Business Law: Legal Business Structure of UK Companies and Recommendations for IOM Solutions

This report covers the legal business structure of UK companies, including sole trader, general partnership, limited liability partnership, and limited company structures. It also provides recommendations for IOM Solutions, a sole trader business looking to expand. The report concludes that a limited liability partnership is the most suitable alternative for IOM Solutions to sustain the expansion of their business.

Business law

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Businesses & Organizations in the UK............................................................................................3
The legal business structure of UK companies................................................................................4
Recommendations for IOM Solutions.............................................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The English Legal system is unique and vast. The uncodified legislation gives wide
power to the judges to interpret ate law and address the issue of general public. Business law
covers all the theories and principles that are applicable to businesses. It is a foundation stone of
the English legal system, as it includes law relating to tort, contract, employment and agency. It
defines the structure and formation of business and governs all the activities that take place
within an organisation. Law is basically a set of rules and regulations that are required to govern
the society and maintain law and order in the country (Bowman and Wyer, 2022). The various
forms of business organisation such as sole trader, partnership, limited liability partnership and
company etc. It is incorporated in accordance with the availability of finance and resources on
the owner. This report will cover various kinds of business organisation and recommendation is
made to IOM solutions in order to seek expansion of their sole trader business into other
alternative forms of business.
TASK
Businesses & Organizations in the UK
The UK business law is complex and provides range of protection to its employees and
employers. Company is considered as an artificial person as per Companies Act, 2006. A
company is registered in order to legally comply with all the terms and conditions as specified
under the law. It is a separate legal entity that are distinct from its owners. The different bodies
of an organisation such as employees, directors, shareholders and employees are important for
effective management of a company. Corporate law defined as the formation and governance of
corporate entities. The Corporate law is largest single piece of legislation that promotes the
healthy working environment and influence the behaviour of the employees within an
organisation. The major changes has been taken place under the corporate law which includes
provisions in relation to director's duties and powers, auditor's liability etc. The recent changes in
the industrial growth has increased the demand of corporate governance and leads to major
reforms in these areas (Cameron and Danson, 2018). The Act of 2006, also adopted some
theories and principles to simplify the company law and ease the mode of doing business.

The Employment law regulated the relationship between the employees and employers. It
governs and monitor the activities of the employees at workplace. It aims to secure the rights of
the employees working in an organisation. It improves the relation of employees and enhance the
overall performance of them. It protects the employees form all kinds of discrimination at
workplace. All employees must be treated equally in terms of wages, holidays, policies paternity
leaves etc. The employment law boost the morale and confidence of employees and enhance the
productivity and growth of an organisation. The various forms of organisation are varied in terms
of infrastructure, resources and machines but they have similar goal of sustaining growth and
expansion of business. The conflict and dispute among the employees can be prevent by
imposing statutory legislation of equality Act, employment relation Act etc. are some of the
important legislation of United Kingdom. The company law is based on several doctrines and
principles that are relevant for smooth running of an organisation. The doctrine of vicarious
liability arises when principle is liable for the act of his agent (Deb, 2022). The Law of tort
includes provision for negligence, mistakes and other tortious liability are imposed on the person
who does civil wrong and lose the faith of an organisation. Directors are the soul and heart of a
company who take important decision for the internal running of an organisation. The contract
law binds the employer and employee from certain terms and conditions that are enforceable on
both the parties. A director should perform his moral and statutory obligations to enhance the
overall growth and success of an organisation. The shareholders are considered as the owner of a
company because they contribute in the capital of a company. The written document of AOA and
MOA are the essential document of a company that outlines its internal affairs and main
objective of formation of a organisation.
The legal business structure of UK companies
Sole Trader
Sole trader is a single individual who is responsible for carrying out business activities. It
involves less legal formalities and easy to form than other kinds of business organisation. The
sole owner is responsible for all the management of a business (Gilmour, 2020). All the profits
and gains of a business belongs to the sole trader and he does not require to share their profits
from other. The tax liability lies on the profits which they earned during financial year.
Advantages of Sole Trader

 Simple registration: The sole trader business is a simple process and involves less
investment . It can be start without registration and easy to register a business.
 Complete Control: The sole trader has full control over their business and not required
to share their profits from other. They are independently make the decision to run their
business.
 Privacy: The sole owner is not required to share their information from other employees
and companies House. Sole trader is responsible for effective management of their
financial resources and all the information remains confidential.
Disadvantages of Sole Trader
 Unlimited Liability: The major drawback of this form of business organisation is
unlimited liability. The owner is required to use their personal assets to pay off their
debts.
 Barriers to Finance: It is quite difficult to raise funds in sole trader from of business
organisation. The chance of expansion and growth is less in this form of organisation.
 Sole responsibility: The sole trader has to manage everything individually this leads to
overload and stress of work. Sole trader is accountable for all the transaction that take
place within a business.
General Partnership
It is an association of more than two members who mutually agrees to carry out business
activities. The business is formed to meet the common purpose of earning revenue and profits. It
is not compulsory to register a partnership firm under the partnership Act, 1890 (Henley, Vorley
and Gherhes, 2021). But, written agreement prevent conflicts and misunderstanding among the
employees. It is not a separate legal entity like a company and have a limited liability over its
partners.
Advantages of General Partnership
 Less formalities: One of the biggest advantages of partnership is less complexity of legal
procedure. The partnership firm is not compulsory to register under the said Act. It can
easily be dissolved at any time.
 Sharing of burden: The burden of loss and stress can easily be shared in this forms of
organisation as partnership are jointly liable for all the profits and gains of the firm.

