LAW - Ch-9 Corporations & Legal Personality

Which of the following is a benefit of running a business as a sole trader?

• No formal procedures to set up the business

• The business is highly dependent on the owner

• An absence of economies of scale

Which of the following statements regarding sole traders is correct?

• The business is legally distinct from the owner

• All of a sole trader's profits accrue to the owner

• Sole traders do not need to register for VAT

In a company limited by shares, what is the limit of a member's liability?

• The amount they guaranteed to pay in the event of the company being liquidated

• The amount of share capital they have purchased, including any amounts outstanding on the shares that they own

• Nothing, the company is liable for its own debts

• None of the above

Which type of company does NOT have share capital?

• An unlimited liability company

• A public company

• A company limited by guarantee

How much is the minimum issued share capital of a public company?

• £12,500

• £25,000

• £50,000

• £0

Which of the following is an effect of a company's separate legal personality?

• Members and directors of a company are protected from the force of the law

• The company is liable for its own debts

• Members have no liability in the event of the company being insolvent

• None of the above

In which of the following situations will the courts lift the veil of incorporation?

• Where a director commits fraudulent trading

• Where a member of a solvent company fails to pay the company what is outstanding on their share capitalW

• Where an employee commits a tort in the course of their employment

• None of the above

Which of the following indicates that a business is being run as a sole trader?

• The business does not employ any employees

• It does not file accounts with the Registrar of Companies

• The business is run by one person who is not legally distinct from the business

• Share capital of the business is not sold on a recognised stock exchange

A group of friends wish to set up a business. They wish to limit their liability for the business' debts to an amount that they agree to when the business is formed.

Which of the following businesses is most suitable to the needs of the group?

• An unlimited company

• A company limited by shares

• A partnership

• A corporation sole

Which TWO of the following are true regarding public companies?

1.) A public company must have a minimum of two members

2.) A public company must have a minimum of two directors

3.) A public company cannot be an unlimited liability company

4.) A public company must have 'ltd' at the end of its name

• 1 & 2

• 3 & 4

• 1 & 3

• 2 & 3