Incorporation – Page 2 – NBC Institute

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.

Question

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)

Answer

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Tags: CIT, Incorporation, Partnership Conversion, Partnership Taxation, Tax implications
Level: Level 2

Topic: Companies Income Tax (CIT), Taxation of Partnerships and Sole Proprietorships
Series: NOV 2016

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

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

Question

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

Answer

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Tags: Incorporation, Legal Documents
Level: Level 1

Topic: Company Law
Series: NOV 2012

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

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

Question

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.

Answer

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Tags: Articles of Association, Incorporation, Memorandum of Association, Share Capital
Level: Level 1

Topic: Company Law
Series: MAY 2013

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

This question tests the understanding of the advantages of incorporation

Question

Which of the following is NOT an advantage of incorporation?

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

Answer

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Tags: Incorporation, Limited Liability, Perpetual Succession
Level: Level 1

Topic: Company Law
Series: MAY 2013

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

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

Question

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

Answer

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Tags: Articles of Association, Company Formation, Incorporation, Memorandum of Association, Share Capital
Level: Level 1

Topic: Business and Organizational Structures and Choices
Series: MAY 2015

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

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

Question

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)

Answer

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Tags: Company Law, Company Secretary, Incorporation
Level: Level 1

Topic: Corporate Governance
Series: MAY 2014

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

Understanding the required documents for company incorporation.

Question

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

Answer

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Tags: Company Law, Incorporation, Required Documents
Level: Level 1

Topic: Company Law
Series: MAY 2014

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

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

Question

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

Answer

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Tags: Company Law, Incorporation, Multiple Choice, Statutory Meeting
Level: Level 1

Topic: Company Law
Series: NOV 2013

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

Documents used for the incorporation of a company.

Question

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

Answer

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Tags: Company Law, Incorporation, Legal Documents, Multiple Choice
Level: Level 1

Topic: Company Law
Series: NOV 2015

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

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

Question

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)

Answer

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Tags: Company Law, Corporate Affairs Commission, Incorporation
Level: Level 1

Topic: Company Law
Series: NOV 2014

BL – Nov 2022 – L1 – SA – Q4 – Company Law

Determining the time within which a public limited company must hold its statutory meeting from incorporation.

Question

What is the period within which a public limited company must hold its statutory meeting from the date of incorporation?

A. 3 months
B. 6 months
C. 9 months
D. 12 months
E. 15 months

Answer

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Tags: Incorporation, Statutory Meeting
Level: Level 1

Topic: Company Law
Series: NOV 2022

BMF – May 2023 – L1 – SA – Q4 – Business and Organizational Structures and Choices

Identify the required nominal share capital for a Public Limited Liability (PLC) company upon incorporation as per CAMA 2020.

Question

In respect of Public Limited Liability (PLC) companies, the position of CAMA 2020 is that upon incorporation:

A. N200,000 in nominal value of its share capital must have been issued
B. N400,000 in nominal value of its share capital must have been issued
C. N2,000,000 in nominal value of its share capital must have been issued
D. N4,000,000 in nominal value of its share capital must have been issued
E. N20,000,000 in nominal value of its share capital must have been issued

Answer

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Tags: CAMA 2020, Company Law, Incorporation, Public Limited Liability Company
Level: Level 1

Topic: Business and Organizational Structures and Choices
Series: MAY 2023

BL – March July 2020 – L1 – SB – Q2b – Company Law

Examines the consequences of incorporating a limited liability company.

Question

There are consequences of incorporation of a company.

Required:
State FIVE consequences of incorporation of a limited liability company.

Answer

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Tags: Company Law, Incorporation, Limited Liability
Level: Level 1

Topic: Company Law
Series: MAR/JULY 2020

BL – May 2024 – L1 – SA – Q5 – Company Law

Identify the document that regulates a company’s external relations.

Question

The documents of incorporation that regulate the company’s external relations is the
A. Articles of Association
B. Articles of incorporation
C. Memorandum of Association
D. Memorandum of Understanding
E. Bye-law

Answer

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Tags: Company Law, External Relations, Incorporation, Legal System
Level: Level 1

Topic: Company Law
Series: MAY 2024

AT – Nov 2018 – L3 – Q3a – Permanent establishment, International taxation

Tax policy implications on the establishment of a permanent entity, finance lease acquisitions, and dividend policies by a foreign company.

Question

The management of Smith Plc, a UK-based company, is considering the possibility of launching its presence in Ghana and it is not sure of the tax implication of the following under the tax laws of Ghana:

i) It is considering making its presence through incorporation in Ghana or creating an external company that is a Permanent Establishment (Branch) instead.
ii) It intends to acquire all its non-current assets through finance lease as against buying the assets outright when it makes its presence in Ghana.
iii) It intends to bring some staff from the United Kingdom to work in Ghana who will be paid half salary in Ghana and the other half paid directly to their accounts in the United Kingdom as against paying their full salary in Ghana.
iv) Management intends to acquire shares in many companies in Ghana as part of efforts to create value for shareholders through dividend receipts as against granting loans to interested companies in Ghana if it is unable to make its presence in Ghana.

Required:
Evaluate the above policy interventions and advise on the tax implication of each to enable the management of Smith Plc to make a decision.

Answer

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Tags: Dividends, Finance lease, Incorporation, Non-current Assets, Permanent Establishment, Tax implications
Level: Level 3

Topic: International taxation, Permanent establishment
Series: NOV 2018

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.

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

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

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

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

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

This question tests the understanding of the advantages of incorporation

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

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

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

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

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

Understanding the required documents for company incorporation.

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

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

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

Documents used for the incorporation of a company.

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

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

BL – Nov 2022 – L1 – SA – Q4 – Company Law

Determining the time within which a public limited company must hold its statutory meeting from incorporation.

BMF – May 2023 – L1 – SA – Q4 – Business and Organizational Structures and Choices

Identify the required nominal share capital for a Public Limited Liability (PLC) company upon incorporation as per CAMA 2020.

BL – March July 2020 – L1 – SB – Q2b – Company Law

Examines the consequences of incorporating a limited liability company.

BL – May 2024 – L1 – SA – Q5 – Company Law

Identify the document that regulates a company’s external relations.

AT – Nov 2018 – L3 – Q3a – Permanent establishment, International taxation

Tax policy implications on the establishment of a permanent entity, finance lease acquisitions, and dividend policies by a foreign company.

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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.

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

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

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

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

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

This question tests the understanding of the advantages of incorporation

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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.

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

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

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

Understanding the required documents for company incorporation.

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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.

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

Documents used for the incorporation of a company.

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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.

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BL – Nov 2022 – L1 – SA – Q4 – Company Law

Determining the time within which a public limited company must hold its statutory meeting from incorporation.

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BMF – May 2023 – L1 – SA – Q4 – Business and Organizational Structures and Choices

Identify the required nominal share capital for a Public Limited Liability (PLC) company upon incorporation as per CAMA 2020.

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BL – March July 2020 – L1 – SB – Q2b – Company Law

Examines the consequences of incorporating a limited liability company.

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BL – May 2024 – L1 – SA – Q5 – Company Law

Identify the document that regulates a company’s external relations.

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AT – Nov 2018 – L3 – Q3a – Permanent establishment, International taxation

Tax policy implications on the establishment of a permanent entity, finance lease acquisitions, and dividend policies by a foreign company.

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