BUSINESS LAW AND PRACTICE
Apply to the October 2026 SQE2 sitting onwards. Anything that changes for a later sitting is flagged where it comes up.
KEY TO THESE NOTES
Legislation · Defined term · Red text = key point to remember · EXAM TRAP boxes = common mistakes · PENDING = announced or
passed but not yet in force – not examinable
Also tested in SQE2: contract law is also examined with Business Law and Practice. It is covered in the Pass Notes Dispute Resolution
notes (Core principles of contract law, Contract terms, Vitiating factors and Remedies).
CONTENTS
BUSINESS ORGANISATIONS, RULES AND PROCEDURES..................................................................................................................3
BUSINESS AND ORGANISATIONAL CHARACTERISTICS (SOLE TRADER / PARTNERSHIP / LLP / PRIVATE AND UNLISTED PUBLIC
COMPANIES)......................................................................................................................................................................................................3
LEGAL PERSONALITY AND LIMITED LIABILITY............................................................................................................................................... 4
PROCEDURES AND DOCUMENTATION REQUIRED TO INCORPORATE A COMPANY.....................................................................................4
PROCEDURES AND DOCUMENTATION REQUIRED TO FORM A PARTNERSHIP / LLP....................................................................................4
OTHER STEPS REQUIRED UNDER COMPANIES AND PARTNERSHIPS LEGISLATION TO ENABLE THE ENTITY TO COMMENCE
OPERATING........................................................................................................................................................................................................ 5
COMPANIES HOUSE FILING REQUIREMENTS..................................................................................................................................................6
FINANCE.....................................................................................................................................................................................8
DEBT FINANCE...................................................................................................................................................................................................9
TYPES OF SECURITY.........................................................................................................................................................................................9
EQUITY FINANCE...............................................................................................................................................................................................9
BUYBACK AND REDEMPTION OF SHARES......................................................................................................................................................11
TRANSFER AND TRANSMISSION OF SHARES.................................................................................................................................................11
DISTRIBUTION OF PROFITS AND GAINS.........................................................................................................................................................12
CORPORATE GOVERNANCE AND COMPLIANCE............................................................................................................................14
RIGHTS, DUTIES AND POWERS OF DIRECTORS AND SHAREHOLDERS OF COMPANIES............................................................................14
DIRECTORS.......................................................................................................................................................................................................14
SHAREHOLDER.................................................................................................................................................................................................15
COMPANY DECISION-MAKING AND MEETINGS: PROCEDURAL, DISCLOSURE AND APPROVAL REQUIREMENTS...................................16
DOCUMENTARY, RECORD-KEEPING, STATUTORY FILING AND DISCLOSURE REQUIREMENTS.................................................................19
APPOINTMENT AND REMOVAL OF DIRECTORS.............................................................................................................................................19
MINORITY SHAREHOLDER PROTECTION....................................................................................................................................................... 21
PARTNERSHIP DECISION-MAKING AND AUTHORITY OF PARTNERS...............................................................................................22
PROCEDURES AND AUTHORITY UNDER THE PARTNERSHIP ACT 1890...................................................................................................... 22
AUTHORITY UNDER PA 1890.......................................................................................................................................................................... 22
PARTNERS’ LIABILITY......................................................................................................................................................................................23
PERSONAL LIABILITY...................................................................................................................................................................................... 23
COMMON PROVISIONS IN PARTNERSHIP AGREEMENTS: DRAFTING..........................................................................................................23
MONEY LAUNDERING AND FINANCIAL SERVICES.........................................................................................................................24
MONEY LAUNDERING (POCA 2002 AND MLR 2017).....................................................................................................................................24
FINANCIAL SERVICES (FSMA 2000)...............................................................................................................................................................25
INSOLVENCY (CORPORATE AND PERSONAL)...............................................................................................................................25
CVA/IVA – Company Voluntary Arrangement................................................................................................................................................. 25
