Key Sources of Laws for Business Organizations in the UK

This report describes the key sources of laws for business organizations in the UK, including employment law, consumer law, and intellectual property law. It also covers the legal formalities, structures, and regulations that apply to businesses in the UK, such as the Articles of Association and Memorandum of Association. The report concludes with recommendations for IOM Solutions to expand its business by entering into a partnership organizational structure.

BSc (Hons) Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of
laws as the legal context for business
organizations in the UK
Submitted by:
Name:
ID:
Contents
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INTRODUCTION
UK has been in the business boom for a while and the number of people who own or
are involved in a business is higher than ever nowadays. With the growth in this field comes
an entire framework of complex, integrated and interconnected laws and regulations which
every business operating in UK has to comply with. Business Law governs many dimensions
of business even when it's at the stage of conception and there are many legal procedures
involved in setting up a business. The structure of a business organization is an important
criteria as legal factors such as personal liability levels, finance generation ability and tax
structure and slabs that applies to a business changes with it's type and chosen
structure(Björkdahl, J., 2020). The UK houses businesses of varied structures but there are
primarily 4 major types that are prevalent which are Sole Trader, Limited Company,
Partnership and Limited Liability partnership. This report will go into details
encompassing the business laws, rules and regulations that applies to businesses in the UK,
the various legal formalities that are to be followed by the organizations and their legal
structure. Sole trader recommendations for IOM solutions will also be given to strengthen
and grow their business.
TASK
Businesses & Organizations in the UK
The nature and management of companies in the UK is very broad in scope as the key
principles of management are universal in application and it involves and understands the
human element behind set policies and procedures(Bo, X.U.E., 2019). There are many key
avenues of management which form it's operations such as office, production, human
resource, marketing and financial management and with these many processes in play, the
organizations are bound and subject to various laws and regulations. In the UK, the
companies have to follow 3 major laws listed herein. Employment law-Existence of these laws is mostly to prevent employee exploitation.
There are rules governing the recruitment process, set minimum standards of pay, safe
work environment practices and anti-harassment laws to prevent employee
discrimination and to eliminate bias from companies.
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 Consumer Law-It includes the Consumer Rights Act (2015), Consumer Protection
Act (1987) and the Trade Descriptions Act (1968). It aims to protect the consumers
from unhealthy, dishonest and manipulative products and advertising. The products
being sold should be safe for consumption, ethically marketed and fully and truthfully
described.
 Intellectual Property Law-IP or intellectual property refers to the intangible assets
that is designed and owned solely by one organization or individual. Protection of IP
is very important for business because theft of IP is a common occurrence and
originality is important for brand building and market recognition(Hannah and
Wilkinson, R., 2018). Patents, legal patents and copyrights are common ways by
which organizations secure and preserve their intellectual properties.
Business Law has a profound impact on commercial transactions that a company involves
itself in on a daily basis. Business transactions management uses Information Technology
solutions to build tools that help keep record of and track transactions across the entire
infrastructure of the company, both physical and digital. The concept of vicarious liability is
an important part of business law that in included in various employee and organizational
contracts which makes an employer responsible for any tortuous mistakes and actions done
by it's employees. This rule is often invoked as the employers make for a much better party to
sue in cases because they are financially stronger than their employees. Organizations have to
also be vary of professional negligence whether it comes from a contractual liability or
liability in tort(Khuntia and et.al., 2019). No social or human resource harm should be a
result of their organizational or employee actions and the company should hold itself
accountable to provide due compensation in case of damages and contractual lapses. Due to
such intricacies in business and legal environment, the position of Director becomes
important for any company as they play important roles and duties in an organization such as: Executing Independent decision making and judgment Promote the success of their companies in the best possible manner. Keeping a record of the entire strategic decision making history of the company
 Prevent conflicts of interest and avoid any personal influence on public and private
matters concerning a business by a third party.
