or leaves the company will still continue.
- Ability to raise additional finance/capital.
- Can set up a company very quickly and begin trading.
Disadvantages
- You deal business to business and some sole traders might be reluctant to deal with limited companies because if company goes bust they dont get paid.
- Financial affairs are public including directors salaries.
Company Law - Case Salomon v Saloman & Co
Subsequently there was a decline in boot sales, the company failed and put into liquidation. Because he was originally a sole trader the creditors argued he was liable, the courts held he had given due notice and it was a separate legal entity and Saloman was NOT liable for debts.
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