SQE1 Business Law and Practice: Types of Business & Limited Companies

Vocabulary flashcards covering key legal terms, corporate entity types, formation documents, and constitutional rules from SQE1 Business Law and Practice Chapter 1.

Incorporated Business

A business entity that possesses a separate legal personality distinct from its owners and managers, created by complying with statutory incorporation requirements, where owners are generally not liable for business debts.

Unincorporated Business

A business format operated by individuals without creating a separate legal entity, leaving the owners personally liable for all business debts and liabilities.

Sole Trader

An individual running an unincorporated business on their own as a self-employed person who owns the assets, receives all profits, and bears unlimited personal liability for all business debts.

Unlimited Liability

The legal concept under which an owner's personal assets and business assets are treated identically for legal obligations, putting personal assets at risk to satisfy unpaid creditors.

Partnership

An unincorporated business structure existing under the Partnership Act 1890 when two or more people are carrying on a business in common with a view of profit.

Limited Partnership (LP)

A business structure governed by the Limited Partnerships Act 1907 consisting of at least one general partner with unlimited liability and at least one limited partner whose liability is capped at their initial investment, provided they do not control or manage the LP.

Private Company Limited by Shares

An incorporated entity registered under the Companies Act 2006 where shareholder liability is limited to the amount unpaid on their shares, and which is statutorily prohibited from offering shares to the public.

Salomon v A Salomon and Co Ltd [1897] AC 22

The landmark House of Lords authority confirming that a legally incorporated company is an independent legal person distinct from its shareholders and directors, capable of incurring its own liabilities.

Piercing the Corporate Veil

The legal mechanism of disregarding a company's separate legal personality to impose liability on its controllers, restricted under Prest v Petrodel Resources Limited and others [2013] UKSC 34 to situations where a person uses a company to deliberately evade or frustrate an existing legal obligation.

Public Limited Company (plc)

A company limited by shares whose constitution states it is public, whose name ends in plc, has an allotted share capital of at least the authorised minimum of $\pounds 50,000$, and is permitted to offer shares to the public.

Limited Liability Partnership (LLP)

A corporate body formed under the Limited Liability Partnerships Act 2000 offering separate legal personality and limited liability to its members while maintaining the tax treatment and organizational flexibility of a general partnership.

Community Interest Company (CIC)

A specialized form of limited liability company intended for social enterprises that use their profits and assets for public benefit rather than private shareholder profit.

Floating Charge

A form of security over a changing class of assets available exclusively to companies and LLPs, enabling them to secure loans without restricting the ordinary disposal of those assets.

Form IN01

The statutory application form submitted to Companies House to register and incorporate a new company in the UK.

Identity Verification (IDV)

A statutory check introduced by the Economic Crime and Corporate Transparency Act 2023 requiring company directors, persons with significant control, and filers to verify their identity with Companies House.

Person with Significant Control (PSC)

An individual or legal entity that holds more than $25\%$ of shares or voting rights in a company, or holds the right to appoint or remove a majority of the board of directors.

Memorandum of Association

A fundamental constitutional document signed by subscribers stating their intention to form a company and agree to become shareholders taking at least one share each.

Articles of Association

The principal internal rulebook forming part of a company's constitution that regulates director powers, board meeting mechanics, shareholder decision-making, and general corporate administration.

Model Articles

The default standard set of articles of association provided under the Companies (Model Articles) Regulations 2008 for private and public companies limited by shares.

Table A

The default standard articles of association under the Companies Act 1985 that govern private companies incorporated prior to 1 October 2009 unless amended.

Special Resolution

A formal resolution of company shareholders requiring a majority of at least $75\%$ of votes cast to pass, mandatory for constitutional actions such as amending articles or changing company names.

Ordinary Resolution

A formal resolution of company shareholders passed by a simple majority (over $50\%$) of votes cast.

Statement of Capital

A section on Form IN01 detailing a company's total share capital, total nominal value, subscriber share allotments, and the prescribed particulars of rights attached to each share class.

Nominal Value

The fixed base or face value assigned to a share (such as $\pounds 1$), representing the base capital value originally paid or agreed to be paid per share.

Shelf Company

A pre-incorporated, inactive company maintained by law firms or formation agents that can be quickly transferred to a client requiring immediate corporate structure.

Trading Certificate

A statutory certificate issued under s 761 CA 2006 following form SH50 submission, required before a public limited company can legally commence trading or borrowing.

Accounting Reference Date

The official end date of a company's financial accounting period, which defaults to the last day of the month in which the company was incorporated.