ADMINISTRATION............................................................................................................................................................................................25
MORATORIUM UNDER CIGA 2020..................................................................................................................................................................26
FIXED ASSET RECEIVERSHIP – FOR SECURED CREDITORS..........................................................................................................................26
LIQUIDATION....................................................................................................................................................................................................26
CLAW-BACK OF ASSETS FOR CREDITORS – PREFERENCES, TRANSACTIONS AT AN UNDERVALUE, FRAUDULENT AND WRONGFUL
TRADING, SETTING ASIDE A FLOATING CHARGE..........................................................................................................................................27
ORDER OF PRIORITY FOR DISTRIBUTION TO CREDITORS............................................................................................................................28
BANKRUPTCY – PERSONAL INSOLVENCY.....................................................................................................................................................29
TAXATION - BUSINESS................................................................................................................................................................31
INCOME TAX.....................................................................................................................................................................................................31
BASIS OF CHARGE – TYPES OF INCOME / MAIN RELIEFS AND EXEMPTIONS.............................................................................................31
THE CHARGE TO TAX: CALCULATION OF INCOME TAX IN EACH OF ENGLAND AND WALES AND COLLECTION....................................32
ANTI-AVOIDANCE – INCOME TAX.................................................................................................................................................................. 34
CAPITAL GAINS TAX........................................................................................................................................................................................34
CHARGEABLE PERSONS/ENTITIES (SOLE TRADERS, PARTNERS, AND SHAREHOLDERS).........................................................................34
BASIS OF CHARGE (CALCULATION OF GAINS/ALLOWABLE DEDUCTIONS/MAIN RELIEFS AND EXEMPTIONS)......................................34
THE CHARGE TO TAX: CALCULATION AND COLLECTION............................................................................................................................35
ANTI-AVOIDANCE – CAPITAL GAINS TAX.......................................................................................................................................................36
CORPORATION TAX.........................................................................................................................................................................................36
BASIS OF CHARGE...........................................................................................................................................................................................36
1
© 2026 Pass Notes Limited. All rights reserved. For the purchaser’s personal study only – do not copy, share or resell.
, CALCULATION, PAYMENT AND COLLECTION OF TAX..................................................................................................................................36
TAX TREATMENT OF COMPANY DISTRIBUTIONS OR DEEMED DISTRIBUTIONS TO SHAREHOLDERS......................................................37
CORPORATION TAX COMPUTATION – STEPS................................................................................................................................................37
VALUE ADDED TAX..........................................................................................................................................................................................38
KEY PRINCIPLES RELATING TO SCOPE, SUPPLY, INPUT AND OUTPUT TAX.............................................................................................. 38
REGISTRATION REQUIREMENTS AND ISSUE OF VAT INVOICES.................................................................................................................. 38
RETURNS/PAYMENT OF VAT AND RECORD KEEPING...................................................................................................................................38
INHERITANCE TAX...........................................................................................................................................................................................38
BUSINESS PROPERTY RELIEF.........................................................................................................................................................................38
TAX AVOIDANCE..............................................................................................................................................................................................39
NUMBERS TO REMEMBER...................................................................................................................................................................................40
2
© 2026 Pass Notes Limited. All rights reserved. For the purchaser’s personal study only – do not copy, share or resell.
, BUSINESS ORGANISATIONS, RULES AND PROCEDURES These types of partnerships must be registered at Companies
House.
BUSINESS AND ORGANISATIONAL CHARACTERISTICS (SOLE
Limited Liability Partnership
TRADER / PARTNERSHIP / LLP / PRIVATE AND UNLISTED PUBLIC
COMPANIES) An LLP is a hybrid as it has flexibility of a partnership with
added advantage of limited liability for its members – law firms
often LLPs.
Sole trader Limited Liability Partnerships Act 2000: governs LLPs.
A person who owns all the assets in the business. The
business is not a separate entity from its owner so sole trader An LLP is a separate legal entity from its members. BUT for tax
business cannot run if sole trader dies. Sole trader liable for all reasons it is treated as a partnership and the members will be
business losses and will make all the decisions in relation to the taxed as partners, each being liable to pay tax on his share of
business. the income of the LLP.
