Chapter 14 Self-test questions

Trading structures and forming the business enterprise
Which of the following is NOT an example of a business organisation?

Limited companies and limited liability partnerships possess a separate legal personality unless the performance of the duties of the undertakings is taken by a director or partner.

The word 'limited' in terms of a limited liability company refers to the limited liability of ___________ for the debts of the company.

Which of the following are types of partner:
i) A 'typical' partner under the Partnership Act 1890.
ii) A silent partner.
iii) A salaried partner.
iv) A partner by estoppel.

The veil of incorporation separating the company from its members may be lifted by the courts where the company's formation was, for example, a stratagem to evade a contractual restriction.

Separate legal personality affords a distinction between the corporation as an entity and its directors and shareholders. This separation identifies a cloak of secrecy/shield of the people behind it and is often referred to as the ____ of incorporation.

Which of the following is NOT a duty imposed on partners?

Partners in an unlimited partnership must adhere to the formalities as required under the Limited Liability Partnerships Act 2000 before they may commence trading.

A partnership may also trade as a limited partnership under the Limited Partnerships Act 1907. Since 2000, a firm can be established as a _______ _______ Partnership

Which of the following is NOT a feature of a simple partnership?

A silent partner is a person who takes an active role in the management of the business, but who remains silent at board/partners meetings.

Where the partner allows his/her name to be used by the partnership, such as on the letterhead of the firm to add to its credibility with outside bodies, the partner may be a partner by ________.

Under the Partnership Act 1890, which of the following events may lead to a partnership being brought to an end:
i) When a partner suffers some permanent form of incapacity.
ii) Where a partner wilfully or persistently breaches the partnership agreement.
iii) Where it is just and equitable to end the partnership.
iv) Where a partner enters into competition with the partnership (with the other partners' consent).

The names of the partners must be shown on the letterheads (and when a business name is used which is different from the true surnames of the partners). This is a requirement identified in the Companies Act 2006.

A significant feature of the business organization of partnerships is that if one partner commits a tort or crime in the course of the business, the partnership will be liable (including each partner) if this was within the offending partner's actual or apparent authority. This results in the partners being held responsible for any losses incurred whilst they are partners. This is known as the ______ ___ _____ liability of the partners.

Which of the following is NOT a feature of a limited company?

Partners are considered agents of the organization under s. 5 of the Partnership Act 1890 for the purpose of the partnership's business.

A Limited Liability Partnership continues despite changes to its internal membership and will only come to an end when formally _______ __.

A limited company may be established by three methods. Which is NOT one of these methods?

Partners are held individually responsible for debts of the business based on their share/ownership. They cannot be held responsible for the debts of other partners in an unlimited partnership.

One of the drawbacks with trading as a sole trader is that when the sole trader dies, the business may die with them. With a partnership of two people, where one dies another partner has to be found or the firm wound up or run as a sole trader/registered as a corporation. The advantage to the limited company is that once established, it will remain in existence until it is legally wound up, regardless of who owns or runs the company. This is known as the ________ __________ of a corporation.

In relation to a private limited company and a public limited company, which of the following are correct:
i) Only one shareholder is necessary and no secretary is required for a private limited company.
ii) The public limited company must have an allotted share capital of £50,000.
iii) The public limited company must hold an Annual General Meeting each calendar year.
iv) Only the private limited company may offer its shares to the public.

The 'limited' status of a limited liability company refers to the restricted liability (contributions to be made) of the members of the company for its debts. The company itself has unlimited liability.

A corporation can be guilty of committing a criminal offence. The actus reus is the guilty act and the ___ ___ is the guilty mind (of the company's directors).

One of the following features is NOT indicative of a 'small' company as provided for in the Companies Act 2006 (as amended)?

A public limited company is entitled to offer its shares and debentures for sale to the public and it may be listed on the London Stock Market (although due to the rules in which companies may be listed this is only applicable to the largest organizations). A private company is prohibited from offering its shares to the public.

A _______ liability company is entitled to offer its shares and debentures for sale to the public and it may be listed on the London Stock Market (although due to the rules in which companies may be listed this is only applicable to the largest organizations).

In relation to the 'veil of incorporation' that is a feature of a limited company's separate legal personality, in which of the following circumstances will a court NOT lift the veil to identify the true nature of the relationship:
i) Where the company has been established to commit a fraud.
ii) Where the company has been established to circumvent contractual agreements.
iii) In the interests of justice.
iv) Where two separate legal entities are run as one economic undertaking.

The Privy Council is the body that may establish a company through Royal Charter.

The public liability company may not be unlimited and must have an allotted share capital of £_______ (one-quarter of the value of which must have been paid up).

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