Tutorial Questions Week 2 – T2 2012 1. What is the difference between incorporated entities and unincorporated entities?
(p51 of textbook)
Unincorporated associations are clubs and societies which are formed to carry on various activities but where the members do not aim to make a profit and distribute it to themselves. Unincorporated associations are not a separate legal entity. This means that it can not hold property in its own name ( property must be held in the names of the individual members of the association) and the association is unable to enter into contracts in its own name. Neither can the association sue or be sued in its own name. The members of an unincorporated association do not have the benefit of limited liability.
An association may incorporate under the Associations Incorporations Act of the state. The benefits of incorporation are that of limited liability and separate legal entity. The association will be able to hold property in its own name. 2. Name unincorporated entities and there main characteristics * Sole Trader – where an individual person caries on business in her or his own name. There is no separation between the business and personal assets or obligations of the person conducting the business. Personal liable for all debts. * Partnership – 2 – 20 persons carrying on business in common with a view to a profit * Joint Venture – a contractual arrangement between two or more people that will cooperate to conduct a particular venture or related ventures.
(page 51 – 54 of text book) 3. Explain the 5 key characteristics of a company
(page 58 – 61) – * Limited liability – debts of the company are not the debts of the participants. The members liability is limited to the amount of the members shares. * Separate Legal entity – Salomans case – the corporation is separate from its participants * Transferability – transfer of investor interests through shares * Ongoing – the company’s existence continues until it is brought to an end through winding up and de-registration * Natural person - can do everything an ordinary person can do. 4. What is meant by a separate legal entity?
The corporation is separate from those who manage its operations and its shareholders. This means that the company can incur and receive obligations and hold property in its own name. Salomons case established the principle that the corporation is separate from its participants and the rights and obligations are the company’s own, not those of its managers, the…