Business Law: Types of Legal System, Sources of Law, and Effects on Companies

This article covers the types of legal systems in the UK, the sources of law, and their impact on different types of businesses. It also discusses the formation of different types of business organizations, their funding, and management. Additionally, it explains the legal obligations and rules that affect businesses, including taxation, employment, and contracts. The article concludes with a discussion on managing corporate funds and the different ways to raise capital for a business.

Unit 7: Business Law

INTRODUCTION

The business has a direct impact on the law and is very important and
extensive for a company. There are different types of business models in
the UK that play a very important role in business. To understand the
depth of this subject we will go through from the nature of the legal system
in the UK and the source of the law, the government's role in legislation,
the impact of different laws on each type of business and the formation of
different types of business organizations with their funding and
management who have the best fit for the UK business model and its legal
sources (Begum, 2020). As we cover the entire subject point by point, we
learn about serious legislative changes in the UK and their main scenarios
within your organization's sources. In addition, this important
information provides a better overview of the legal system in the United
Kingdom and the role that the government plays in the same legal system
in the country.

MAIN BODY

LO1 - TYPE OF LEGAL SYSTEM:

The UK has four countries, namely Scotland, England and Wales and
Northern Ireland, each of which has its own jurisdiction and court laws
applying different jurisdictions have been derived through acts of
parliament and statutory instruments. They have different jurisdictions
and courts that can decide matters according to their court order, but all
matters rest with the UK Supreme Court (Blindell, 2021). The country's
legal system works well and there is still no written constitution for the
country as the Queen is the head of state but all major powers reside
within the government which has all executive functions. Since the Labor
government came into force in 1997, there have been important
constitutional rules. They immediately start the decentralization process,
which means that some areas of government are transferred to countries
that make up the United Kingdom.

VARIOUS LEGAL SOURCES:

In the UK there are mainly 3 sources of law before 31 December 2020, but
after leaving the EU the UK has 2 sources of law which make them
unconstitutional laws:

JURISDICTION :

The decision of the magistrate or higher court made by the judge is binding
on any lower court in the country. Going through precedents in previous
cases helps the court make a decision on the same facts when the same case
has already been decided in the past. As soon as a case has to be decided
on the same facts as a new case, the case will be dealt with in the same way
as before, since according to the principle of "stare decisis" this means
"standing by what is decided", the lower court follows the established
precedence previous case with similar facts and if facts were similar
sufficient and not exactly the same as the judge has options:

1) Distinguish: When the facts are different, the judges have the opportunity
to distinguish 2 cases and they do not have to refer to the decision of
previous cases.

2) OVERRULE: If the decision in a case is made by a lower court, the upper
court can overrule the judgment of the lower court in the same case
(Baillie, 2019).

3) RECOVERY: Upon appeal to a higher court, the judges can overturn the
judgment rendered by a lower court.

LEGISLATION :

This is the primary source of law in the UK, this is the only body that makes
or breaks legislation and this means making a new law or amending an
existing one. The bill passed by Parliament must be approved by both
houses before the bill becomes law. There are steps that create new law.
The rules laid down by law refer to statutory provisions. The
parliamentary act or statute is an essential source for creating new law or
destroying older ones, as it is one of the main sources for the country's
legislation, along with the judge's decision in court.

ROLE OF GOVERNMENT IN LEGISLATION:

This has a large government role in legislation in the UK as it is only one way
of making legislation in the country through Parliament. Legislation is
made by Parliament, which has 2 houses, one is the House of Common and
the second is the House of Lords, the parliamentary act applies to all 4
countries of the UK.

There are two types of bills submitted to Parliament:

1) PUBLIC LAW: The law that is introduced when the general public needs
to amend laws passed by the Cabinet in the Legislative Government's
program.

2) PRIVATE LEGISLATION: The bill is introduced by non-ministerial MPs,
the bill has priority some days but not regularly due to the lack of
parliamentary time.

COMMON LAW :

The decision of the Court of Appeals or previous precedents, called
jurisprudence or common law or jurisprudence, gives precedence to
common law as it is considered unfair when the same fact is treated in
different ways (Cejnar and Duke, 2018). Judges referred to cases that
happened in the past to make decisions in current cases that would be
enforced in future court rulings. If in the future a case similar to the
previous one comes before the court, the court will make the same verdict.