Key Characteristics: The members of the LLP are not personally liable and their
- Number of persons needed to set up: 1 person. Cannot liability will be limited to their investment as with companies.
be any more or less.
- Control and management: Sole traders have complete These types of partnerships must be registered at Companies
control over running of business. This gives sole traders House.
flexibility but pressure if working without support.
- Liability: not limited. Unlimited personal liability. Key Characteristics:
- Expenses when setting up: No formalities so no setting - Number of persons needed to set up: Min. 2
up costs. - Expenses when setting up: Low costs but must pay legal
- On-going expenses after business has been set up: fees for Partnership Agreement.
None, but sometimes accountant used for account - On-going expenses after business is set up: Accounts
keeping. must be prepared by accountants annually. File a
- Methods of financing: Sole trader can borrow from bank Confirmation Statement minimum once a year. Higher
but can’t create floating charges or raise finance by share costs due to regulation and disclosure rules.
issue. - Management structure of business: Apart from few
- Profits: All go to owner default provisions, the LLPA and regulations leave matters
- Tax: Owner pays tax as individual (income tax + CGT) of governance to partnership agreement – if one exists.
- May trade immediately? Yes An advantage of an LLP is that there are few formalities
for management procedures.
- Methods of financing: LLPs can borrow and create
General Partnership floating charges. If any financing is underwritten by
s.1(1) Partnership Act 1890: Partnership = persons carrying on member’s personal guarantee, that member is personally
business with a view of profit. It is based on an agreement liable for that debt.
between the parties. May form a partnership irrespective of
contrary intention.
Company Limited by Shares
No separate legal identity. The partnership is unable to own A company has a separate legal identity from that of its owners.
property or enter into contracts. It is the individual partners who Company can therefore own property, enter into contracts and
will sue, own property jointly, and enter into contracts jointly. If be sued in own name. The owners of shares in company are
goes insolvent, creditors can enforce debt against partners known as shareholders or members.
personally.
Companies must be registered at Companies House.
Key Characteristics:
- Number of persons needed to set up: Min. 2 Key Characteristics:
- Expenses when setting up: None, but beneficial to - Number of persons needed for set up: Min 1.
have Partnership Agreement drawn up which will - Expenses when setting up: Higher set up costs as there
come at cost. will be legal costs incurred in dealing with the company’s
- On-going expenses: None necessary but must pay constitutional documents etc., as well as incorporation
for accountants. fees due to Companies House.
- Management structure of business: If Partnership - On-going expenses after the business is set up:
Agreement in place, in accordance with that. If no Accounts must be prepared by accountants annually. High
agreement default provisions of PA 1890 apply. on-going administrative costs because of the greater
- Methods of financing: Partners can borrow but can’t regulation and disclosure rules.
create floating charges. They can’t raise money from - Management structure of business: Meetings of the
issuing shares. directors and shareholders held in accordance with the
- Liability: Each partner has unlimited personal liability. Companies Act 2006 and the company’s articles.
- Publicity: Fewer requirements than for other options, - Methods of financing: Company can borrow & create
easier to maintain privacy. No disclosure required. floating charges. If members give personal guarantees,
- May trade immediately? Yes. limited liability lost. Can raise finance by issuing shares.
- Liability to third parties: Shareholders have no liability to
Limited Partnership third parties – their liability to contribute is limited to any
Limited Partnerships Act 1907: governs limited partnerships. amount unpaid on their shares.
- Publicity: No privacy. Onerous disclosure requirements.
Two types of partners in these – need 1 of each:
1. General partners: manage the business and have
unlimited liability. These partners will be ones entering
into contracts on behalf of partnership.
2. Limited partners: invests capital in the business and
has limited liability. Liability limited to amount they
have spent on the business.
3
© 2026 Pass Notes Limited. All rights reserved. For the purchaser’s personal study only – do not copy, share or resell.
, LEGAL PERSONALITY AND LIMITED LIABILITY code) before incorporation; each PSC must give their
personal code within 14 days of registration
COMPANY
A company is a separate legal entity from its shareholders and TIME TAKEN TO PROCESS: Applications may take up to 5 days to
directors (s.16 CA 2006). It can: process but can pay a higher fee for same day incorporations.