The directors also have a host of personal liabilities such as being personally liable to a fine if
the organization doesn't comply with set company regulations, they are responsible for
actions occurring before the incorporation of the company such as contract signing, making
and negotiating a fraudulent contract with third parties and they are also held responsible for
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wrongful and unethical trading under the company name. When an organization is setting
itself up in UK, it requires two legal statements called Articles of Association (AOA) and
Memorandum of Association (MOA). AOA statement is a set of regulations by which the
company is set to be ran and has the director, shareholder and secretary signature. MOA is a
legal statement containing all the signatures of initial shareholders which have jointly agreed
towards the formation of the company(Knoke, 2018). MOA doesn't have to be personally
written in case of online company registration.
The legal business structure of UK companies Solo Trader-It is a type of business structure where an individual is solely responsible
for establishing and operating an organization. This type of structure hosts a solo act
with every major and minor activity revolves around the owner being a single entity.
Taxation rules are also different for solo traders as they are not liable to pay
corporation tax and they are required to submit income tax personally after deducting
their expenses from their annual income. Sole traders have unlimited liability and are
fully responsible for all the debt a business occurs and as such the process of
dissolution is also relatively straightforward. This organizational structure has many
advantages and disadvantages stated herein.
1. Advantages-Solo traders enjoy full operational control over their business
proceedings, they have full retention over all business profits and the legal hassles
surrounding solo trading is very minimal.
2. Disadvantages-There is very heavy workload and operational burden on solo traders
as they have sole responsibility to keep the business afloat, the task of increasing
finance is also very difficult and slow for a single individual and having unlimited
liability is also a huge risk. General Partnership-Partnership comes in many forms and general form of
partnership is characterized by all the involved partners sharing the operational
responsibility equally and unlimited liability exists for all partners in this structure.
(Löfgren and et.al., 2018). The taxation occurs on the partner's respective share of the
total profits, general partnership is not taxable due to it's existence. The advantages
and disadvantages of this form of partnership are listed herein.
1. Advantages-There is minimum paperwork and hassles involved in the starting and
annual forecasting of the organization, general partnership is not taxable on it's own.
Partners can alter the way their roles work and the firm's operations via agreements.
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2. Disadvantages-General Partnership isn't a suitable structure to attract investor's
money and all the partners have to bear unlimited liability for the actions of all other
partners. Partnership-It is a form of business structure where multiple people enter into an
agreement to collectively run a company and share profits and liabilities together. The
UK has several hundred partnerships operating in the country and it is one of the most
common organizational structures across the world(Palombo, 2019). Both general and
limited partnerships are subject to individual taxation on partners and it's dissolution
can be both mutual and enforced and deemed compulsory. Partnership includes
various pros and cons:
1. Advantages-A partnership allows flexibility in structure with less legal and
professional frameworks, it is much more secure and easy to start as paperwork is
minimal and burden is shared and the capital invested can be much larger.
2. Disadvantages-The lack of an independent legal status is a big drawback for being in
a partnership as it leads to an unstable environment, the profits earned have to shared
among partners which can breed disputes and insecurity. Decision-making in
partnership is also slowed down in partnerships. Limited Liability Company-It is a United States owned legal entity whose main task
is to form a safety net around it's owners which protects them from personal
responsibilities surrounding a firm's liabilities and debt. Registration with Companies
House (CH) is mandatory for it's setup but the overall process is easy and
conventional. Dissolution of a LLC is a complex and long process which includes
member voting, settling debts, filing of final tax reports and completing all other
outstanding operational tasks(Romashina, Chistyakov and Dmitriev, 2018). Limited
Liability Companies aren't taxed based on their existence just like partnerships and
individuals are taxed based upon their shares in the profits . LLC's as corporate
vehicles offer a lot of advantages and disadvantages listed herein.
1. Advantages-LLC's offer complete protection to the personal assets of an individual
from business debts and Limited Liability Companies offer great versatility as there is
no compulsion to engage in yearly shareholder meetings and keeping an active board
of directors.