LAW :

This is a written document or act that is considered the will of the legislature.
This is a command statement formed by law that must prohibit or obey
some actions of people. This is a rule of law, or a system of principles
established by the legislature that governs the citizens of the country. If
the bill passes both houses for all citizens to obey, and if they fail, a citizen
will have to go to court. The court must follow the law or act passed as
legislation.

M1 – EFFECTIVENESS OF THE LEGAL SYSTEM :

The UK legal system is based entirely on precedent which was clear as it is
substantive common law. Having left the European Union, the UK has
now become a fully independent judiciary with the rule of law and that
fact attracts business confidence, bringing stability to the trading world
and changing at a rapid pace. Arbitration in the UK has become the most
common legal factor in settling a dispute, which is a great thing for the
court's time efficiency and for the citizens of the country or the people in
dispute. The organization of Great Britain grows over time and becomes
one of the leading insurance, commercial and financial centers around the
world, affecting business across Great Britain.

D1 – CRITICAL DEVELOPMENT OF THE LEGAL SYSTEM :

The UK has common law in the country, but it does not have a written
constitution that makes much of a difference and an unstable situation
that leaves the legislature unbalanced or even following them. In court,
they apply the rule of stare decisis, which must be described above for the
project (Cowling, and, et. al., 2020). However, as they depend on
judgments made before the application of judgments in similar situations
which have been the crux of the matter in UK courts, it is against legal
harmony where the situation is related but not exactly the same. Yet they
have loopholes in the UK legal system that need to be tended to for the
betterment of citizens.

LO2 - EFFECTS OF THE LAW IN THE COMPANY:

UK law applies to all areas of business and every business has legal obligations
and rules to keep its organization or business running smoothly and this
means that from employer to employee from contract to company all are
affected by industry and business laws are . Make sure the company
complies with legal requirements that encourage this and can protect the
company from massive mistakes.

• BUSINESS IMPACT:

When companies make profits or revenue there must be a legal obligation
affecting the business by paying taxes for HMRC which depends solely on
the company structure:

• ONLY DEALER :

In three months self-employment a sole proprietor must register himself with
HMRC, if registration fails the hundred pounds fine must be imposed by
the sole proprietor and once registered the business must complete an
annual self-assessment duty and pay taxes (Mandal and Aiyanna, 2019).

• LIMITED LIABILITY COMPANIES:

There are some requirements for their company, the company must register
in the company house which lists all directors as well as significant
influence over the company. Filing annual tax returns with HMRC and
paying corporation tax is mandatory.

• EMPLOYMENT IMPLICATIONS:

According to the Employment Act, the company has a legal duty to the
workers by providing them with pension, liability insurance, minimum
wages, etc. If they have legal requirements, an employer will shut down
their business, and if they don't, the company faces a huge loss:

HMRC: The company must register with HMRC through an employer before
paying any of the workers.

WORK: The legal obligation for a company is to check whether the worker
has the right to work in the UK or not.

WAGE: The employer must pay their employee according to the national
minimum wage set by the UK government.

SALARY: The employer must provide the employee with a payslip showing
how they are earning during their tariff period.

CONTRACT: Every employer must provide the employee with a written legal
contract that includes the work accommodation, salary, duties and
contractual rights to the employees.

• CONTRACT EFFECTS:

The contract basically affects the business as the organization or company has
to make the contract before starting the business even though they are
selling products or providing services. The right of contract is included in
each scenario to buy, sell and resell the product. There will be a legal
factor that a contract must have for any employer or employee in the
business world.

M2 : DIFFERENCE BETWEEN LEGISLATION, REGULATIONS AND
STANDARDS :

LEGISLATION: This is a legal entity for the government that governs a set of
organizations or corporations, an industry, a community, or an entire
country that has a systematic ability to make laws in the country for every
citizen, followed by every corporation must be (Meggitt, 2022). .

REGULATIONS: Regulations are a set of legal imperatives that must be
followed by an organization for business or other business that, because of
protection, reasonable security and other factors in the public interest,
making regulations in administration, with a legal obligation for the
country must be connected.