Own property
STEP 2: Once approved, company receives a certificate of
Sue and be sued in its own name incorporation which contains:
Enter into contracts 1. Name of company
2. Date of incorporation
Limited liability means members are only liable up to: 3. Company’s registered number
The amount unpaid on their shares (if limited by shares),
or Company becomes a legal entity from date of incorporation
The amount they guarantee (if limited by guarantee).
ADVANTAGES
PARTNERSHIP - Traditionally slower but with online incorporation services
A general partnership under the Partnership Act 1890 is not a difference in speed negligible, BUT incorporation can
separate legal person. only take place during Companies House opening hours.
- Easier to prepare tailor made articles,
Partners are:
Jointly liable for partnership debts SHELF COMPANY ROUTE
Jointly and severally liable for torts committed in the A shelf company has already been set up in advance by another
course of business company / law firm ready to tailor it to client’s requirements.
Used to speed up incorporation.
LLP (LIMITED LIABILITY PARTNERSHIP)
An LLP under the LLP Act 2000 is a separate legal person from its When client requests a new company, change the following via
members. shareholder resolutions:
- Articles – s.21(1) CA 2006
LLPs combine: - Members, directors and company secretary
Flexibility of partnership structure - Shares held by subscribers are to be transferred to client
Limited liability for members - Client’s representatives are appointed as directors
Tax transparency (members taxed individually) - The first directors resign
- Registered office.
ADVANTAGES: Available all year round vs incorporation method
which is only available during Companies House opening hours.
PROCEDURES AND DOCUMENTATION REQUIRED TO
INCORPORATE A COMPANY
COMPANY NAME: can’t be misleading, offensive, suggest
association with government, use sensitive words, must end
TWO METHODS FOR INCORPORATION:
with “Limited” or “Ltd”.
1. Incorporating a new company from scratch
2. Purchasing an existing shelf company
CONSTITUTION
INCORPORATION FROM SCRATCH
Company’s constitution (s.17 CA 2006) = the articles +
resolutions and agreements affecting the constitution
Procedure:
(s.29)
(1) Memorandum of association – for post-2009 companies a
STEP 1: Send to the Registrar of Companies at Companies House:
historic snapshot only; provisions of pre-2009 memoranda
1. The application form (Form IN01) with the relevant fee
(e.g. objects) are treated as part of the articles (s.28)
2. Articles of association
(2) Articles of association
- Model Articles apply automatically
(3) Special resolutions and other resolutions / agreements
- Company may entrench articles: notify registrar
affecting the constitution (s.29)
- A company may have modified articles.
(4) NB: the certificate of incorporation and statement of capital
are documents a member can request (s.32) – they are not
IN01 application form must contain:
part of the s.17 constitution
- Name of company
- Registered Office address
- Memorandum of association
PROCEDURES AND DOCUMENTATION REQUIRED TO FORM A
- A statement of capital setting out the following:
PARTNERSHIP / LLP
1. Total number of shares for the subscribers
2. Aggregate nominal value of the shares
PARTNERSHIP
3. Total number of shares in each class
4. The amount to be paid up on each share Definition
5. Details of all subscribers s.1(1) PA 1890: A partnership is “the relation which subsists
- Initial shareholdings + list of directors and their addresses. between persons carrying on a business in common with a view
- If company is limited by guarantee, details of the guarantee of profit.”
- Statement of compliance.
- Registered email address (not made public) – from 4 March Key Concepts
2024 “Business” includes all trades/professions (s.45 PA
- Registered office must be an “appropriate address” (no PO 1890)
boxes) – from 4 March 2024 Can exist before trading begins
- Statement that the company is being formed for a lawful o Khan v Miah – partners preparing for business
purpose – from 4 March 2024 were held to be in partnership
- Identity verification (from 18 November 2025): every o Christie Owen & Davies v Raobgle – court found
proposed director must have verified their identity (personal partnership on acquisition of property for
business
4
© 2026 Pass Notes Limited. All rights reserved. For the purchaser’s personal study only – do not copy, share or resell.
