Question Tag: Incorporation

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AX – Nov 2016 – L2 – Q3 – Taxation of Partnerships and Sole Proprietorships

Discuss the tax implications of converting a partnership into a limited liability company and the treatment of incorporation costs.

Johnson, Seyi, and Bernard, based in Kaduna State, have run the firm Johnson, Seyi & Bernard (Estate Managers) for several years. The partnership agreement provides the following:

(i) Salary paid to partners:

  • Johnson: N288,000
  • Seyi: N576,000
  • Bernard: N1,152,000

(ii) Profit-sharing ratio:

  • Johnson: 2
  • Seyi: 3
  • Bernard: 5

In April 2015, there was a decision to review the partnership agreement. Messrs Johnson, Seyi, and Bernard were unable to find worthy successors to take over as partners. Rather than review the partnership agreement, they agreed to convert the partnership into a limited liability company.

A firm of legal practitioners was contacted to incorporate a new company, JSB Consultants Limited. The Authorised Share Capital was agreed at N50,000,000, made up of 50,000,000 Ordinary Shares of N1.00 each. The shareholding structure is as follows:

  • Johnson: 20%
  • Seyi: 30%
  • Bernard: 50%

The Certificate of Incorporation was dated July 15, 2015, and the company commenced business on September 1, 2015. The cost of incorporation includes:

  • Payment for Stamp Duty: N400,000
  • Professional fee for incorporation: N250,000
  • Corporate Affairs Commission (CAC) registration fee: N500,000
  • Miscellaneous costs: N200,000
    Total: N1,350,000

The financial results for the year ended December 31, 2015, are as follows:

  • Revenue: N20,000,000
  • Expenses:
    • Cost of incorporation: N1,350,000
    • Transport and travelling: N675,000
    • Medical: N600,000
    • Hotel and accommodation: N625,000
    • Audit and accountancy: N550,000
    • Postages and telephone: N750,000
    • Salaries:
      • Johnson: N1,440,000
      • Seyi: N2,880,000
      • Bernard: N5,760,000
        Total expenses: N14,630,000
  • Net Profit: N5,370,000

Required:
As the Tax Consultant, you are required to write a report to Messrs Johnson, Seyi, and Bernard highlighting:
a. Tax implications of the decision to convert to a limited liability company, limiting yourself to the details provided. (11 Marks)
b. Your comment on the breakdown of the cost of incorporation of N1,350,000 and the tax implication of each item. (9 Marks)

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BL – Nov 2012 – L1 – SA – Q15 – Company Law

Identify the document sworn to by a legal practitioner for company registration.

Name the incorporation document which a legal practitioner must swear to in order to effect the registration or incorporation of a company.

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BL – May 2013 – L1 – SB – Q4A – Company Law

List and explain five incorporation documents required for registering a company.

Hassan, a young businessman engaged in the manufacturing of “Healthy Energy Drink”, has recently contacted you for the incorporation of a company to be known as Healthy Energy Limited.

You are required to:

State FIVE incorporation documents required to be submitted by the company, indicating the purpose of each document.

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BL – May 2013 – L1 – SA – Q3 – Company Law

This question tests the understanding of the advantages of incorporation

Which of the following is NOT an advantage of incorporation?

A. Perpetual succession
B. Property right
C. Limited liability
D. Separate personality
E. Merger

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BMF – MAY 2015 – L1 – SA – Q10 – Business and Organizational Structures and Choices

Requirements for incorporating a limited liability company, excluding non-essential documents.

The following are required to incorporate a limited liability company EXCEPT:

A. Memorandum of Association
B. Articles of Association
C. Statement of authorised share capital
D. Location of the registered office
E. Source of finance

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BL – May 2014 – L1 – SB – Q5 – Corporate Governance

Discussing requirements for incorporation and the implications of proposed company names.

a. Jossy is a cabinet maker based on Victoria Island, Lagos, where he has a lucrative business. Jossy is proposing to expand his business and wants to invite James to form a Limited Liability Company, using the name Jossy James Limited.

You are required to:
i. State FIVE documents that must be filed for the incorporation of the company; and (5 Marks)
ii. Advise the parties on whether the proposed name, Jossy James Limited is appropriate and, state FOUR prohibited or restricted company names. (5 Marks)

b. State FIVE advantages of a Limited Liability Company over a Partnership. (5 Marks)

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BL – May 2014 – L1 – SA – Q13 – Company Law

Understanding the required documents for company incorporation.

The persons proposing to form a company are required to prepare and present documents to the Corporate Affairs Commission for registration. Which of the following documents states the objects of the proposed company?
A. Statutory declaration of compliance sworn to by a legal practitioner
B. Statement of the authorised or minimum share capital
C. The Memorandum of Association
D. The Articles of Association
E. Written consent of the first directors

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BL – Nov 2013 – L1 – SA – Q14 – Company Law

Identifies the time frame within which a public company must hold its statutory meeting after incorporation.

On incorporation, a public company must hold its Statutory meeting within

A. 6 months
B. 5 months
C. 3 months
D. 2 months
E. 1 month

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BL – Nov 2015 – L1 – SA – Q3 – Company Law

Documents used for the incorporation of a company.

Memorandum and Articles of Association are documents of
A. Incorporation of a company
B. Formation of a partnership agreement
C. Pre-incorporation contract
D. Sealing of all e-contracts
E. Conclusion of a contract under seal

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BL – Nov 2014 – L1 – SB – Q3b – Company Law

State eight documents required for the incorporation of a company at the Corporate Affairs Commission.

Persons proposing to form a company are required to present certain documents to the Corporate Affairs Commission.
You are required to state any EIGHT of the documents to be presented to the Corporate Affairs Commission for the incorporation of a company.
(Total 8 Marks)

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AX – Nov 2016 – L2 – Q3 – Taxation of Partnerships and Sole Proprietorships

Discuss the tax implications of converting a partnership into a limited liability company and the treatment of incorporation costs.

Johnson, Seyi, and Bernard, based in Kaduna State, have run the firm Johnson, Seyi & Bernard (Estate Managers) for several years. The partnership agreement provides the following:

(i) Salary paid to partners:

  • Johnson: N288,000
  • Seyi: N576,000
  • Bernard: N1,152,000

(ii) Profit-sharing ratio:

  • Johnson: 2
  • Seyi: 3
  • Bernard: 5

In April 2015, there was a decision to review the partnership agreement. Messrs Johnson, Seyi, and Bernard were unable to find worthy successors to take over as partners. Rather than review the partnership agreement, they agreed to convert the partnership into a limited liability company.

A firm of legal practitioners was contacted to incorporate a new company, JSB Consultants Limited. The Authorised Share Capital was agreed at N50,000,000, made up of 50,000,000 Ordinary Shares of N1.00 each. The shareholding structure is as follows:

  • Johnson: 20%
  • Seyi: 30%
  • Bernard: 50%

The Certificate of Incorporation was dated July 15, 2015, and the company commenced business on September 1, 2015. The cost of incorporation includes:

  • Payment for Stamp Duty: N400,000
  • Professional fee for incorporation: N250,000
  • Corporate Affairs Commission (CAC) registration fee: N500,000
  • Miscellaneous costs: N200,000
    Total: N1,350,000

The financial results for the year ended December 31, 2015, are as follows:

  • Revenue: N20,000,000
  • Expenses:
    • Cost of incorporation: N1,350,000
    • Transport and travelling: N675,000
    • Medical: N600,000
    • Hotel and accommodation: N625,000
    • Audit and accountancy: N550,000
    • Postages and telephone: N750,000
    • Salaries:
      • Johnson: N1,440,000
      • Seyi: N2,880,000
      • Bernard: N5,760,000
        Total expenses: N14,630,000
  • Net Profit: N5,370,000

Required:
As the Tax Consultant, you are required to write a report to Messrs Johnson, Seyi, and Bernard highlighting:
a. Tax implications of the decision to convert to a limited liability company, limiting yourself to the details provided. (11 Marks)
b. Your comment on the breakdown of the cost of incorporation of N1,350,000 and the tax implication of each item. (9 Marks)

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BL – Nov 2012 – L1 – SA – Q15 – Company Law

Identify the document sworn to by a legal practitioner for company registration.