STANDARDS: These make specifications for products or services by
organizations, they can have a long list of policies for business modules
that ensure safety and quality. These are business requirements that must
be in place or must be followed by a company.

D2 – CRITICAL ASSESSMENT OF DIFFERENT TYPES OF BUSINESS
ORGANIZATIONS:

Turning a company into a sole proprietorship, a GmbH or an LLP is not that
easy. The person needs to invest more time and money than they can ever
imagine, a successful business wants investment in different types of
people and different types of time management lead to growth in business
that is not possible for everyone given their tactics and skills need in-depth
understanding of the corporate world for a business owner to survive in
the corporate organization world and change their profit in the industry,
but want to make sure they are prepared in an calculative way to handle
losses as well (Mogaji, 2020).

LO3 - FORMATION OF DIFFERENT TYPES OF ORGANIZATION:

Incorporating a company is a process of registering a company with a firm
house, which is a registrar for a company in the UK. Anyone registers a
company by filling out the online application form. Once registered, a
company enters into a contract in its own name or takes ownership of its
assets.

1) PERSONAL ENTREPRENEUR: As a sole proprietorship, sole proprietors
wish to register with HM Revenue and Customs to make a business after
registering with HMRC. A sole trader must file a self-assessment tax
return to fully qualify as a UK company and file one tax return per year
(Nästega, 2022).

2) LLP: There are few ways a limited liability company needs to be registered.
It can register a corporation online without approval of registration by the
corporation house and through a professional corporation representative,
or send a mail directly to the corporation house by proposing the
corporation name and address of office, director details, PSC information,
MOA and AOA. Everything must be present in the information list in a
good manner for forming LLP.

3) SPS: These want to have good investments and resources for the company.
In order to form a PLC they must make an AOA which clearly states the
purpose of forming a company, assets and capital together with a
shareholder as no business need take place in the UK without registering
with the company house.

ADMINISTRATION AND FUNDS OF BUSINESS ORGANIZATIONS :

There are many ways a business owner manages the establishment of an
organization from which a business can grow in the marketplace and
increase its value. Some of the many ways a corporate fund can be
managed by a company:

• SMALL BUSINESS GRANTS are to be provided by the UK Government
with private organizations and local authorities providing funding and
opportunities for small business owners available for new or existing
businesses (Nemeczek and Pitz, 2018).

• CROWDFUNDING provides a platform where a company raises funds by
the number of investments made by individual buyers and investors.
Companies give equity in exchange for investments, or they must provide
rewards and grants to investors in exchange for their capital.

• VENTURE CAPITALS invest capital growth and high risk start-ups,
resulting in great potential for founding an organization. They have large
capital with enormous risks and knowledge that allows them to expect
substantial returns and ensure an organization has a good business plan
for investments that support economic growth in an area or across the
country.

• CROWDFUNDING provides a platform where a company raises funds
through the number of investments made by individual buyers and
investors. The company gives equity in return for the investment or
provides rewards and grants to the investor in exchange for capital.

• VENTURE CAPITALS invest capital in growing companies and start with
high risk, resulting in good potential for building the organization
(Nwoha, 2021). They offer good capital with high risk and knowledge,
thereby expecting a substantial reward and ensuring an organization has a
better business plan for investing.
• MERCHANT CASH ADVANCE is financing from which a business receives
financing in exchange for a percentage of its daily credit card income. This
only applies to businesses that generate the bulk of their revenue from
credit cards. MCA provides prepayments in the form of an average
monthly card spend.
M3 – ADVANTAGES AND DISADVANTAGES OF DIFFERENT TYPE OF
BUSINESS ORGANISATION :
SOLE TRADER :
ADVANTAGES DISADVANTAGES
1) This is easy to set up due to the low legal
requirement. Sole proprietors have full control
over corporate benefits to keep all profits for
themselves.
1) As sole proprietors, they run a business after
their own demise. This lasts until they make
money and make gross profit at startup.
2) There are sole proprietors who are decision
makers for a business where the essential
information stays with them unlike others.
2) This is a slow win process, so a negative thing
that has no liability protection with the
company.
LLP ( LIMITED LIABILITY PARTNERSHIP) :
ADVANTAGES DISADVANTAGES
1) This gives the most flexible structure in the 2) The sole proprietorship tends to cost more

