Company Law – An Introduction
Unit Code: DE5H 35
Within this report you will find:
1.2. Terms of Reference
1.3. Sole Traders
1.5. Corporate Bodies
1.5.1. Private Limited Companies
1.5.2. Public Limited Companies
The aim of this report is to:
Describe the differences in legal personalities and responsibilities between different company types. Formalities and documents required for registering as a company Types of corporate bodies and their characteristics (public and private companies) Advise the best course of action
1.2. Terms of reference
The purpose of this report is to advise Karl and Theo in which direction they should expand their business next. Karl and Theo are seeking advice on the different types of companies available and the legal responsibilities involved within the different entities. As stands currently Theo and Karl are currently trading as partners in a sole tradership, both men like and trust one another and they’re skill sets complement each other. They wish to expand although they are unsure in which direction and what each direction means. Currently they have not managed to reach an agreement on their own as to how the business should be organised although they agree that they wish to form a company. Both are unsure if they wish to set up a private or public company and both are unaware of the legal requirements of trading as a company. Karl wishes for a prominent leadership role whereas Theo would prefer a role of lessor responsibility, both wish to know the personal liability that the different company types divulge. In this report I will investigate the personal liability and legal responsibility for each member, advantages and disadvantages of a sole trader, partnership, private limited company and a public limited company.
1.3. Sole trader
Sole traders can be set up with very little legalities involved, they are not required to register with any kind of government or professional body unless they choose to, which is done by some sole traders solely dependent on the trade they possess this allows them to give customers more reassurance of a honest trader although for most this is not a legal requirement nor a guarantee that the workmanship is of a certain quality. Example of such would be equine livery yards and riding schools joining the British Horse Society (BHS) although an initial inspection is carried out, they are not carried out on any kind of regular basis once accepted. Sole traders MUST inform HMRC of their income by submitting a self-assessment form each year once they have begun to trade in business. The owner retains all the profits obtained from the trading of the business. By trading as a sole trader there is no distinction between the business and the owner/s as separate identities, the owner/s are responsible for the day to day running and management of the business, raising any and all capital and obtaining credit rather than cash accounts from suppliers which a trader may find difficult if his own credit rating is not of an acceptable standard, this is due to there being no distinction between a sole trader business and its owner/s since the owner/s are fully and solely responsible for the liability of all and any debts that the company owes which can be recovered right down to the owner’s last personal penny, There is no distinction between a sole trading companies debts and its owners personal belongings such as their house and personal bank accounts. This is known as unlimited liability.
Partnerships are often referred to as firms as with sole traders they hold full liability to all capital raised and debts owed, although this allows a variety of different skill sets held by the partners to come together...
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