Name the incorporation document which a legal practitioner must swear to in order to effect the registration or incorporation of a company.

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BL – May 2013 – L1 – SB – Q4A – Company Law

List and explain five incorporation documents required for registering a company.

Hassan, a young businessman engaged in the manufacturing of “Healthy Energy Drink”, has recently contacted you for the incorporation of a company to be known as Healthy Energy Limited.

You are required to:

State FIVE incorporation documents required to be submitted by the company, indicating the purpose of each document.

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BL – May 2013 – L1 – SA – Q3 – Company Law

This question tests the understanding of the advantages of incorporation

Which of the following is NOT an advantage of incorporation?

A. Perpetual succession
B. Property right
C. Limited liability
D. Separate personality
E. Merger

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You're reporting an error for "BL – May 2013 – L1 – SA – Q3 – Company Law"

BMF – MAY 2015 – L1 – SA – Q10 – Business and Organizational Structures and Choices

Requirements for incorporating a limited liability company, excluding non-essential documents.

The following are required to incorporate a limited liability company EXCEPT:

A. Memorandum of Association
B. Articles of Association
C. Statement of authorised share capital
D. Location of the registered office
E. Source of finance

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BL – May 2014 – L1 – SB – Q5 – Corporate Governance

Discussing requirements for incorporation and the implications of proposed company names.

a. Jossy is a cabinet maker based on Victoria Island, Lagos, where he has a lucrative business. Jossy is proposing to expand his business and wants to invite James to form a Limited Liability Company, using the name Jossy James Limited.

You are required to:
i. State FIVE documents that must be filed for the incorporation of the company; and (5 Marks)
ii. Advise the parties on whether the proposed name, Jossy James Limited is appropriate and, state FOUR prohibited or restricted company names. (5 Marks)

b. State FIVE advantages of a Limited Liability Company over a Partnership. (5 Marks)

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BL – May 2014 – L1 – SA – Q13 – Company Law

Understanding the required documents for company incorporation.

The persons proposing to form a company are required to prepare and present documents to the Corporate Affairs Commission for registration. Which of the following documents states the objects of the proposed company?
A. Statutory declaration of compliance sworn to by a legal practitioner
B. Statement of the authorised or minimum share capital
C. The Memorandum of Association
D. The Articles of Association
E. Written consent of the first directors

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You're reporting an error for "BL – May 2014 – L1 – SA – Q13 – Company Law"

BL – Nov 2013 – L1 – SA – Q14 – Company Law

Identifies the time frame within which a public company must hold its statutory meeting after incorporation.

On incorporation, a public company must hold its Statutory meeting within

A. 6 months
B. 5 months
C. 3 months
D. 2 months
E. 1 month

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You're reporting an error for "BL – Nov 2013 – L1 – SA – Q14 – Company Law"

BL – Nov 2015 – L1 – SA – Q3 – Company Law

Documents used for the incorporation of a company.

Memorandum and Articles of Association are documents of
A. Incorporation of a company
B. Formation of a partnership agreement
C. Pre-incorporation contract
D. Sealing of all e-contracts
E. Conclusion of a contract under seal

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BL – Nov 2014 – L1 – SB – Q3b – Company Law

State eight documents required for the incorporation of a company at the Corporate Affairs Commission.

Persons proposing to form a company are required to present certain documents to the Corporate Affairs Commission.
You are required to state any EIGHT of the documents to be presented to the Corporate Affairs Commission for the incorporation of a company.
(Total 8 Marks)

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