Different Types of Business Organisation and Their Legal Consequences

Business Law

Contents
Introduction.................................................................................................................................................4
Main body...................................................................................................................................................4
Different types of business organisation.................................................................................................4
Legal consequences.................................................................................................................................6
Recommendations...................................................................................................................................8
Conclusion.................................................................................................................................................10
References.................................................................................................................................................11

Introduction
Business is an enterprise which is producing goods and services in order to earn
profitability from the market. Business law helps in order to maintain their functioning in a legal
and effective manner. These are the body of rules and regulations which governs the commerce
and it is considered as the branch of civil law (Ali, 2019). This report is discussed about this case
study of Sam who is a sole trader (IOM Solutions). He is running the business where he is selling
the electric parts at the local garages. In the year of 2018, Sam has grown his business in a very
effective manner. But due to the less number of people it is difficult for him to run his business
in an effective manner and grab all the opportunities from the competitive market. So for that the
report is being discussed about the different types of organisations and their legal consequences.
Main body
Different types of business organisation
Private limited company
It is the company which has a legal entity in the competitive market. Organisation has
rights and liabilities before the eye of law. These types of organisations are beneficial as the
entrepreneurs have limited liability towards the company (Choi, Kim and Kim, 2018). They are
most commonly referred to as public limited companies and the word Limited talks about the
limited liability with context to be shares which is possessed by the party. It is privately owned
by the shareholders and run by its directors. The company is responsible for everything whatever
it does and its finances are separate to the personal affairs of its owner. The prophets which are
generated in the company only that can be distributed among the shareholders in the form of
dividends. It can be live melted either by shares or by guarantee.
Benefits
 This is useful in order to protect their grant and the directors can claim their expenses
from the business.
 It will be easy for them to decide on remuneration packages if they are controlling with
respect to the shareholders.

 This is used in order to retain profits in a better manner.
Disadvantages
 It imposes restrictions while transferring the shares from one to another person.
 The company cannot issue prospectus to the general public.
Partnership
When two or more individuals come together in order to agree to share the profit and
losses of a business it is called a partnership. They used to share the rest cost and other benefits
and responsibilities with respect to running in organization (Cooley and Hansen, 2021). In this
the partners can be responsible personally for the losses or depths that the business can
undertake. Partners are also responsible or liable for others' partner negligence and misconduct.
The profits can be shared with respect to their agreed ratio in agreement.
Benefits
 It is very easy to register.
 The agreement talks about the share of profits and losses which will be helpful in
resolving any of the issues rose in future.
Disadvantages
When the partnership is not determined the agreed ratio then it will be difficult for them
to determine the liability of one another.
Limited liability Partnership
It is similar to partnership where the liability of a partner is limited to the amount of
money which they have invested in the company (Garber, 2018). This kind of partnership is
registered at the company's house with HMRC. It is important for them to prepare and file their
annual accounts. It can be incorporated with two or more people where the responsible and share
of profits with respect to the agreement and in this they are required to submit a personal self
assessment tax return every year.
Benefits