Company Formation: A Comprehensive Guide to Setting Up a Business in the UK

Question 1

For a small business with few shareholders who want to keep control, which company type is best?

Accepted Answer

Private limited company (LTD)

Answer

Public limited company (PLC)

Answer

Unlimited company

Answer

Charitable incorporated organisation (CIO)

Question 2

Preferred shares often carry which of the following features, EXCEPT:

Accepted Answer

Equal voting rights

Answer

Fixed dividend

Answer

Priority in liquidation

Answer

Cumulative dividends

Question 3

Which of the following is NOT a requirement for registering a company with Companies House?

Accepted Answer

Share capital

Answer

Company name

Answer

Registered office address

Answer

Memorandum of Association

Question 4

What type of company offers limited liability to its owners and can issue shares?

Accepted Answer

Limited company

Answer

Sole proprietorship

Answer

Partnership

Answer

Unlimited company

Question 5

What is the primary purpose of a Memorandum of Association?

Accepted Answer

To outline the company's objectives and powers

Answer

To appoint the initial directors

Answer

To create the company's share capital

Answer

To register the company with Companies House

Question 6

Who is primarily responsible for managing a company's affairs?

Accepted Answer

Directors

Answer

Shareholders

Answer

Company secretary

Answer

Auditors

Question 7

What is the minimum number of directors required for a private limited company in the UK?

Accepted Answer

1

Answer

2

Answer

3

Answer

4

Question 8

Which of the following is NOT a type of share capital?

Accepted Answer

Loan capital

Answer

Ordinary shares

Answer

Preference shares

Answer

Venture capital

Question 9

What is the main purpose of a company's Articles of Association?

Accepted Answer

To set out the internal rules and regulations of the company

Answer

To appoint the company's auditors

Answer

To issue shares to shareholders

Answer

To register the company with Companies House

Question 10

Which of the following is NOT required when registering a company at Companies House in the UK?

Accepted Answer

Passport

Answer

Memorandum of Association

Answer

Articles of Association

Answer

Proof of identity

Question 11

Which type of business structure provides limited liability to its owners in the UK?

Accepted Answer

Limited company

Answer

Sole proprietorship

Answer

Partnership

Answer

Unlimited company

Question 12

What is the key difference between a public limited company (PLC) and a private limited company (LTD) in the UK?

Accepted Answer

PLCs can issue shares to the public, while LTDs cannot.

Answer

LTDs have more stringent reporting requirements than PLCs.

Answer

PLCs are more regulated than LTDs.

Answer

There is no difference between PLCs and LTDs.

Question 13

In the UK, what is the primary purpose of the Memorandum of Association?

Accepted Answer

To outline the company's objectives and powers

Answer

To describe the company's share structure

Answer

To list the directors of the company

Answer

To specify the company's registered office

Question 14

Which of the following is NOT a requirement for registering a company with Companies House?

Accepted Answer

Obtaining a business license

Answer

Filing a Memorandum of Association

Answer

Submitting Articles of Association

Answer

Paying a registration fee

Question 15

What are the primary legal duties of directors in UK company law?

Accepted Answer

Act in the best interests of the company

Accepted Answer

Disclose potential conflicts of interest

Accepted Answer

Ensure compliance with legal and regulatory requirements

Answer

Attend all board meetings

Question 16

What is the minimum number of directors required for a private limited company in the UK?

Accepted Answer

1

Answer

2

Answer

3

Answer

4

Question 17

What is the primary purpose of a Memorandum of Association (MOA)?

Accepted Answer

To outline the company's objectives and powers

Answer

To appoint the first directors

Answer

To register the company with Companies House

Answer

To issue shares to shareholders

Question 18

Which of the following is **NOT** a benefit of incorporating a limited company?

Accepted Answer

Increased flexibility

Answer

Limited liability

Answer

Tax efficiency

Answer

Access to additional funding

Question 19

What is the primary difference between a shareholder and a director?

Accepted Answer

Shareholders own the company, while directors manage it.

Answer

Directors own the company, while shareholders manage it.

Answer

Shareholders and directors have the same roles and responsibilities.

Answer

There is no difference between a shareholder and a director.

Question 20

What is the term for the process of closing down a company?

Accepted Answer

Liquidation

Answer

Dissolution

Answer

Deregistration

Answer

Administration

Question 21

Which of the following is a type of private company that can be formed in the United Kingdom?

Accepted Answer

Limited company

Answer

Partnership

Answer

Sole proprietorship

Answer

Public limited company

Question 22

What is the minimum required number of directors for a private company in the UK?

Accepted Answer

One

Answer

Two

Answer

Three

Answer

Four

Question 23

What is the primary function of a company constitution?

Accepted Answer

To define the governing rules and procedures of the company

Answer

To safeguard shareholder interests

Answer

To adhere to legal requirements

Answer

To attract potential investors

Question 24

What is the primary purpose of a company constitution?

Accepted Answer

To outline the rules and regulations governing the company

Answer

To appoint the company's directors

Answer

To register the company with Companies House

Answer

To raise capital for the company

Question 25

To form a Private Limited Company in the UK, what is the minimum number of directors required?

Accepted Answer

One

Answer

Two

Answer

Three

Answer

Four

Question 26

Which of the following is NOT an advantage associated with forming a Private Limited Company?

Accepted Answer

Unlimited control for the sole owner

Answer

Limited liability protection

Answer

Tax efficiency

Answer

Ease of fundraising

Question 27

What is the primary purpose of a company's Articles of Association?

