Business Practice Exam Questions and
Complete Solutions Graded A+
what is in the articles of association? - Answer: A document that provides an internal 'rulebook'
e.g.,
- powers of directors
- when dividends are paid
- when/how shares can be transferred
standard is model articles, but can be amended
who meets at a board meeting? - Answer: company's board of directors
- policy issues/problems discussed
- board resolutions taken
when is an ordinary/special/board resolution used? - Answer: (in order of decision importance)
board = decisions made by directors at board meetings
- policy issues mainly
ordinary = made by shareholders- default type of resolution to use where CA/Articles simply require
'resolution of the shareholders'
- simply majority (more than 50%)
special resolution = made by shareholders - MAJOR decisions
- minimum 75% shareholder approval
- only used when expressly required under the CA or articles
,how can a resolution be passed? - Answer: general meetings
- all shareholders
- rights based on shareholder resolutions put before them
- notice + agenda circulated beforehand
written resolution
- passed in writing
- must follow certain procedure
business model options BASIC ADV/DISAD - Answer: SOLE
1. sole trade (unincorporated)
ADV - quick set up/private
DISAD - raising finance difficult/liabilities
- no set up costs/formalities/no constraints on how run
- risky - sole trader is liable for all debts/liabilities
- quick formation
- will have to complete a self-assessment tax return each year for HMRC though
- raising finance - difficult, banks will often demand loans to be secured against property/assets - could
provide guarantor but they will be in risk too - no options of issuing new shares
PARTNERSHIP
- partners pay income tax on partnership profits
1. ordinary partnership (unincorporated)
- Partnership Act 1890
- ADV: simple formationL informal/formal agreement between two or more people carrying on business
together
- statute regulated - fiduciary duties
- DISADV: all partners have joint, several and personal, unlimited liability
- often all partners must consult with each other = slow decision making
, (limited partnership - not included)
3. limited liability partnership(incorporated)
- Limited Liability Partnership Act 2000
- must be registered with registrar of companies at CH
- give rise to a separate corporate personality
- regulated heavily by company law CA 2006
- ADV: not personally liable for debts/liabilities - own distinct legal personality
- DISAD: often all partners must consult with each other = slow decision making
COMPANY
1. private limited company (ltd) (incorporated) - with/without share capital
- may require business owner to code some control to other shareholders/directors
- company liable for its own debts
- fee for registering the company at CH
2. private unlimited company (incorporated) - with/without share capital
3. public limited company (plc)(incorporated) - share capital
4. listed plc (incorporated) - share capital
how to explain the creation/nature/liability of a partnership? (Partnership Act 1890) - Answer:
CREATION: does a partnership exist?
- expressly created in a partnership agreement?
- implied by law in accordance with PA
a) exists where two or more people are 'carrying on a business in common with a view of profit'
b) partners' intention that matters - do not need to actually make a profit
c) variety of factors considered - most convincing is a share of profits of a business/held out as a partner
NATURE:
- no a separate legal entity
- acts through partners ('firm')
Complete Solutions Graded A+
what is in the articles of association? - Answer: A document that provides an internal 'rulebook'
e.g.,
- powers of directors
- when dividends are paid
- when/how shares can be transferred
standard is model articles, but can be amended
who meets at a board meeting? - Answer: company's board of directors
- policy issues/problems discussed
- board resolutions taken
when is an ordinary/special/board resolution used? - Answer: (in order of decision importance)
board = decisions made by directors at board meetings
- policy issues mainly
ordinary = made by shareholders- default type of resolution to use where CA/Articles simply require
'resolution of the shareholders'
- simply majority (more than 50%)
special resolution = made by shareholders - MAJOR decisions
- minimum 75% shareholder approval
- only used when expressly required under the CA or articles
,how can a resolution be passed? - Answer: general meetings
- all shareholders
- rights based on shareholder resolutions put before them
- notice + agenda circulated beforehand
written resolution
- passed in writing
- must follow certain procedure
business model options BASIC ADV/DISAD - Answer: SOLE
1. sole trade (unincorporated)
ADV - quick set up/private
DISAD - raising finance difficult/liabilities
- no set up costs/formalities/no constraints on how run
- risky - sole trader is liable for all debts/liabilities
- quick formation
- will have to complete a self-assessment tax return each year for HMRC though
- raising finance - difficult, banks will often demand loans to be secured against property/assets - could
provide guarantor but they will be in risk too - no options of issuing new shares
PARTNERSHIP
- partners pay income tax on partnership profits
1. ordinary partnership (unincorporated)
- Partnership Act 1890
- ADV: simple formationL informal/formal agreement between two or more people carrying on business
together
- statute regulated - fiduciary duties
- DISADV: all partners have joint, several and personal, unlimited liability
- often all partners must consult with each other = slow decision making
, (limited partnership - not included)
3. limited liability partnership(incorporated)
- Limited Liability Partnership Act 2000
- must be registered with registrar of companies at CH
- give rise to a separate corporate personality
- regulated heavily by company law CA 2006
- ADV: not personally liable for debts/liabilities - own distinct legal personality
- DISAD: often all partners must consult with each other = slow decision making
COMPANY
1. private limited company (ltd) (incorporated) - with/without share capital
- may require business owner to code some control to other shareholders/directors
- company liable for its own debts
- fee for registering the company at CH
2. private unlimited company (incorporated) - with/without share capital
3. public limited company (plc)(incorporated) - share capital
4. listed plc (incorporated) - share capital
how to explain the creation/nature/liability of a partnership? (Partnership Act 1890) - Answer:
CREATION: does a partnership exist?
- expressly created in a partnership agreement?
- implied by law in accordance with PA
a) exists where two or more people are 'carrying on a business in common with a view of profit'
b) partners' intention that matters - do not need to actually make a profit
c) variety of factors considered - most convincing is a share of profits of a business/held out as a partner
NATURE:
- no a separate legal entity
- acts through partners ('firm')
