Summary SQE Business law revision notes

BLP Compact Notes
Introduction to Business Law and Practice
Overview
 Preliminary Reading: Complete Company Law module reading
before starting.
 Five Elements:
1. Different legal forms of business
2. Tax treatment of different business models
3. Private and public companies
4. Legal personality and limited liability
5. Core principles of contract law


Different Legal Forms of Business
 Business Models: Sole trader, partnership, LLP, private and unlisted
public companies.
 Features to Revise: Costs, risk, structure, formalities, privacy, and
finance.


Tax Treatment of Different Business Models
 LLPs: Tax transparent.
 Sole Traders and Partners: Pay income tax on profits and capital
gains tax on gains.
 Companies: Pay corporation tax; shareholders pay income tax on
dividends (double taxation).


Private and Public Companies
 Private Companies: Lighter regulation, cannot offer shares to the
public, use written resolutions.
 Public Companies: Can offer shares to the public, require a minimum
share capital of £50,000, more regulation.
 Listed Companies: Additional regulation to ensure director
accountability.

,Legal Personality and Limited Liability
 Separate Legal Personality: Companies and LLPs are separate legal
entities from their members.
 Limited Liability: Shareholders’ liability is limited to their investment.


Core Principles of Contract Law
 Key Elements: Offer, acceptance, intention, and consideration.
 Contractual Terms: Conditions, warranties, innominate terms;
express or implied.
 Drafting Issues: Conditions precedent, Contracts (Rights of Third
Parties) Act 1999.
 Execution of Documents: Proper execution ensures enforceability for
individuals, companies, and partnerships.


Different Legal Forms of Business
Introduction to Business Models
 Business Models to Understand:
o Sole trader
o Partnership
o Limited liability partnership (LLP)
o Private and unlisted public companies
 Features to Revise: Costs, risk, structure, formalities, privacy,
finance, and tax.


Key Considerations When Forming a Business
 Costs: Setup expenses.
 Risk: Personal liability for business debts.
 Structure: Organizational clarity and flexibility.
 Formalities: Legal requirements for running the business.
 Privacy: Public disclosure of business information.
 Finance: Methods of raising capital.
 Tax: Taxation of the business model.

,Sole Traders – Key Characteristics
 No Setup Costs: Can start trading immediately.
 Unlimited Personal Liability: Personal assets at risk for business
debts.
 No Formal Structure: Individual decides business operations.
 No Filing Requirements: Complete privacy, no public accounts.
 Personal Capital: Funded by the sole trader’s personal resources.


Partnerships – Key Characteristics
 No Setup Costs: Can start trading without formalities.
 Unlimited Liability: Joint (contract) or joint and several (tort) liability
for debts.
 No Separate Legal Entity: Partners are the business.
 No Filing Requirements: Complete privacy, no public accounts.
 Personal Capital: Funded by partners’ personal resources.


Limited Liability Partnership (LLP) – Key Characteristics
 Setup Costs: Legal fees for incorporation.
 Limited Liability: Liability limited to agreed contributions.
 Separate Legal Personality: Hybrid of partnership and company.
 Flexible Structure: Defined by a formal Members’ Agreement.
 Filing Requirements: Registered at Companies House, annual
accounts required.
 Borrowing: Can borrow in its own name and create floating charges.


Companies – Key Characteristics
 Setup Costs: Legal fees for incorporation.
 Limited Liability: Shareholders’ liability limited to unpaid shares.
 Separate Legal Entity: Distinct from owners.
 Filing Requirements: Registered at Companies House, various
disclosures required.
 Borrowing and Security: Preferred by lenders, can issue shares and
provide more security forms.

, Summary
 Choosing a Business Model: Consider costs, risk, structure,
formalities, privacy, finance, and tax.
 Advantages and Disadvantages:
o Sole Trader and Partnership: No public disclosure, but
unlimited liability.
o LLP and Company: Limited liability, but public filing
requirements.
 Tailoring to Business Needs: Select the model based on specific
business requirements and advantages.


Tax Treatment of Different Business Models
Additional Consideration When Forming a Business – Tax
 Importance: Tax payable on business profits is a key consideration.
 Complexity: Tax implications vary by business medium; specialist
advice from tax lawyers and accountants is often needed.


Sole Traders - Tax
 Not a Separate Entity: Profits taxed as the individual’s income.
 Income Tax: Sole trader’s profits are taxed as personal income.
 Capital Gains Tax: Gains on one-off transactions are taxed as capital
gains.


Partnerships - Tax
 Tax Transparency: Business is not a separate entity.
 Individual Taxation: Partners are taxed on their individual shares of
profits and gains.
 Income and Capital Gains Tax: Profits and gains taxed as personal
income and capital gains.


LLPs - Tax
 Hybrid Entity: Treated like a company for liability, like a partnership
for tax.