Apply to the October 2026 SQE2 sitting onwards. Anything that changes for a later sitting is flagged where it comes up.
KEY TO THESE NOTES
Legislation · Defined term · Red text = key point to remember · EXAM TRAP boxes = common mistakes · PENDING = announced or
passed but not yet in force – not examinable
Also tested in SQE2: contract law is also examined with Business Law and Practice. It is covered in the Pass Notes Dispute Resolution
notes (Core principles of contract law, Contract terms, Vitiating factors and Remedies).
CONTENTS
BUSINESS ORGANISATIONS, RULES AND PROCEDURES..................................................................................................................3
BUSINESS AND ORGANISATIONAL CHARACTERISTICS (SOLE TRADER / PARTNERSHIP / LLP / PRIVATE AND UNLISTED PUBLIC
COMPANIES)......................................................................................................................................................................................................3
LEGAL PERSONALITY AND LIMITED LIABILITY............................................................................................................................................... 4
PROCEDURES AND DOCUMENTATION REQUIRED TO INCORPORATE A COMPANY.....................................................................................4
PROCEDURES AND DOCUMENTATION REQUIRED TO FORM A PARTNERSHIP / LLP....................................................................................4
OTHER STEPS REQUIRED UNDER COMPANIES AND PARTNERSHIPS LEGISLATION TO ENABLE THE ENTITY TO COMMENCE
OPERATING........................................................................................................................................................................................................ 5
COMPANIES HOUSE FILING REQUIREMENTS..................................................................................................................................................6
FINANCE.....................................................................................................................................................................................8
DEBT FINANCE...................................................................................................................................................................................................9
TYPES OF SECURITY.........................................................................................................................................................................................9
EQUITY FINANCE...............................................................................................................................................................................................9
BUYBACK AND REDEMPTION OF SHARES......................................................................................................................................................11
TRANSFER AND TRANSMISSION OF SHARES.................................................................................................................................................11
DISTRIBUTION OF PROFITS AND GAINS.........................................................................................................................................................12
CORPORATE GOVERNANCE AND COMPLIANCE............................................................................................................................14
RIGHTS, DUTIES AND POWERS OF DIRECTORS AND SHAREHOLDERS OF COMPANIES............................................................................14
DIRECTORS.......................................................................................................................................................................................................14
SHAREHOLDER.................................................................................................................................................................................................15
COMPANY DECISION-MAKING AND MEETINGS: PROCEDURAL, DISCLOSURE AND APPROVAL REQUIREMENTS...................................16
DOCUMENTARY, RECORD-KEEPING, STATUTORY FILING AND DISCLOSURE REQUIREMENTS.................................................................19
APPOINTMENT AND REMOVAL OF DIRECTORS.............................................................................................................................................19
MINORITY SHAREHOLDER PROTECTION....................................................................................................................................................... 21
PARTNERSHIP DECISION-MAKING AND AUTHORITY OF PARTNERS...............................................................................................22
PROCEDURES AND AUTHORITY UNDER THE PARTNERSHIP ACT 1890...................................................................................................... 22
AUTHORITY UNDER PA 1890.......................................................................................................................................................................... 22
PARTNERS’ LIABILITY......................................................................................................................................................................................23
PERSONAL LIABILITY...................................................................................................................................................................................... 23
COMMON PROVISIONS IN PARTNERSHIP AGREEMENTS: DRAFTING..........................................................................................................23
MONEY LAUNDERING AND FINANCIAL SERVICES.........................................................................................................................24
MONEY LAUNDERING (POCA 2002 AND MLR 2017).....................................................................................................................................24
FINANCIAL SERVICES (FSMA 2000)...............................................................................................................................................................25
INSOLVENCY (CORPORATE AND PERSONAL)...............................................................................................................................25
CVA/IVA – Company Voluntary Arrangement................................................................................................................................................. 25
