Legal Formation of Different Types of Business Organisations

This presentation provides an overview of the legal formation of different types of business organisations, including sole proprietorship, corporation, and limited liability company (LLC). It discusses the advantages and disadvantages of each type and explores how business organisations are funded and managed. The presentation also includes references to relevant books and journals on the topic.

Business Law

Table of Contents
LO3
 P4 Legal Formation of Different
Types of Business Organisations
 P5 How Business Organisations
are Funded and Managed
 References

P4 Legal Formation of Different Types of
Business Organisations
 There are various ways through which business organisations can legally form and
operate within the UK. Most significant of these are as follows:
 Sole Proprietorship:
 This is the most common and simplest way through which a business organisation can
legally form within the UK.
 These are businesses that are started and operated by an individual for their own profits.
 These are primarily dependent on the owner's decisions in relation to its existence and
decision making operations.
 Advantages:
 All profits are the owners.

CONT.
 Corporation:
 Corporations are completely separate
business organisations that are considered a
legal entity for taxation purposes.
 This means profits of corporations are taxed
as personal income, with additional taxes
paid again for income distributed to
shareholders.
 Advantages:
 Limited liability of ownership towards
corporation's losses or debts.
 Easily transferable to new ownerships.

CONT.
 Limited Liability Company (LLC):
 Limited liability company LLC provide their ownerships with limited liabilities while
also providing them with some of the income advantages of partnership organisations
in relation to using shared resources for the LLC.
 LLC combines together the advantages of corporation and partnership businesses while
mitigating the disadvantages of each.
 Advantages:
 Limited liability of ownership for business's debts or losses.
 The profits generated by LLC are not double taxed when shared amongst shareholders.
 Disadvantages
 Agreements are required to be complex and comprehensive..

P5 How Business
Organisations are Funded
and Managed
 There are several ways through which a business
organisation is effectively managed. The most significant
managerial operations used to effectively manage
business organisation within the UK are as follows:
 Employee Relations: In order to effectively manage the
operations of a business, its management is required to
cultivate and maintain relationships between the business
organisation and its employees which are productive and
beneficial for both the parties involved.

CONT.
 Stakeholder Management: Effective management of a business also
requires all of its stakeholders such as employees, ownership, investors
etc. to be managed, as without them the business cannot operate
successfully within the operational industries for a sustained period of
time.
 Planning and Strategy: Another management operation of a business
organisation requires its managers to effectively plan and create
dedicated business strategies after thoroughly analysing all factors
concerned, in order for the business to operate successfully.

CONT.
 There are also several ways through which a business organisation can procure financial
funding required for its operations from the external environment such as:
 Bank Loans: Business organisations have can access financial funding required for their
operations by strategically taking financial loans from banks with the intention to paying
back the amount plus some interest within the specified period of time.
 Crowdfunding: Businesses also have the option to procure financial funding necessary
for their operations by engaging in crowdfunding.
 This method of procuring financial resources operates by raising small amounts of
financial resources from a large number of people within a given population, typically
conducted through the use of the internet.

References
 Books and Journals
 Jones, L., 2019. Introduction to business law. Oxford
University Press, USA.
 Beatty, J.F., Samuelson, S.S. and Abril, P., 2018. Business law
and the legal environment. Cengage Learning.