A Short Business Law Test Quiz Part- II

A sole trader is a business owned and operated by a single individual. As the sole owner, this person is entitled to receive all the profits generated by the firm. Additionally, they are also responsible for any losses incurred by the business. It is important to note that while a sole trader may have employees, the ultimate decision-making authority and financial responsibility lies with the owner. Therefore, the correct answer is "Profits."

A contract is a legally binding agreement between two or more parties. It is a formal arrangement that outlines the rights and obligations of each party involved. By agreeing to a contract, the parties involved are legally obligated to fulfill their respective duties as stated in the agreement. Therefore, the statement that a contract is a form of agreement that is legally binding is true.

The statement is false because there is no maximum limit on the number of people who can form a partnership. A partnership can be formed by any number of individuals, and there is no legal restriction on the maximum number of partners.

Limited liability companies fall into two categories: public limited companies (plcs) and private companies (Ltd). Public limited companies are companies that have their shares traded on a public stock exchange, allowing the general public to invest in them. Private companies, on the other hand, are not publicly traded and have restrictions on the transfer of shares. Both types of companies offer limited liability protection to their owners, meaning that the owners' personal assets are protected from the company's debts and liabilities.

The explanation for the given correct answer is that a mortgage is indeed a type of charge that allows companies to give charges over their property. When a charge is placed on a specific asset, it is referred to as a fixed charge. The grant of a fixed charge prevents the borrower from selling or disposing of the property without the lender's permission. Therefore, the statement "A mortgage is a type of charge and companies can give charges over their property in the same way, and if the charge is over a specific asset, this is usually termed a fixed charge. The grant of a fixed charge stops the borrower from disposing of the property without the consent of the lender" is true.

The first feature is that the buyer and seller will agree on what is to be purchased and the price to be paid. This is essential in any contract as it establishes the terms of the agreement. The second feature is that both parties will exchange something, which is known as consideration. This is also a fundamental aspect of a contract as it ensures that both parties have something to gain from the agreement. The third feature is that both parties will intend for the transaction to be legally binding. This means that they both understand and accept the legal consequences of entering into the contract.

This statement is true because in a company, individual members, who are usually shareholders, have the right to vote at the annual general meeting. This means they can participate in decision-making processes and have a say in the company's affairs. Additionally, shareholders also have the right to receive a copy of the company's accounts, which allows them to stay informed about the financial performance and position of the company.

The formation process of forming a company requires the submission of several documents to the Registrar of Companies. These documents include the Memorandum of Association, which outlines the company's objectives and rules; the Articles of Association, which detail the internal regulations of the company; the Statement of the personal details of the directors and their signed consents to act as directors; the address of the registered office; the Statement of the capital of the company, which specifies the amount of capital invested; the Declaration of compliance, confirming that all legal requirements have been met; and the Registration fee, which is the payment required for the registration process.

Directors have wide powers of management, which means they have the authority to make decisions and take actions on behalf of the company. However, if these powers are abused, directors may prioritize their own interests over the interests of the company. To prevent this from happening, their powers are balanced by legal duties. These legal duties serve as a safeguard to ensure that directors act in the best interests of the company and its shareholders, rather than using their powers for personal gain.

The explanation for the given correct answer is that capital is considered a liability because it represents the funds that the company owes to its owners or shareholders. When capital is raised, it is typically used to purchase assets, such as equipment or property, which are recorded on the company's balance sheet as assets. Therefore, the total liabilities, which include capital, will be equal to the total assets. This is a fundamental principle of accounting known as the accounting equation, which states that assets must always equal liabilities plus equity.

The given statement is false. The contract of employment is the legal agreement between an employer and an employee, outlining the terms and conditions of their working relationship. It is not the relationship itself, but rather the document that governs it.

The court may terminate a partnership agreement under the following conditions: if a partner is incapacitated and unable to fulfill their role due to mental illness, if a partner's conduct negatively impacts the firm such as through a criminal conviction for dishonesty, if there is a collapse of trust between partners or a breach of the partnership agreement, if the business is no longer profitable, and if it is deemed "just and equitable" to dissolve the partnership. Additionally, if a partner becomes insolvent, it can also lead to the termination of the partnership agreement.