BLP - Business media comparison
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- What statute governs sole traders?
- None
- What statute governs partnerships?
- Partnership Act 1890
- What statute governs limited companies?
- Companies Act 2006
- What statute governs Limited Liability Partnerships (LLPs)?
-
Limited Liability Partnerships Act 2000 (LLPA)
Also, the Limited Liability Partnerships:
(1) Regulations 2001 (as amended);
(2) (Accounts & Audit) (Application of the Companies Act 2006) Regulations 2008; and
(3) (Application of Companies Act 2006) Regulations 2009. - What does the Limited Liability Partnerships Regulations 2001 (as amended) contain?
- Default provisions on capital and profit share between members.
- Liability of investors in a sole trader?
- Unlimited personal liability
- Liability of investors in a partnership?
-
Partners have unlimited personal liability on either a joint, or a joint and several basis determined by the nature of the
liability. - Liability of investors in a Limited Liability Partnership?
- Liability is limited: individual members are not personally liable over and above their capital share in the LLP.
- Liability of investors in a Limited Company?
- Liability is limited: members are only liable to pay any amount unpaid on their shares – s.3 (2) CA 2006.
- What is the legal status of a sole trader?
-
Not a separate legal entity.
The sole trader is the business and is individually responsible. - What is the legal status of a partnership?
- Not a separate legal entity. The partners are the partnership. Each partner is individually responsible.
- What are the legal statuses of an LLP and a private limited company?
- Each is a separate legal entity
- How many people are needed to set up a sole trader?
- One person
- How many people are needed to set up a limited liability partnership?
-
Minimum 2 persons required.
Note:
- Business is carried on for over 6 months after the LLP is down to one member
- That member becomes jointly and severally liable, with the LLP, for debts incurred after the 6 month grace period
– i.e. the benefit of limited liability is lost. - How many people are needed to set up a limited company?
- Minimum 1 person – s.7(1) CA 06
- What expenses are incurred in setting up a sole trader?
- None
- What expenses are incurred in setting up a partnership?
-
None necessary, although it is highly
recommended to have a partnership agreement drawn up by lawyers. - What expenses are incurred in setting up a LLP?
-
(1) Incorporation document required
(2) Registration fee
(3) Do not require the equivalent of a
memorandum or articles of association.
(4) The LLP regulations provide
some default provisions but it is highly
recommended to have a limited liability
partnership agreement drawn up by
lawyers.
(5) LLP stationery - the LLP’s name
must appear on all the partnership's documents (e.g. letterhead,
invoices and cheques). - What expenses are incurred in setting up a limited company?
-
(1) Incorporation documents required including memorandum and articles of association.
(2) Recommended to have lawyers involved in drafting incorporation documents (or, if a shelf company is used, amending articles) to suit the specific client.
(3) Registration fee.
(4) Printing of company stationery. - What publicity and disclosure is required for the purpose of a sole trader or partnership?
- No disclosure required.
- What publicity and disclosure is required for the purpose of a LLP?
-
 Registered office – s.2 (2)(c) and (d) LLPA and 2009 Regs
 Details of members – s.2 (2)(e) LLPA
 Identity and details of ‘designated members’ – s.2(2)(f) LLPA
 Accounts – 2008 Regs - What publicity and disclosure is required for the purpose of a limited company?
-
In the normal course of trading disclosure to the Registrar of:
 Registered office – s.87 CA 06
 Accounts – s.441 CA 06
ï‚· Information on directors (and secretary if the company has one), members and share capital
 Certain resolutions of the members – e.g. s.29 CA 2006 - What ongoing expenses will a sole trader incur?
- None necessary, although usually accountants will be involved in keeping accounts.
- What ongoing expenses will a partnership incur?
- None necessary, although usually accountants will be involved in keeping accounts.
- What ongoing expenses will a LLP incur?
-
(1) Accounts must be prepared by accountants annually – 2008 Regs;
(2) An Annual Return must also be filed (excluding parts relating to share capital) – 2009 Regs; and
(3) Most LLPs that do not qualify as 'small’
must file audited accounts. - What is the management structure of the business of a sole trader?
- As the sole trader wishes – no legal requirements
- What is the management structure of the business of a partnership?
-
(1) Accords with partnership agreement.
(2) Default provisions in the Partnership Act 1890 relate only to issues such as partnership property, expulsion, retirement, etc. - What is the management structure of the business of a LLP?
-
(1) Accords with partnership agreement (if one exists)
Note: Advantage - few of the formalities associated with company management procedures. - What is the management structure of the business of a limited company?
-
(1) Director and shareholder meetings held in accordance with CA 06 and articles of association.
(2) Model Articles are default, however, companies can adopt their own tailor made articles instead. - What were the default articles under CA 1985?
- Table A
- What do a company's articles of association form?
- The company’s constitution.
-
What are the available methods of
financing for a sole trader? -
- Sole trader can borrow.
- Cannot create floating charges.
- Cannot raise finance by issuing shares. - What are the available methods of financing for a partnership?
-
- Partners can borrow.
- Cannot create floating charges.
- Cannot raise finance by issuing shares. - What are the available methods of financing a LLP?
-
- LLP can borrow.
- Can create floating charges.
- Cannot raise finance by issuing shares - capital in an LLP is not divided into shares.
Note: If member underwrites financing by personal guarantee, this effectively removes the safety of limited liability. - What are the available methods of financing a limited company?
-
- Company can borrow.
- Can create floating charges.
- Can raise finance by issuing shares - i.e. will be easier for a limited liability company to obtain financing.
Note: if members give personal guarantee, limited liability is lost. - What is one of the oldest business mediums in the UK?
- Partnerships
- Must parties intend to form a partnership?
- No, a partnership can be formed even without the specific intent of the parties to form one.
- What liability do partners in a partnership have?
-
- Joint liability in contract
- Joint and several liability in tort - Are partnerships are tax transparent?
- Yes
- True or false - does conducting business through a partnership allow for a high degree of confidentiality regarding the business’s affairs?
- True
- What does a limited partnership have?
- A general partner with unlimited liability and a limited partner with limited liability
- What should limited partners not be involved in?
- Management of the business.
- What should a general partner do in a partnership?
- Manage the limited partnership.
- When are limited partnerships usually used?
- In very specific commercial contexts such as private equity or real estate investment.
- Do LLPs have members or partners?
- Members
- What should clients using an LLP consider drafting?
- A members’ agreement
- Can an LLP contract with third parties on its own behalf?
- Yes. This means that liability for its debts rests with the LLP (rather than its members).
- Does an LLP benefit from being transparent for tax purposes?
- Yes