ADMINISTRATION............................................................................................................................................................................................25
MORATORIUM UNDER CIGA 2020..................................................................................................................................................................26
FIXED ASSET RECEIVERSHIP – FOR SECURED CREDITORS..........................................................................................................................26
LIQUIDATION....................................................................................................................................................................................................26
CLAW-BACK OF ASSETS FOR CREDITORS – PREFERENCES, TRANSACTIONS AT AN UNDERVALUE, FRAUDULENT AND WRONGFUL
TRADING, SETTING ASIDE A FLOATING CHARGE..........................................................................................................................................27
ORDER OF PRIORITY FOR DISTRIBUTION TO CREDITORS............................................................................................................................28
BANKRUPTCY – PERSONAL INSOLVENCY.....................................................................................................................................................29
TAXATION - BUSINESS................................................................................................................................................................31
INCOME TAX.....................................................................................................................................................................................................31
BASIS OF CHARGE – TYPES OF INCOME / MAIN RELIEFS AND EXEMPTIONS.............................................................................................31
THE CHARGE TO TAX: CALCULATION OF INCOME TAX IN EACH OF ENGLAND AND WALES AND COLLECTION....................................32
ANTI-AVOIDANCE – INCOME TAX.................................................................................................................................................................. 34
CAPITAL GAINS TAX........................................................................................................................................................................................34
CHARGEABLE PERSONS/ENTITIES (SOLE TRADERS, PARTNERS, AND SHAREHOLDERS).........................................................................34
BASIS OF CHARGE (CALCULATION OF GAINS/ALLOWABLE DEDUCTIONS/MAIN RELIEFS AND EXEMPTIONS)......................................34
THE CHARGE TO TAX: CALCULATION AND COLLECTION............................................................................................................................35
ANTI-AVOIDANCE – CAPITAL GAINS TAX.......................................................................................................................................................36
CORPORATION TAX.........................................................................................................................................................................................36
BASIS OF CHARGE...........................................................................................................................................................................................36
1
© 2026 Pass Notes Limited. All rights reserved. For the purchaser’s personal study only – do not copy, share or resell.
, CALCULATION, PAYMENT AND COLLECTION OF TAX..................................................................................................................................36
TAX TREATMENT OF COMPANY DISTRIBUTIONS OR DEEMED DISTRIBUTIONS TO SHAREHOLDERS......................................................37
CORPORATION TAX COMPUTATION – STEPS................................................................................................................................................37
VALUE ADDED TAX..........................................................................................................................................................................................38
KEY PRINCIPLES RELATING TO SCOPE, SUPPLY, INPUT AND OUTPUT TAX.............................................................................................. 38
REGISTRATION REQUIREMENTS AND ISSUE OF VAT INVOICES.................................................................................................................. 38
RETURNS/PAYMENT OF VAT AND RECORD KEEPING...................................................................................................................................38
INHERITANCE TAX...........................................................................................................................................................................................38
BUSINESS PROPERTY RELIEF.........................................................................................................................................................................38
TAX AVOIDANCE..............................................................................................................................................................................................39
NUMBERS TO REMEMBER...................................................................................................................................................................................40
2
© 2026 Pass Notes Limited. All rights reserved. For the purchaser’s personal study only – do not copy, share or resell.
, BUSINESS ORGANISATIONS, RULES AND PROCEDURES These types of partnerships must be registered at Companies
House.
BUSINESS AND ORGANISATIONAL CHARACTERISTICS (SOLE
Limited Liability Partnership
TRADER / PARTNERSHIP / LLP / PRIVATE AND UNLISTED PUBLIC
COMPANIES) An LLP is a hybrid as it has flexibility of a partnership with
added advantage of limited liability for its members – law firms
often LLPs.
Sole trader Limited Liability Partnerships Act 2000: governs LLPs.
A person who owns all the assets in the business. The
business is not a separate entity from its owner so sole trader An LLP is a separate legal entity from its members. BUT for tax
business cannot run if sole trader dies. Sole trader liable for all reasons it is treated as a partnership and the members will be
business losses and will make all the decisions in relation to the taxed as partners, each being liable to pay tax on his share of
business. the income of the LLP.
