8/9/2019 Jason Assignment Edit 1

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Law1015 Re-draft

The advice that should be given to Edward is to set up a company, as this gives him many

benefits over being a sole trader. Edward can be advised to become a company due to the

great number of benefits in comparison, for example by having limited liability there is no

risk of major possessions (his house, his car etc.) being taken if he loses his business.Another

advantage is that a company can have a separate legal identify, allows it to own land,

property, to create contracts and it also allows it to borrow money. You can have limited

liability, so that there isnt risk of major possessions being taken should he lose his business,

such as his home. A company also cannot die, and the company also has a separate legal

identity, allowing it to have the same rights as a natural human being, such as borrowing

money, creating contracts and owning land or property. Two2 cases to explain this are

Solomon v Salomon & Co Ltd as well as Re Macura.

When setting up a company, there are 2 types of company that Edward could set up. Theseare either public or private companies. With a private company, only one member is

required, with whom can perform the dual role of being both a director and secretary of the

company, whereas a public company must have at least 2 members to successfully set up.In

a public company, a starting capital of at least £50,000 must be allocated towards the

company in order to start up, however there is no minimum limit for private companies.

This may prove to be a good idea for Edward as he may not be able to collect £50,000 worth

of capital and on top of that, it may be suitable for him to work both roles of director and

secretary, as hiring in a secretary may be too costly for him at the present time. On top of 

this, another benefit of a private company over a public is that a private company only

requires to produce a summarized report of their accounts out to the public. A public

company however, must produce their entire book of accounts and reports to the public,

allowing an opening for criticisms. The lack of privacy in a public company may not be what

Edward wants and the a dvice that should be given is to go for a private company.

There are two types of possible companies that can be set up. The first is a public limited

company (Plc) and the second is a private limited company (Ltd). Private companies require

only one member who can perform several roles within the business whereas in a public

limited company it must have at least 2 members to be set up. Within these public limited

companies, they must have a £50,000 start up budget for the start up process. This

contrasts to a private limited company because there is no mimimum requirement for

finance (anyone can set up a private limited company).

Edward may not be able to gather the start up capital for a Public Limited Company and also

it may suitable for him to work dual roles because it may be far too costly for him to hire

others.

Another benefit of a private limited company over a public limited company is that a private

limited company only requires to produce a summarized report of their accounts out to thepublic. A public limited company must declare all of its accounts and reports for public

access so it easy for it to be criticized. The lack of privacy may not be what Edward desired

so it is recommended that he selects a private company system.

Comment [J1]: Can be cut down. Will type in

example.

Comment [J2]: Lots of things for something s

simple See above rewrite

Comment [J3]: In essays, ALWAYS PUT THE F

BLOODY NUMBER

Comment [J4]: Get your theory right. Its Pub

Limited Company (Plc) and Private Limited Comp

(Ltd).

Comment [J5]: Another complicated paragra

that can be explained so simply! See rewrite.

Comment [J6]: Rewritten. Not sure on what tdo about the multiple uses of the private/public

limited company.

Comment [J7]: Not really that evaluated. Not

sure what you want. If you are mak ing a decision

should evaluate that decision.

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When setting up a private limited company, Edward can go down one of two routes. The

private limited company can either be limited by shares or limited by guarantee. When a

company is limited by shares, it allows only the remaining payment of any shares as itsliability should the company enter liquidation. It is also a vital part of raising capital for the

company, as selling shares at a given price allows this capital to be pumped into the

company for improvements, expansions and so on. The alternative other method, limited

by guarantee, means that the company is only restricted to paying an agreed amount should

the company enter liquidation. This can be minimal (As small as even £1) and is typically

agreed to when the company is originally formed. This sort of limited by guarantee is found

in non profit organisations (schools or charities). As most guarantee are typically non-profit

organisations, such as schools or charities, and

due to the benefit of extra potential to raise capital, it is advised to Edward to incorporate a

private limited company that is limited by shares. 

There is high potential of raising capital so Edward should incorporate a private limitedcompany that is limited by shares.

To incorporate a private limited company that is limited by shares, Edward would need to

send off some documentation to Companies House, where information of all companies are

kept. The first one is Form 10, which can be downloaded from the Companies House

website. This, when filled in, will contain information revolving the First Directors, the

Secretary (In this instance, can also be the same person as the First Director) as well as the

share capital, since this is a company that is limited by shares. The next piece of 

documentation required is a Memorandum of Association.This is simply a historic

document that is named and signed by those starting up the company (In this case, simply

one person) and that you agree to form a company under the Companies Act 2006 and by

taking this action you become a member of the company and you are required to take at

least one share in the company. There is no maximum limit to the amount of shares that can

be distributed here. The other form that needs to be organised is the articles of association.

This details the running of the company, how management will take care of business, and

what the company will be liable for. The article can either be made entirely by yourself, or

you can also use framework models of articles. These articles can be changed at a later date,

but must pass a special resolution, requiring a 74% majority for it to be passed through.

After completion of the three forms, it needs to all be sent off to Companies House, a

government-led organisation which helps to incorporate companies, along with one of two

fees. The standard fee is £20, where it takes around 8-10 working days for the company to

be incorporated. If you need the company to be incorporated quickly, there is a Same Day

Incorporation Service, with which it costs £50. It will only be incorporated that day providing

it is received before 15:00. 

Comment [J8]: Good :D

Comment [J9]: You are reporting. Use varied

vocab.

Comment [J10]: Hmmm Im not so sure bab

Rewrite this.

Comment [J11]: More evaluation needed.

Comment [J12]: Can be shorter! List them th

describe.