Jason Assignment Edit 1

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 isn’t 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. These
are 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 advice 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 the
public. 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.
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 its
liability 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 limited
company 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.

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