Key Characteristics: The members of the LLP are not personally liable and their
- Number of persons needed to set up: 1 person. Cannot liability will be limited to their investment as with companies.
be any more or less.
- Control and management: Sole traders have complete These types of partnerships must be registered at Companies
control over running of business. This gives sole traders House.
flexibility but pressure if working without support.
- Liability: not limited. Unlimited personal liability. Key Characteristics:
- Expenses when setting up: No formalities so no setting - Number of persons needed to set up: Min. 2
up costs. - Expenses when setting up: Low costs but must pay legal
- On-going expenses after business has been set up: fees for Partnership Agreement.
None, but sometimes accountant used for account - On-going expenses after business is set up: Accounts
keeping. must be prepared by accountants annually. File a
- Methods of financing: Sole trader can borrow from bank Confirmation Statement minimum once a year. Higher
but can’t create floating charges or raise finance by share costs due to regulation and disclosure rules.
issue. - Management structure of business: Apart from few
- Profits: All go to owner default provisions, the LLPA and regulations leave matters
- Tax: Owner pays tax as individual (income tax + CGT) of governance to partnership agreement – if one exists.
- May trade immediately? Yes An advantage of an LLP is that there are few formalities
for management procedures.
- Methods of financing: LLPs can borrow and create
General Partnership floating charges. If any financing is underwritten by
s.1(1) Partnership Act 1890: Partnership = persons carrying on member’s personal guarantee, that member is personally
business with a view of profit. It is based on an agreement liable for that debt.
between the parties. May form a partnership irrespective of
contrary intention.
Company Limited by Shares
No separate legal identity. The partnership is unable to own A company has a separate legal identity from that of its owners.
property or enter into contracts. It is the individual partners who Company can therefore own property, enter into contracts and
will sue, own property jointly, and enter into contracts jointly. If be sued in own name. The owners of shares in company are
goes insolvent, creditors can enforce debt against partners known as shareholders or members.
personally.
Companies must be registered at Companies House.
Key Characteristics:
- Number of persons needed to set up: Min. 2 Key Characteristics:
- Expenses when setting up: None, but beneficial to - Number of persons needed for set up: Min 1.
have Partnership Agreement drawn up which will - Expenses when setting up: Higher set up costs as there
come at cost. will be legal costs incurred in dealing with the company’s
- On-going expenses: None necessary but must pay constitutional documents etc., as well as incorporation
for accountants. fees due to Companies House.
- Management structure of business: If Partnership - On-going expenses after the business is set up:
Agreement in place, in accordance with that. If no Accounts must be prepared by accountants annually. High
agreement default provisions of PA 1890 apply. on-going administrative costs because of the greater
- Methods of financing: Partners can borrow but can’t regulation and disclosure rules.
create floating charges. They can’t raise money from - Management structure of business: Meetings of the
issuing shares. directors and shareholders held in accordance with the
- Liability: Each partner has unlimited personal liability. Companies Act 2006 and the company’s articles.
- Publicity: Fewer requirements than for other options, - Methods of financing: Company can borrow & create
easier to maintain privacy. No disclosure required. floating charges. If members give personal guarantees,
- May trade immediately? Yes. limited liability lost. Can raise finance by issuing shares.
- Liability to third parties: Shareholders have no liability to
Limited Partnership third parties – their liability to contribute is limited to any
Limited Partnerships Act 1907: governs limited partnerships. amount unpaid on their shares.
- Publicity: No privacy. Onerous disclosure requirements.
Two types of partners in these – need 1 of each:
1. General partners: manage the business and have
unlimited liability. These partners will be ones entering
into contracts on behalf of partnership.
2. Limited partners: invests capital in the business and
has limited liability. Liability limited to amount they
have spent on the business.
3
© 2026 Pass Notes Limited. All rights reserved. For the purchaser’s personal study only – do not copy, share or resell.
, LEGAL PERSONALITY AND LIMITED LIABILITY code) before incorporation; each PSC must give their
personal code within 14 days of registration
COMPANY
A company is a separate legal entity from its shareholders and TIME TAKEN TO PROCESS: Applications may take up to 5 days to
directors (s.16 CA 2006). It can: process but can pay a higher fee for same day incorporations.
