Business and Organisational Characteristics

Introduction

Before advising any business client, a solicitor must first identify **which legal form** the business takes, because that single choice drives **liability**, **taxation**, **management**, **finance** and **regulation**. This chapter introduces the principal forms of business organisation in England and Wales, dividing them into **incorporated businesses** (which have a **separate legal personality**) and **unincorporated businesses** (which do not). You will meet the **sole trader**, the ordinary **partnership** under the **Partnership Act 1890**, the **limited partnership** under the **Limited Partnerships Act 1907**, the **limited liability partnership (LLP)** under the **Limited Liability Partnerships Act 2000**, and the **company** (private and public) under the **Companies Act 2006**.

Assessment focus

For the SQE1 FLK1 assessment, you must be able to distinguish the **key characteristics** of each business medium and **advise a client which form best suits their commercial objectives**. Expect single best answer questions (SBAQs) set in **realistic client-based scenarios** that turn on **limited v unlimited liability**, the ability to **grant a floating charge**, the **taxation** treatment, the **number of directors / members**, and the **minimum share capital** of a public company. You should be able to recall the governing statute for each medium and the conditions a public company must satisfy. This is a closed-book assessment — commit the distinctions and statutory thresholds to memory.

Study tips

1) Anchor every medium to its **governing Act**: sole trader (no dedicated Act); partnership (**PA 1890**); LP (**LPA 1907**); LLP (**LLPA 2000**); company (**CA 2006**). 2) Master the **liability ladder**: sole trader and ordinary partners — **unlimited**; LP limited partner and LLP members — **limited**; company shareholders — limited to the amount unpaid on their shares. 3) Remember a **partnership is NOT a separate legal entity**, but an **LLP and a company ARE**. 4) Memorise the **public company thresholds**: **two directors**, qualified company secretary, **£50,000 authorised minimum** (ss. 761, 763 CA 2006), each allotted share paid up to at least **one quarter** of nominal value plus the whole premium (s. 586). 5) Note the **trap**: a public company may now be formed with **one member** (CA 2006), and a private company needs only **one director** (s. 154 CA 2006).