Types of Business Organisations and Legal Consequences

Business Law

INTRODUCTION
Business is an activity which is done for the purpose of gaining profits by selling their
products or providing services. The government of United Kingdom regulates the formation of
companies by the Companies Act, 2006 and many other minor Acts. These act helps the
company to attain the objective of business. The law governs the rights and duties of the
shareholders, stake, employees, creditors and debtors. The board of director of a company is
having a major authority to manage the affairs of the company. This is provided by the
memorandum of association of the firm. The dissolution of the firm is also specified in a
prescribed manner. The company use to raise funds by issuing the shares in the market. When
the profit is enjoyed by the organisation then that will be distributed by the organisation as a
dividend to the company's shareholders (Apriliyanti and Kristiansen, 2019). This report deals
with the case scenario in which sole proprietorship company wants to enlarge their business so
that it will be easy for them to conduct its operations.
MAIN BODY
Case Scenario
This report talks about the case scenario in which, Sam is a sole trader (IOM Solutions)
he use to sell electric parts in their local stores. He is engaged in this business since eight years,
but from the last two years he has grown his business at large and for this he has facing many
problems in conducting his affairs of company (Ashley, 2017). This makes difficult for Sam to
manage the operations of the business, as he is alone responsible to manage everything. For this
he has planned to expand his enterprise by using IOM solutions. IOM solution stands for
Inventory Operations and Marketing. It helps the organisation to assess the risk of inventory and
helps in developing the unique majors for the benefits of the company. It acts in long term
business to cut the cost and helps clients in achieving efficiency in their operations. It provides
logistic measures in providing efficient works. For this Sam wants to expand it business for
which he has many options which can be adopted by him which are as follows:
The types of business organisations
Business is the conduct which aids in generating the revenue of the firm. There are many
kinds of business organisation which helps the owners to conduct their businesses and these are
as follows:

Partnerships: This is a kind of partnership, which can be done by two or more
individuals (Bergman, 2018). This should be registered under the Companies Act, 2006. In this
partners agree to be co-owner, responsibilities are distributed between them, and share the profits
and losses among themselves. The agreement between the parties should state the amount of
shared risky and profits between them. In the absence of sharing ratio, then it will be treated as
equal equal. Each partner will be treated as the agent to a partnership firm. It can be formed by
the oral or written agreement. Mostly an written agreement is considered before the law of
justice (Zeng, 2019). It helps in easy to star and run the enterprise.
Advantages of partnerships:
 It is easy to formulate the partnership firms.
 They have more amount of resources which will be helpful for the growth of the firm.
 Its easy to change in the terms and conditions of the firm to attain the desired gaols of the
company.
 They have a number of skills, talent, experience of different partners together. The risk is shared between all the partners that will not made any burden on any
individual.
Disadvantages of Partnership firm:
 They might face the lack of communication between all the partners.
 The act of one partner will effect the other partners.
 It is difficult to deal with the issues arises between the partners. The power of making decisions is divided among the partners (Chepurenko, 2018).
Legal consequences in Partnership Firms:
 The partners are liable for the wrongful act of the other partner.
 In the absence of an agreement it is difficult for the firm to resolve the disputes.
 When they are not disclosed the information then this might leads to fraud, cheating etc.
Limited liabilities Business or LLP: It is also a kind of the partnership when partners
agreed on the ratio of their profits and losses. It is a separate legal entity which is governed by
Limited Liability Partnership Act 2002. in this partners are liable up to the extend on which they
are agreed(Keller, 2019) (Khan and Arafa, 2021). Sometimes in this, the partners are not liable
for the act or negligence of the other partners. In this the organisation has to file an annual report.
Benefits of Limited Liability Business: