© strawberrywaffles 2025
Forms of business
Incorporated (can grant fixed / floating charges): LLPs, companies
Not incorporated (can only grant fixed charges): sole trader, partnerships
Flexibility in raising finance + low disclosure requirements = private limited company (ltd).
Limited partnership: hybrid between partnership and LLP
- Some partners have unlimited liability while some have limited liability
- Limited partners (who have limited liability) not involved in day-to-day management
1. Sole trader
a. No set up costs – no formalities → can start trading straight away.
b. Not a separate legal entity – contracts formed between individual and third
parties.
c. Unlimited personal liability
d. No formal structure.
e. No Companies House filing/procedural requirements
f. Complete privacy – no need for publicly filed accounts etc.
g. Financed by the sole trader themselves (personal capital injection).
h. Can employ staff
i. Name restrictions – Companies Act 2006
2. Partnership
a. SRA loves questions on partnerships
b. No set up costs – no formalities → can start trading straight away.
c. Partnerships can be formed without any formal agreement or even intention.
d. Not a separate legal entity. Contracts are formed between third parties and
the partners in the partnership as individuals.
e. Unlimited personal liability - joint (in contract) or joint and several (in tort)
liability between partners.
f. No Companies House filing / procedural requirements → privacy
i. No need to file accounts
g. Formally governed by Partnership Act 1890 (PA 1890), but more likely
governed by partnership agreement between partners
,© strawberrywaffles 2025
i. Partnership agreement need not be written
ii. Default PA provisions: equal profit sharing ratio, no right to
remuneration, majority decision-making, partner can’t be expelled by
majority vote unless previously agreed that expulsion can happen on
majority vote
3. LLPs
a. Limited Liability Partnership Act 2000
b. Separate legal personality – contract between LLP and third parties
i. Can create floating charges from banks
c. All partners have limited liability (limited to initial capital contribution)
d. Flexible structure, decided via a written Members’ Agreement
e. For tax purposes, treated as a partnership – each member is taxed as a
partner, liable to pay tax on their share of income/gains from the LLP (“tax
transparency”)
f. Need two or more “persons” (include both companies + individuals)
g. Must be registered at Companies House + must file accounts
h. No formal written Members’ Agreement → default provisions:
i. Members share equally in capital & profits
ii. LLP must indemnify its members for payments made and personal
liabilities incurred by them in the ordinary and proper conduct of the
business of the LLP.
iii. Every member may take part in management but no right to
remuneration.
iv. No person can become a member or assign their membership without
the consent of all existing members.
v. Ordinary decision making may be by the majority of the members. Any
proposed change to nature of business requires unanimous consent
vi. No implied power of expulsion of a member by the majority unless the
members have expressly provided for such a power in a Members’
Agreement
4. Companies
,© strawberrywaffles 2025
Companies
Incorporation → separate legal personality + limited liability
Company: who signs a contract?
- Company seal in accordance with company’s articles of association (e.g. signature
by one or two authorised signatories)
- No company seal, but signed by two directors or one director and the company
secretary
- Signed by one company director and witnessed by an independent witness
- Signed by a senior employee (not director / company secretary) under a power of
attorney
1. Private company
*SQE focuses on private company limited by shares (Ltd)
Limited by shares (Ltd) Limited by guarantee Unlimited
companies
- Most common. - Rare Rare.
- No minimum share - No share capital
capital requirements. - Liability of members Unlimited liability.
- Cannot offer shares to limited to the amount they
public. agreed to contribute, in
- Can be formed by one the event of winding up
person. - Non-transferable
membership
2. Public company limited by shares (Plc)
- Most companies in E&W are private limited companies
- All Plcs can offer shares to the public
- Not all Plcs are listed (i.e. admitted on a regulated market e.g. LSE)
- Conversion of Ltd → Plc needs the following from the Registrar of Companies:
o New certificate of incorporation
o Trading certificate showing that Plc has met the minimum share capital
, © strawberrywaffles 2025
Public vs private companies:
Public company (Plc) Private limited company (Ltd)
Need trading certificate + Certificate of Needs Certificate of Incorporation before
Incorporation before trading. trading.
Minimum share capital of £50k, of which Must have at least 1 share with nominal
25% must be paid up (at time of purchase). value of at least 1p.
Minimum 2 directors Minimum 1 director
At least 1 member At least 1 member
Must have company secretary who must be No need to have secretary (director can do
qualified. whatever secretary does).
At least one annual AGM. No need AGM (but can have, if it wants)
Higher regulatory requirements. Basically no regulatory requirements.
Cannot use written resolutions Can use written resolutions
Can offer shares to the public Cannot offer shares to the public.
Company secretary:
- Keeps records, file documents at Companies House, general administration
Directors of a public company must convene a general meeting if the company’s net assets
are 50% or less of its called-up share capital
- Consider whether, and if so, what steps should be taken to deal with the situation
- No obligation to take any steps
Advantages & disadvantages of incorporation (i.e. set up a company):
Advantages Disadvantages
- Limited liability – limited to amount - For small private companies
unpaid on shares where directors = shareholders, no
- Separate legal entity – can enter effective separation of ownership
contracts, own property etc & control
- Minimises risk - High levels of formality
- Gives formal structure to business - Public disclosure needed
Forms of business
Incorporated (can grant fixed / floating charges): LLPs, companies
Not incorporated (can only grant fixed charges): sole trader, partnerships
Flexibility in raising finance + low disclosure requirements = private limited company (ltd).
