Académique Documents
Professionnel Documents
Culture Documents
Forming a traditional partnership may seem like the most logical option in a case like this one.
Emily and Gemma have a common business idea and different skills, which can be combined
to build a good business team. A partnership is easier to set up and run as well as the way it is
governed and taxed (Adams, 2010). Emily and Gemma will share the profits, the liabilities and
any financial risks. They can split their responsibility according to their skills. Partners also
may share the decision making, in order to help each other out when they need to. These are
However, a partnership also has some disadvantages. Emily will have less of freedoms with
regards to the management of the business because she has to get Gemma's agreement with
things that are being done. This leads to one of the most obvious disadvantages is a danger of
disagreements between the partners because partners may different view on how the business
should be run (Adrian, 2010a). Additionally, the equal profit sharing can lead to inconsistency
where one of the partners isn’t putting necessary efforts into the business, but still getting
rewards. Also, Emily and Gemma must pay tax in the same way as sole traders, it means each
submitting an individual assessment tax return each year. They must pay a greater level of
A private company limited by shares is a type of company which when set-up allows an
entrepreneur to keep their own assets and finances separate from the business itself (Salomon
v Salomon & Co. Ltd [1897] AC 22). It can be run with just one member, but cannot trade
shares to the public to raise capital. The obvious advantage is the financial security and fact
that the company will be deemed a separate legal entity from its owners (Allen and Riches,
2009). A limited company is only taxed on its profit. If Emily is forming and running the
limited company, she will get a benefit to pay herself in dividends instead of in the form of
minimum wage level. As owners are the main shareholders of the company, Emily also can
get more decision making power and profit because her initial investments are more than
Gemma's investments. Also, Emily or Gemma can use the own house to start their business
and claim back for the cost of doing so. Disadvantages of a limited company can be costs to
set up and complex rules of the accounts and bookkeeping governing (Adrian, 2010b). As
mentioned, a company's shares are restricted, but both the ownership and control of the
A company is created by registration under the Companies Act 2006. This Act states that any
registered company, which is not a public company is a private company and it must have
‘limited’ or ‘ltd’ after its name. All companies limited by shares must be legally registered
with Companies House. The following must be done in order to incorporate a business:
company type;
proposed name. Section 66 of the Companies Act 2006 states the name cannot be the
same as a current registered name. Emily and Gemma can use their chosen name of
“Silver & Stones” for the business. According to Companies House, the company with
this name has been dissolved on 8 January 2013. The names of dissolved companies
can be registered by new company, but Emily and Gemma should consider the
reputation of the business that previously operated under this name (Adams, 2010);
statement of share capital and initial shareholdings. Section 10 of the Companies Act
2006 states a company must have at least one shareholder, who can be a director and
the statement must include the names and addresses of all shareholders;
statement of compliance.
2. Memorandum of Association. It includes the people who agree to take shares once the
company is incorporated. Section 8 of the Companies Act 2006 states each member must hold
at least one share; must be authenticated by each member. It cannot be amended after
registration.
3. Articles of Association. It outlines the rules and regulation of the company and its
members. Part 3 of the Companies Act 2006 represents a company's constitution and includes
the company's articles, and any resolutions and agreements affecting the company's
constitution. Schedule 1 of the Companies (Model Articles) Regulations 2008, is the default
company constitution for private companies limited by shares under UK company law.
Companies can register its own unique Articles or adopt the Model Articles in part.
4. Fee for Incorporation. The fee can be different and depends on the submitting types:
£100 for submitting hard copy materials and the same day service;
£12 for register online, if the company is limited by shares and uses standard articles of
association (UK Government, 2017).
If the documents are in order, the registrar will issue a certificate of incorporation, which
means a company has a legal identity of its own and it is not related to the legal identity of its
owners. After company formation, the company must be registered for Corporation Tax within
3 months of starting operations. Under the Companies Act 2006, company is required to
Since Giles does not want to be involved in the day-to-day running of the business, he cannot
be a director. Considering this, the best solution is to make Giles a shareholder and give him
some shares. Giles must be added to the statement of share capital and initial shareholdings,
and can be described as a ‘quasi-partnership’. As the shareholder, he does not to have any
influence in the day-to-day running of the company, but this is determined by the articles
(Adams, 2010). Giles will have the potential to profit from the company if the business goes
well, but not be personally liable for the company's debts if anything should go wrong.
REFERENCES
Adams, A. (2010) Law for Business Students [online]. 6th ed. Harlow, England: Pearson
Allen, V and Riches, S. (2009) Keenan and Riches’ Business Law [online]. 9th ed. Harlow,
Companies Act 2006 [online]. Chapter 46 (2006) Legislation UK. Available from:
http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf [Accessed 07
March 2017].