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Running head: BUSINESS LAW0Legal Aspects ofBusiness
BUSINESS LAW1TASK1In the United Kingdom, the business environment is friendly for organisations which areincorporated or operating in the country due to flexible legal requirements and growthopportunities. There many forms of business structures existing in the nation such as soletraders, limited partnerships, unlimited partnerships, LLPs, and companies. These businessstructures have both advantages and disadvantages based on their attributes and legalrequirements. Unlimited partnerships and private limited companies are two of the mostpopular forms of business structures which entities choose for their business. Evaluation ofthese two business structures will be the focus of this essay, and relevant case laws andlegislation will be discussed as well.The key legislation that governs the unlimited partnerships which operate in the UK is thePartnership Act 1890. A partnership is based on an agreement between two or more partieswhich is constructed based on the partnership agreement. Its disadvantages includepartners have unlimited liability which means the court can use their personal assets to payoff the loans or liabilities of the partnership as it did not have a separate personality. Itsadvantages include fewer legal formalities and easy formation. Section 1 of the act providesthat definition of a partnership. It is referred to the relationship between individuals forcarrying on a business in common, and the partners have a view of profit(Legislation.gov.uk, 2018a). There are four elements of a partnership which are given basedon this definition which includes the relationship between people, carrying a business, incommon, and with a view of profit. The first key element provides that in order to establisha partnership, it is necessary that a relationship is created between the parties to thepartnership.InTiffin v Lester Aldridge LLP EWCA Civ 35 case, the importance of the element of therelationship between parties was emphasised by the court. In this case, a claimant becomesa fixed share partner in a firm, and he also received a salary and small amount of the profits,and he had limited rights. He claimed an unfair dismissal when other partners fired himfrom his post. The court held that the relationship between partners is the key element of apartnership and it does not affect the number of shares a partner holds (Berry, 2017).
BUSINESS LAW2Furthermore, a partner cannot be an employee of the partnership, hence, the claimantcannot claim for unfair dismissal. The second element of a partnership is “to carry out abusiness”. It provides that partners must join together to carry out a business in thepartnership. A good example was given inKhan v Miah 1 WLR 2123 case in which thecourt provided that a partnership cannot exist between partners until trading begins,therefore, an agreement for carrying out a business in the future cannot form a partnership.Similar judgement was given in s The third element of the partnership is “in common” whichmeans partners must carry out the business of the partnership in common. InGeorge Hall &Son v Platt TR 331 case, a farmer and an agriculture merchant agreed to growcarrots, and they equally divided the expenses and profit. The court that law is clear on thefact that in order to establish a partnership, parties must carry out business in commonhence it was considered as a partnership (Roach, 2014). The fourth element of thepartnership is “with a view of profit” which means that the business must be carried outwith an intention to make a profit even if the parties do not realise it. InJennings v Baddeley 3 K&J 78 case, the court held that as long as a partnership is capable of making aprofit, then it does not matter that partners are not making profit, it is the intention ofmaking a profit which is important. However, inCox v Hickman 11 ER 431 case, theHouse of Lords provided that a right to profit is not enough to create a partnership betweenparties (Henning, 2017).A private limited company or Ltd is another form of business structure which is popular inthe UK. The Companies Act 2006 governs the operation of Ltd in the UK. A private limitedcorporation is different from a public limited company (PLC) which has the ability to issue itsshare in the public for raising capital and list them on the stock exchange. According tosection 9 of the act, each Ltd is required to maintain and registered documents such as amemorandum of association (MoA) and article of association (AoA) (Legislation.gov.uk,2018b). The AoA is an important document because it provided guidelines which arerequired to be followed by the management of the company while operating its businessand necessary bylaws which ensure that the operations of the enterprise comply by theprovisions of Companies Act 2006 and other relevant laws. Section 10, 11, 12 and 13provided provisions regarding different statements which are required to be made by themanagement of a private limited company such as capita and initial shareholding,