Limited partnership: hybrid between partnership and LLP
- Some partners have unlimited liability while some have limited liability
- Limited partners (who have limited liability) not involved in day-to-day management
1. Sole trader
a. No set up costs – no formalities → can start trading straight away.
b. Not a separate legal entity – contracts formed between individual and third
parties.
c. Unlimited personal liability
d. No formal structure.
e. No Companies House filing/procedural requirements
f. Complete privacy – no need for publicly filed accounts etc.
g. Financed by the sole trader themselves (personal capital injection).
h. Can employ staff
i. Name restrictions – Companies Act 2006
2. Partnership
a. SRA loves questions on partnerships
b. No set up costs – no formalities → can start trading straight away.
c. Partnerships can be formed without any formal agreement or even intention.
d. Not a separate legal entity. Contracts are formed between third parties and
the partners in the partnership as individuals.
e. Unlimited personal liability - joint (in contract) or joint and several (in tort)
liability between partners.
f. No Companies House filing / procedural requirements → privacy
i. No need to file accounts
g. Formally governed by Partnership Act 1890 (PA 1890), but more likely
governed by partnership agreement between partners
,© strawberrywaffles 2025
i. Partnership agreement need not be written
ii. Default PA provisions: equal profit sharing ratio, no right to
remuneration, majority decision-making, partner can’t be expelled by
majority vote unless previously agreed that expulsion can happen on
majority vote
3. LLPs
a. Limited Liability Partnership Act 2000
b. Separate legal personality – contract between LLP and third parties
i. Can create floating charges from banks
c. All partners have limited liability (limited to initial capital contribution)
d. Flexible structure, decided via a written Members’ Agreement
e. For tax purposes, treated as a partnership – each member is taxed as a
partner, liable to pay tax on their share of income/gains from the LLP (“tax
transparency”)
f. Need two or more “persons” (include both companies + individuals)
g. Must be registered at Companies House + must file accounts
h. No formal written Members’ Agreement → default provisions:
i. Members share equally in capital & profits
ii. LLP must indemnify its members for payments made and personal
liabilities incurred by them in the ordinary and proper conduct of the
business of the LLP.
iii. Every member may take part in management but no right to
remuneration.
iv. No person can become a member or assign their membership without
the consent of all existing members.
v. Ordinary decision making may be by the majority of the members. Any
proposed change to nature of business requires unanimous consent
vi. No implied power of expulsion of a member by the majority unless the
members have expressly provided for such a power in a Members’
Agreement
4. Companies
,© strawberrywaffles 2025
Companies
Incorporation → separate legal personality + limited liability
Company: who signs a contract?
- Company seal in accordance with company’s articles of association (e.g. signature
by one or two authorised signatories)
- No company seal, but signed by two directors or one director and the company
secretary
- Signed by one company director and witnessed by an independent witness
- Signed by a senior employee (not director / company secretary) under a power of
attorney
1. Private company
*SQE focuses on private company limited by shares (Ltd)
Limited by shares (Ltd) Limited by guarantee Unlimited
companies
- Most common. - Rare Rare.
- No minimum share - No share capital
capital requirements. - Liability of members Unlimited liability.
- Cannot offer shares to limited to the amount they
public. agreed to contribute, in
- Can be formed by one the event of winding up
person. - Non-transferable
membership
2. Public company limited by shares (Plc)
- Most companies in E&W are private limited companies
- All Plcs can offer shares to the public
- Not all Plcs are listed (i.e. admitted on a regulated market e.g. LSE)
- Conversion of Ltd → Plc needs the following from the Registrar of Companies:
o New certificate of incorporation
o Trading certificate showing that Plc has met the minimum share capital
, © strawberrywaffles 2025
Public vs private companies:
Public company (Plc) Private limited company (Ltd)
Need trading certificate + Certificate of Needs Certificate of Incorporation before
Incorporation before trading. trading.
Minimum share capital of £50k, of which Must have at least 1 share with nominal
25% must be paid up (at time of purchase). value of at least 1p.
Minimum 2 directors Minimum 1 director
At least 1 member At least 1 member
Must have company secretary who must be No need to have secretary (director can do
qualified. whatever secretary does).
At least one annual AGM. No need AGM (but can have, if it wants)
Higher regulatory requirements. Basically no regulatory requirements.
Cannot use written resolutions Can use written resolutions
Can offer shares to the public Cannot offer shares to the public.
Company secretary:
- Keeps records, file documents at Companies House, general administration
Directors of a public company must convene a general meeting if the company’s net assets
are 50% or less of its called-up share capital
- Consider whether, and if so, what steps should be taken to deal with the situation
- No obligation to take any steps
Advantages & disadvantages of incorporation (i.e. set up a company):
Advantages Disadvantages
- Limited liability – limited to amount - For small private companies
unpaid on shares where directors = shareholders, no
- Separate legal entity – can enter effective separation of ownership
contracts, own property etc & control
- Minimises risk - High levels of formality
- Gives formal structure to business - Public disclosure needed