 Access to knowledge: Each partners are specialised in different field, possess different
skills, knowledge and abilities which give them better chance to grow and expand the
business.
 More partners leads to more growth: Partners are contributed in the capital of a firm
when they enter into business, as they provide combined resources to fuel the growth and
earning capacity of a business.
Disadvantages of General Partnership
 Unlimited Liability: The liability of the partners in a general partnership firm is
unlimited due to which they incurred their personal asset to repay the creditors. All the
partners contribute in the loss equal to the share they has contributed in the firm.
 Indifference and conflicts: The partners are belong to different culture, background and
have different perception and views due to which there may be a chance of conflicts and
indifference among them.
Limited Liability Partnership
Limited Partnership is a type of partnership which gives legal identity to the firm. It is governed
by the Act of Limited Partnership, 1907. The partnership have full control over the business and
management of a company. The liability of the partner is limited and chance of expansion is
comparatively high.
Advantages of Limited Liability Partnership
 Separate legal entity: LLP has separate legal existence and always distinct from its
members. It can sue or can be sued in its own name (Jyothirmai, 2020). It enjoys some
features of company, assets and funds can be borrowed on the name of LLP.
 Limited Liability: The biggest advantage of LLP is limited liability that exclude the
partners from using their personal asset for repaying the creditors.
 Low cost of legal compliances: The cost of incorporating LLP is less and requires legal
compliances is also few which is dealing with statutory audit and annual meetings that
are important to conduct annually.

Disadvantages of Limited Liability Partnership
 Public Disclosure: The main disadvantage of LLP is disclosure of financial information
before the Companies House. This may affect the privacy of the organisation and
confidential information which may be shared easily.
 Limited funding Alternatives: LLP have limited opportunities to raise their finance.
They can either borrow from debt via loan and short term borrowings or through angel
investors etc.
Limited Company
It is an organisation which is registered under Companies Act, 2006. It is incorporated through
strict legal compliances which gives them legal entity distinct from its owners (Knapp, 2020).
Limited company is an artificial person which can sue or can be sued on the name of company.
The directors and shareholder are the important part of an organisation who contributes in the
growth and expansion of a business.
Advantages of Limited Company
 Minimising personal liability: The biggest advantages of limited company is limited
liability protection. The loss and gain suffered by the company is always the
responsibility of company itself.
 Professional status: The status owned by limited company is much higher than the sole
trader and partnership form of business organisation.
 Expansion and growth: Capital asset of the company can be raised easily due to
shareholder and other investor who invest and add value in the company.
Disadvantages of Limited Company
 Heavy Compliances: The huge legal compliances enhance the paperwork of the
company and requires effective administration to manage the work.
 Costly procedure: The incorporation of limited company requires huge investment and
capital to sustain growth and expansion of a business.
Recommendations for IOM Solutions
IOM solution is a sole trader business which is running by the Sam who trades electrical
parts at local garages. Sam is the actual owner of that business who works for almost eight years.

Considering the potential growth of their business, there is high demand of employees in IOM
solution for business operations which burdened them to go for alternative structure of business
organisation. It is recommended to IOM solutions to go ahead with the Limited Liability
Partnership as it is the most suitable alternative available to IOM solution that gives limited
liability protection to the owner of a business (Liu, 2018). It has hybrid features of both
company and partnership form of business organisation. Further, it will contribute in the success
and growth of the IOM solution as it is separate legal body that are distinct from its members.
Therefore, it is recommended to Sam that LLP is potential business alternatives that may bring
affirmative change in the business.
CONCLUSION
From this above report, it has been concluded that the business world is diversified and
complex. It is a wide concept that brings major change in the economic growth of a country. The
business law safeguards the general interest of its employees and governs the business activities.
However, the IOM solution is a sole trader business organisation that assumed to expand their
business. The various forms of business organisation such as sole trader, partnership, LLP and
Limited Company are some alternatives available before the Sam. The LLP is suitable option for
them to gain advantages of the growth of business. It is recommendable for IOM solution to opt
LLP to sustain the expansion of their business.

REFERENCES
Books and Journals
Bowman, S. and Wyer, P., 2022. The Distinctiveness of Small Businesses. In Small Business
Management and Control of the Uncertain External Environment. Emerald Publishing
Limited.
Cameron, G. and Danson, M., 2018. The European partnership model and the changing role of
regional development agencies: a regional development and organisation perspective.
In Governance, institutional change and regional development (pp. 11-36). Routledge.
Deb, E., 2022. International Business Law-Critical Review on Corporate Governance in
UK. Available at SSRN 4074105.
Gilmour, P.M., 2020. Lifting the veil on beneficial ownership: challenges of implementing the
UK’s registers of beneficial owners. Journal of Money Laundering Control.
Henley, A., Vorley, T. and Gherhes, C., 2021. Implications and impacts of the crisis on micro
businesses and their future. In Productivity and the Pandemic (pp. 46-58). Edward Elgar
Publishing.
Jyothirmai, B., 2020. Limited Liability Partnership Suitable to Emerging Enterprises in Current
Trends. Issue 4 Int'l JL Mgmt. & Human., 3, p.432.
Knapp, V., 2020. UK and EU Company Law after Brexit. European Company and Financial
Law Review, 17(2), pp.184-199.
Liu, J., 2018. Policy Briefing-Management Capability, Business Support and the-Performance of
Micro-businesses in the UK.
Omolaja, O., 2018. Comparative Analysis of the Laws of Delaware and UK Company Law on
Enforcement of Pre-Incorporation Contracts. Available at SSRN 3117638.
Rye, J., 2020. What is the difference between a sole trader and a limited company?. In Setting
Up and Running a Therapy Business (pp. 132-134). Routledge.
Wheater, J. and Proudlock, E., 2018. UK Corporate Offence of Failure to Prevent the Facilitation
of Tax Evasion. Bus. L. Int'l, 19, p.178.