Business Law

Business Law
Running Head: Business Law 0
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BUSINESS LAW 1
Apart from the sole ownership, a business may be established or run in many other forms. Sole
ownership is a very basic business structure that people often choose for their small business, as
this structure is easy to carry. Only a single person is there that carries all the business activities
(England.shelter.org.uk, 2019). In addition to sole ownership, the other business structures that
are available to Homer are partnership firm and company. These structures have their own
benefits and losses. Homer considering to change the business structure as he wants to limit the
liability now. In order to discuss the other business structure, this is to state that partnership
business structure is somewhere typical than sole ownership. Not similar to the sole owner,
partnership firm consists of two or more business managers. This structure has some benefits.
For instance, more capital is available for the business (Business.tas.gov.au, 2017). Partners
collect their capital and contribute the same to the business of the firm. Secondly, borrowing
capacity also enhances. Further disadvantages are also there. This business also offers unlimited
liability and partners of the firm have personal liability with respect to the debt of the business
(Thompson, 2019). Risk can be distributed among the partners but they cannot be free from their
liability with respect to the conduct of firm and other partners.
Another structure is a company that is more formal in comparison to sole proprietorship and
partnership business structure. In the case of a company, two main parties are there that is
owners and managers. Shareholders of the company are actual owners of business whereas, on a
different side, directors and officers of the company are managers of the same. Shareholders are
people that contribute their capital to the company and get shares of the same in return. They
appoint directors of the company who manage the affairs of business on behalf of them. Similar
to the partnership firm, company structure also has certain positives and negatives factors.
Firstly, to discuss the positive factors this is to state that limited liability is one of the greatest

BUSINESS LAW 2
advantages that a company structure offers. A company has a separate legal status from its
directors, members, and promoters (Abass, 2012). A company is entitled to carry the business in
its own name, can enter into a contract; can sue members, directors or any other third party. The
third party that deals with a company can hold the same liable for any kind of mistake or breach
of a contractual term. In this way, it is clear that for the conduct of a company, only a company
can be held liable and not the directors or members of the same. By choosing the company as a
business structure, a person can limit his/her liability with respect to the debts of the business. In
the case of Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22, it has been decided
that a member cannot be held liable for the affairs and conduct of a company even when the
same holds an entire shareholding of the company. Another benefit of this structure is perpetual
succession. As mentioned earlier that a company is a separate legal person hence the existence of
the same does not get the affected from retirement or death of any member or director of the
company. It is a saying about company business structure that members may come and go but a
company goes on forever. In addition to this, a person gets professional assistance from other
people by selecting company business structure. It is common that a person cannot be perfect in
everything and hence by setting a company, skills of other people can be taken for the benefit of
the business. Moving towards the disadvantages of this structure this is to state that there is a
lack of secrecy (Sinha, 2019). A company needs to produce its results to various stakeholders on
a timely basis and therefore no secrecy remains there. Competitors may take advantages of the
financial information of a business. Another drawback of the subjective business structure is
more restriction and legal requirements. A company has to follow various rules and regulations.
Companies that are incorporated in the UK have to comply with the provisions of Companies