Own property
STEP 2: Once approved, company receives a certificate of
Sue and be sued in its own name incorporation which contains:
Enter into contracts 1. Name of company
2. Date of incorporation
Limited liability means members are only liable up to: 3. Company’s registered number
The amount unpaid on their shares (if limited by shares),
or Company becomes a legal entity from date of incorporation
The amount they guarantee (if limited by guarantee).
ADVANTAGES
PARTNERSHIP - Traditionally slower but with online incorporation services
A general partnership under the Partnership Act 1890 is not a difference in speed negligible, BUT incorporation can
separate legal person. only take place during Companies House opening hours.
- Easier to prepare tailor made articles,
Partners are:
Jointly liable for partnership debts SHELF COMPANY ROUTE
Jointly and severally liable for torts committed in the A shelf company has already been set up in advance by another
course of business company / law firm ready to tailor it to client’s requirements.
Used to speed up incorporation.
LLP (LIMITED LIABILITY PARTNERSHIP)
An LLP under the LLP Act 2000 is a separate legal person from its When client requests a new company, change the following via
members. shareholder resolutions:
- Articles – s.21(1) CA 2006
LLPs combine: - Members, directors and company secretary
Flexibility of partnership structure - Shares held by subscribers are to be transferred to client
Limited liability for members - Client’s representatives are appointed as directors
Tax transparency (members taxed individually) - The first directors resign
- Registered office.
ADVANTAGES: Available all year round vs incorporation method
which is only available during Companies House opening hours.
PROCEDURES AND DOCUMENTATION REQUIRED TO
INCORPORATE A COMPANY
COMPANY NAME: can’t be misleading, offensive, suggest
association with government, use sensitive words, must end
TWO METHODS FOR INCORPORATION:
with “Limited” or “Ltd”.
1. Incorporating a new company from scratch
2. Purchasing an existing shelf company
CONSTITUTION
INCORPORATION FROM SCRATCH
Company’s constitution (s.17 CA 2006) = the articles +
resolutions and agreements affecting the constitution
Procedure:
(s.29)
(1) Memorandum of association – for post-2009 companies a
STEP 1: Send to the Registrar of Companies at Companies House:
historic snapshot only; provisions of pre-2009 memoranda
1. The application form (Form IN01) with the relevant fee
(e.g. objects) are treated as part of the articles (s.28)
2. Articles of association
(2) Articles of association
- Model Articles apply automatically
(3) Special resolutions and other resolutions / agreements
- Company may entrench articles: notify registrar
affecting the constitution (s.29)
- A company may have modified articles.
(4) NB: the certificate of incorporation and statement of capital
are documents a member can request (s.32) – they are not
IN01 application form must contain:
part of the s.17 constitution
- Name of company
- Registered Office address
- Memorandum of association
PROCEDURES AND DOCUMENTATION REQUIRED TO FORM A
- A statement of capital setting out the following:
PARTNERSHIP / LLP
1. Total number of shares for the subscribers
2. Aggregate nominal value of the shares
PARTNERSHIP
3. Total number of shares in each class
4. The amount to be paid up on each share Definition
5. Details of all subscribers s.1(1) PA 1890: A partnership is “the relation which subsists
- Initial shareholdings + list of directors and their addresses. between persons carrying on a business in common with a view
- If company is limited by guarantee, details of the guarantee of profit.”
- Statement of compliance.
- Registered email address (not made public) – from 4 March Key Concepts
2024 “Business” includes all trades/professions (s.45 PA
- Registered office must be an “appropriate address” (no PO 1890)
boxes) – from 4 March 2024 Can exist before trading begins
- Statement that the company is being formed for a lawful o Khan v Miah – partners preparing for business
purpose – from 4 March 2024 were held to be in partnership
- Identity verification (from 18 November 2025): every o Christie Owen & Davies v Raobgle – court found
proposed director must have verified their identity (personal partnership on acquisition of property for
business
4
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