Business Organisations (BB) (1)
Week 4 Business Organisations: Types, Formation, and Features
Presenter: Dean Taylor, Dean.Taylor@soton.ac.uk
Learning Aims and Outcomes
By the end of this lecture, students will be able to:
Identify various forms of business organization, including advantages and disadvantages of each.
Explain the process of forming different business organizations.
Compare and contrast a ‘simple’ partnership and a limited liability partnership (LLP).
Compare the different types of limited company and explain the implications of forming either a public or private limited company.
Forms of Business Organisation
Unincorporated: No separate legal entity from participants.
Incorporated: Legal entity in its own right.
Types include:
Sole Trader
Partnership
Private Limited Company (Ltd)
Public Limited Company (Plc)
Limited Liability Partnership (LLP)
Sole Traders
Characteristics
Formation
Termination
Partnerships
Formation
Established through a contractually binding agreement (partnership agreement).
Agreement details:
Purpose of the partnership.
Duration of existence.
Names of partners.
Business address.
Percentage of ownership and profit distribution.
Management authority.
Responsibilities of each partner.
Characteristics
Defined by the Partnership Act 1890, Section 1: partnerships are created when two or more individuals come together for profit.
Types of partners:
Typical partner.
Silent partner.
Salaried partner.
Partner by estoppel.
Duties
Fiduciary duty to act in good faith towards the partnership.
Duty of disclosure of relevant information (s 28).
Duty to account for profits from unilateral transactions (s 29).
Duty not to compete without consent (s 30).
Rights
Right to equal sharing in profit (s 24(1)).
Indemnification for liabilities (s 24(2)).
Participation in management (s 24(5)).
Right to inspect accounts (s 24(9)).
Right to veto new partners (s 24(7)).
Liability
Jointly and severally liable for firm’s debts and contracts (Partnership Act 1890, ss 9-12).
Usual shared liability according to ownership percentages.
Termination
Conditions for dissolution as per Partnership Act 1890:
Lapse of time (s. 32(a)).
Completion of a specific task (s. 32(b)).
Mutual agreement (s. 32(c)).
Illegality (s. 34).
Death or bankruptcy of a partner (s 33(1)).
Court-ordered dissolution (s 35).
Limited Liability Partnership (LLP)
Formation
Liability
Partners' liability is limited to their investment.
LLP as a separate legal person holds unlimited liability for its debts.
Termination
Can be voluntarily dissolved by a majority of members.
May also wind up through insolvency.
Limited Companies
Nature of the Company
Formation
Founders must file:
Memorandum of association.
Articles of association.
Form IN01 with Companies House.
Characteristics
Limited Liability
Shareholder liability is limited.
Unlimited liability for the company itself.
Established legal precedent in Salomon v Salomon [1897].
Distinguishing Between Private and Public Companies
Private Company (Ltd):
Cannot offer shares to the public.
No requirements for a secretary.
No obligation to hold Annual General Meetings (AGM).
Public Company (Plc):
Required to have ‘PLC’ in name.
Allowed to offer shares publicly and may list on stock exchange.
Must have a qualified secretary.
Required to hold annual AGMs.
Minimum share capital of £50,000.
At least two directors required.
Termination
Limited companies exist until formally wound up.
Winding up methods include:
Application to Companies House for striking off.
Voluntary liquidation for solvent companies.
Court-ordered liquidation for insolvent companies.
Questions
What questions do you have for me?