Accepted Answer

To outline the company's internal rules and regulations

Answer

To define the company's purpose and objectives

Answer

To list the company's shareholders and directors

Answer

To describe the company's financial structure

Question 28

Which of the following is a mandatory requirement for all companies operating in the UK?

Accepted Answer

Filing annual financial statements

Answer

Hiring an auditor

Answer

Conducting an annual general meeting

Answer

Paying corporation tax

Question 29

What is the main purpose of the Memorandum of Association (MOA) in setting up a company?

Accepted Answer

To define the company's name, goals, and powers

Answer

To outline the company's internal management and procedures

Answer

To specify the types of shares the company can issue

Answer

To list the names and addresses of the company's directors

Question 30

Which financial method involves giving investors partial ownership of the company in return for funding?

Accepted Answer

Equity financing

Answer

Debt financing

Answer

Government grants

Question 31

Which two documents form the company constitution, outlining the rules and regulations governing the company's internal affairs?

Accepted Answer

Memorandum of Association and Articles of Association

Answer

Articles of Association and Shareholders' Agreement

Answer

Company Bylaws and Share Certificate

Answer

Certificate of Incorporation and Annual Report

Question 32

Which of the following is NOT a legal obligation of a company director in the UK?

Accepted Answer

Duty to make a profit

Answer

Duty of care

Answer

Duty of loyalty

Answer

Duty to avoid conflicts of interest

Question 33

Which of the following is the correct order of steps in forming a UK limited company?

Accepted Answer

Choosing a company name, appointing directors, registering with Companies House, drafting a company constitution

Answer

Appointing directors, choosing a company name, registering with Companies House, drafting a company constitution

Answer

Registering with Companies House, choosing a company name, appointing directors, drafting a company constitution

Answer

Drafting a company constitution, choosing a company name, appointing directors, registering with Companies House

Question 34

What is the primary function of a company constitution?

Accepted Answer

To outline the rules and regulations governing the internal operations of the company

Answer

To protect the rights of shareholders

Answer

To define the company's purpose and objectives

Answer

To register the company with Companies House

Question 35

Which of the following is NOT a benefit of forming a limited company?

Accepted Answer

Complete control over the company's operations

Answer

Limited liability for shareholders

Answer

Tax advantages

Answer

Increased credibility and professionalism

Question 36

What is the legal liability of a shareholder in a UK limited company?

Accepted Answer

Shareholders are liable only for the amount they have invested in the company.

Answer

Shareholders are personally liable for the debts of the company.

Answer

Shareholders are not liable for anything as long as the company is solvent.

Answer

The liability of shareholders depends on the specific circumstances of each case.

Question 37

What is the primary purpose of the Memorandum of Association?

Accepted Answer

Sets out the company's purpose and powers

Answer

Describes the company's financial structure

Answer

Defines the rights and responsibilities of shareholders

Answer

Appoints the company's directors

Question 38

Which of the following is a primary duty of a company director?

Accepted Answer

To act in the best interests of the company

Answer

To avoid any potential conflicts of interest

Answer

To maximize profits for shareholders

Answer

To follow the instructions of the shareholders

Question 39

What is the fundamental difference between a share and a bond?

Accepted Answer

Shares represent ownership, while bonds represent debt

Answer

Shares provide a fixed return, while bonds do not

Answer

Bonds are more risky than shares

Question 40

Which of the following is a potential advantage of forming a partnership?

Accepted Answer

Shared decision-making

Answer

Access to additional capital

Answer

Limited liability

Answer

Tax efficiency

Question 41

What is the primary disadvantage of forming a sole proprietorship?

Accepted Answer

Unlimited liability

Answer

Difficult to raise capital

Answer

Lack of flexibility

Answer

Taxation complexity

Question 42

What is the primary function of Companies House in the company formation process?

Accepted Answer

Registers and maintains information about companies

Answer

Issues licenses to companies

Answer

Approves company names

Question 43

What is the minimum number of directors required to form a private limited company in the UK?

Accepted Answer

1

Answer

2

Answer

4 or more

Answer

3

Question 44

Which of the following documents is **not** required to register a company with Companies House?

Accepted Answer

Business plan

Answer

Articles of Association

Answer

Form IN01

Answer

Memorandum of Association

Question 45

What is a primary advantage of forming a limited liability company (LLC) over a sole proprietorship?

Accepted Answer

Limited personal liability

Answer

Greater flexibility

Answer

Lower tax rates

Answer

Easier access to funding

Question 46

Which of the following is a **disadvantage** of forming a public limited company (PLC)?

Accepted Answer

Higher compliance costs and administrative burden

Answer

Increased access to funding

Answer

Enhanced reputation

Answer

Greater flexibility

Question 47

What is the primary purpose of a shareholder agreement?

Accepted Answer

To set out the rights, responsibilities, and relationships of shareholders

Answer

To appoint directors

Answer

To register the company with Companies House

Question 48

What is the role of Companies House in the UK company formation process?

Accepted Answer

To register and store information about companies

Answer

To provide legal advice

Answer

To appoint directors

Answer

To issue shares

Question 49

Which of the following is a benefit of using a company formation agent?

Accepted Answer

Reduced administrative burden and potential cost savings

Answer

Guaranteed approval of company registration

Answer

Lower registration fees

Answer

Increased control over the formation process

Question 50

What is the minimum share capital required to form a private limited company in the UK?

Accepted Answer

£1

Answer

£1,000

Answer

£10,000

Answer

£100