AAT L2 Introduction to Business and Company Law

Question 1

Which of the following is a characteristic of a sole trader?

Accepted Answer

The owner has unlimited liability for all business debts

Answer

Limited liability for business debts

Answer

Separate legal personality from the owner

Answer

It must have at least two partners

Question 2

A contract requires which of the following essential elements to be legally binding?

Accepted Answer

Offer, acceptance, consideration, intention to create legal relations, and capacity

Answer

Only a written document signed by both parties

Answer

A solicitor to witness the agreement

Answer

Payment of a deposit

Question 3

The term 'limited liability' in relation to a limited company means:

Accepted Answer

The shareholders' liability is limited to the amount they have invested or guaranteed

Answer

The company can only trade for a limited time

Answer

The company can only have a limited number of employees

Answer

The directors have no responsibilities

Question 4

Which UK legislation governs the formation and operation of companies?

Accepted Answer

The Companies Act 2006

Answer

The Partnership Act 1890

Answer

The Sale of Goods Act 1979

Answer

The Consumer Rights Act 2015

Question 5

An invitation to treat is:

Accepted Answer

An indication of willingness to negotiate or receive offers, not a binding offer itself

Answer

A legally binding offer

Answer

A type of contract

Answer

An acceptance of an offer

Question 6

A private limited company (Ltd) differs from a public limited company (PLC) because:

Accepted Answer

An Ltd cannot offer its shares for sale to the general public on a stock exchange

Answer

An Ltd cannot have shareholders

Answer

A PLC has unlimited liability

Answer

An Ltd must have more directors than a PLC