Business Entities Revision-Questions and Answers Graded A+

Business Entities Revision-Questions and Answers Graded A+ 1. INTRODUCTION TO COMPNAY LAW AND FORMATION OF COMPANIES Chapter 1 & 3 of Company law - ANSWER- Why are companies important ? - ANSWER-1. Legal personality - companies are separate legal persons from their members and directors and in many ways are treated by the law like human beings. 2. Limited liability - in a limited liability company, the members of a company are separate from the company itself, and if a limited company fails, the members are only liable for what they agreed to be liable for and not for all the company's debts. Companies and Partnerships Compared - ANSWER-- different legislations (the main statute on partnership is the Partnership Act 1890 - companies are formed by incorporation, partnerships are formed by consensus/agreement - companies are more expensive to run because there are more rules that must be complied with - both are legal persons in Scotland, though the legal personality of a partnership in Scotland is incompetent - a partnership cannot have 1 member only - company shares are normally freely transferable, while partners need the consent of all partners to transfer shares - partners normally have a right to take part in the management, whereas members of a company do not - members of a company usually have limited liability, whereas partners in a partnership (other than a limited partnership or limited liability partnership) are jointly and severally liable to an unlimited extent for partnership obligations. - Companies (like LLPs) must disclose financial details to Companies House, which are then available to the public - partnerships do not - A company can make use of the floating charge to secure loans it takes out, which a normal partnership (other than a LLP) cannot do - A partnership can be dissolved by any partner, but this is not normally the case in a company - The partnership form cannot be used by a not-for-profit business, whereas the company form can - The company is a much more popular legal form Methods of Incorporating a Company - ANSWER-Companies incorporated by Royal Charter