partnership due to the smooth management
system in this type of company.
compared to LLP firms, with the downside of
their cumbersome process and expensive
bookkeeping.
2) Each member of the company receives
limited liability according to the investment in
the partnership and the tax deducted according
to the share of the profit (Sivani, 2019).
2) In this type of company there is no
confidentiality, reports must be private as all
owner information must be public.
PLC ( PUBLIC,PVT. LIMITED COMPANY) :
ADVANTAGES DISADVANTAGES
1) This offers protection against risk and
provides limited liability as no other company
has the benefit of a tax break.
1) This is complicated and not easy to do like
other legal businesses and organizations due to
the complex legal formalities required to create
the PLC.
2) This has good value as there are specialized
staff in a company that offers good financing
and good business opportunities.
2) You have another owner in a company, which
creates an obstacle to discussing the lack of
ownership of a company.
LO4 - LEGAL SOLUTIONS TO RESOLVE AREAS OF DISPUTE :
Alternative Dispute Resolution is an effective legal system in the UK as it is cheaper,
more flexible and faster compared to court, making it more convenient for people. There are
three ways provided by the UK government to resolve the dispute more effectively:
1) ARBITRATION: Arbitration proposes an arbitrator who makes an independent determination
of his dispute. The decision of the arbitrator is legally binding on every people and later they
cannot go to court if they are satisfied with the decision of the arbitrator. The decision made in
the arbitration will be made through submitted evidence and papers sent by both parties. Most

people use arbitration as a legal solution for business owners as they do not want to go to court to
represent the company as it can damage an organization's image.
2) MEDIATION: This is the dispute attempt to consider a solution for both sides impartial to all
persons in a dispute. This creates a healthy legal environment as both parties must resolve the
issue in the most reasonable manner (Test, 2021). Mediation seeks to find a solution that will
help both parties and get them to agree to the deal that benefits the agreement and both sides
would be legally binding if that is a signed mediation agreement.
3) ARBITRATION: If we compare it with the other dispute resolution procedures, it is generally
a free solution and also compared to the other resolution procedures it is to a lesser extent formal,
it is the same as mediation but they are different legal ones obligations attached. Basically, it's
about focusing on what both parties want and then coming to a mutually beneficial deal based on
the fact.
ADR is considered to be one of the quickest and easiest ways to resolve disputes between
parties. The parties choose ADR to solve their problems because it saves time, hassle-free and
resolves the dispute in private.
M4 – COMPARISON AND CONTRAST OF DIFFERENT SOURCES OF LEGAL ADVICE:
After analyzing the different dispute resolution methods, the best dispute resolution depends on
the situation and the contract clauses that the parties are more comfortable with. If the individual
can afford arbitration then they will surely move towards it as it is one of the quickest ways to
resolve the dispute and its decision is both binding on the party and both parties cannot appeal
the same matter (Yeoh, 2019). Some of the people may choose mediation as it is a solution
process that tries to come to a decision that will be in favor of both parties and few may choose
the arbitration process as it is sometimes free and less formal and In comparison, arbitration
allows the parties to appeal the decisions if they are not satisfied with the decisions.
D3 – EFFECTIVENESS OF THE LEGAL SYSTEM:

There are several legal systems to obtain justice, but compared to the courts, ADR is considered
to be the most effective way to resolve the issues between two parties and the court process is
also time-consuming. People must opt for Alternative Dispute Resolution if they are willing to
save time and the other is that the person does not want to go to court because it would damage
their organization's reputation.
CONCLUSION
This report concludes that the UK legal system is bifurcated into different sectors, which
is easy to understand and also very complex. It depends entirely on the facts of the scenario on
which the precedents of the various courts and the entire UK legal system are based. The nation
module of the company has a legal obligation although there are different business owners like
sole proprietorship, LLP or the PLC and each of them should ensure their business legality. In
terms of following courts to seek justice, there are several judicial bodies in the UK such as ADR
through which individuals can seek justice quickly compared to the traditional courts. Depending
on the circumstances, you can choose between ADR, mediation or arbitration.
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