Unit 1. Business Structures
Businesses are all the legal relationships involved so the business can function
A partnership is the relationship which subsists between two or more people
carrying on a business in common with a view of profit (S1 Partnership Act 1890)
A company’s articles of association is a set of rules which determines the detail of
how the company is going to be run
Salomon v A Salomon & Co Ltd [1897] AC 22
Mr Salomon works as a sole trader. He owns a small shop which mends shoes. He
decides to change the form of his business from a sole traders to a private limited
company. Later on, the business gets into financial difficulties, and the company is
sued for unpaid debts. It doesn’t have enough money to pay its creditors and so the
creditors want Mr Salomon himself to pay. Once a company is properly formed, then
it’s a separate person, responsible for its own debts.
Public companies are allowed to offer their shares to the public so they can expect
to have a wide range of shareholders
Shares of a public company may be traded on the stock market
A personal guarantee is where a director guarantees the liabilities of the company
1. Guarantees for financial liability (if a company doesn’t pay a sum due, the
director will personally pay that sum)
2. Guarantee for a liability to perform a particular contract (if the company cannot
perform the obligations, then the director personally with perform it)
A guarantee has to be in writing to be enforceable (either contract or deed)
Identify who the parties are
Identify clearly what is being guaranteed
Identify what the terms of the guarantee are
A deed must be signed and witnessed
Limitation of liabilities on guarantees
Changed in the credit limit
Businesses are all the legal relationships involved so the business can function
A partnership is the relationship which subsists between two or more people
carrying on a business in common with a view of profit (S1 Partnership Act 1890)
A company’s articles of association is a set of rules which determines the detail of
how the company is going to be run
Salomon v A Salomon & Co Ltd [1897] AC 22
Mr Salomon works as a sole trader. He owns a small shop which mends shoes. He
decides to change the form of his business from a sole traders to a private limited
company. Later on, the business gets into financial difficulties, and the company is
sued for unpaid debts. It doesn’t have enough money to pay its creditors and so the
creditors want Mr Salomon himself to pay. Once a company is properly formed, then
it’s a separate person, responsible for its own debts.
Public companies are allowed to offer their shares to the public so they can expect
to have a wide range of shareholders
Shares of a public company may be traded on the stock market
A personal guarantee is where a director guarantees the liabilities of the company
1. Guarantees for financial liability (if a company doesn’t pay a sum due, the
director will personally pay that sum)
2. Guarantee for a liability to perform a particular contract (if the company cannot
perform the obligations, then the director personally with perform it)
A guarantee has to be in writing to be enforceable (either contract or deed)
Identify who the parties are
Identify clearly what is being guaranteed
Identify what the terms of the guarantee are
A deed must be signed and witnessed
Limitation of liabilities on guarantees
Changed in the credit limit