2. Disadvantages-LLC's are very uneconomical for small businesses as costs vary
because of it's formation at state level, the transfer of membership status of an LLC is
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very difficult across the organization and for established businesses with more outside
operations and investments, there are better options to employ.
Recommendations for IOM Solutions
As a sole trading organization that has been in the market for 8 years, IOM solutions
has had considerable experience in the electronics market and in order to capitalize on the
rapid growth in demand and market share in the electronics sector, it would be most helpful if
IOM solutions made a change in it's organizational structure as sole trading alone is limited in
scope when it comes to business expansion and market capitalization(Wang, Q., 2019). It
would be recommend for IOM solutions to expand it's business by entering into a partnership
organizational structure as it suits it's current market situation and it has major marketing and
legal benefits which are listed herein. Growing needs of employees can be addressed-IOM solutions can expand the scope
and scale of it's business and hire more employees after the boost in efficiency and
capital arrives from entering into a reliable partnership. Reduction in burden and increased operational efficiency-With the need to expand
business and cater to an increasing demand, a sole trading organization will incur
more operational burden which is hard to keep up. A partnership results in sharing of
burden and leads to increase in productivity through multiple partners. Increased flow of capital and funds-When it comes to business expansion, a major
advantage of partnership is that with the increase in ownership, the amount of funds
and capital brought into the business also increases, IOM solutions can upscale their
business according to the market needs. Taxation benefits-Partnerships aren't taxed due to their formation yet they generate,
circulate and employ much bigger streams of funds and capitals then a sole trading
organization(Wu, C.L. and So, 2018). The taxation is done on the personal profit
shares of partners which is a small price to pay for an easy business expansion.
CONCLUSION
The above report provided a detailed outlook at the various business organizational
structures that are currently prevailing in the UK such as sole trading, partnership and
Limited Liability Company (LLC's). The broad dimensions of business laws that regulate
business organization's in the UK were also stated along with the various regulations that a
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company has to comply with such as contractual lapses and vicarious liability. The formation,
dissolution, taxation and legal frameworks of various organization structures were
highlighted along with their advantages and disadvantages so that a comparative analysis can
be made possible between the different structures. Recommendations for business expansion
and optimal business structure change were given to IOM solutions so it cope with increasing
marketing and employment demands.
REFERENCES
Books and Journals
Björkdahl, J., 2020. Strategies for digitization in manufacturing firms. California
Management Review, 62(4), pp.17-36.
Bo, X.U.E., 2019. On the Liability of Shareholders when the Company Reduces Capital in
Violation of the Notification Obligation——Commentary on the “Delixi Case” in
the Supreme People's Court Gazette. Northern Legal Science, p.03.
Hannah, E., Scott, J. and Wilkinson, R., 2018. The WTO in Buenos Aires: The outcome and
its significance for the future of the multilateral trading system. The world economy,
41(10), pp.2578-2598.
Khuntia and et.al., 2019. Benefits of IT-enabled flexibilities for foreign versus local firms in
emerging economies. Journal of management information systems, 36(3), pp.855-
892.
Knoke, D., 2018. Changing organizations: Business networks in the new political economy.
Routledge.
Löfgren and et.al., 2018. Distribution of emissions allowances and the use of auction
revenues in the European Union emissions trading system. Review of Environmental
Economics and Policy, 12(2), pp.284-303.
Palombo, D., 2019. The duty of care of the parent company: A comparison between French
law, UK precedents and the Swiss proposals. Business and Human Rights Journal,
4(2), pp.265-286.
Romashina, A., Chistyakov, P. and Dmitriev, M., 2018. The role of spatial policy in
acceleration of economic growth. Obshchestvennye nauki i sovremennost, (5),
pp.31-47.
Wang, Q., 2019. Gender, race/ethnicity, and entrepreneurship: women entrepreneurs in a US
south city. International Journal of Entrepreneurial Behavior & Research.
Wu, C.L. and So, T.H., 2018. On the flight choice behaviour of business-purpose passengers
in the Australian domestic air market. Journal of Air Transport Management, 72,
pp.56-67.
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