Business Law: Types of Business Structures and Legal Obligations in the UK

This report discusses the different types of business structures and legal obligations in the UK, including sole trader, general partnership, partnership, and limited liability. It provides recommendations for IOM Solutions to adopt a limited liability partnership structure to improve their stability and profitability in the competitive market.

BUSINESS LAW

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY ..................................................................................................................................3
Business and Organizations in UK.............................................................................................3
The legal business structure of UK companies...........................................................................4
Sole Trader ............................................................................................................................5
General Partnership ...............................................................................................................5
Partnership .............................................................................................................................6
Limited Liability ....................................................................................................................6
Recommendations for IOM Solutions........................................................................................7
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8
INTRODUCTION
The term business is being considered as an entity which may be defined as the process
of undertaking any commercial and industrial activity in order to generate profit. The laws which
are related to the business helps in regulating the working of the enterprises in a very effective
manner. The body of law helps the business organisation in performing their business activities
in a very effective as these activities has been governed by these laws. Corporate contract, sales,
hiring and recruiting practices operational practices and many more has been regulates by this
law. An important role has been played by these business enterprises in improving the living

standard of society people by providing them good quality of services. All the business
organisation run with a motive in the competitive market is to earn more and more profit by
following all the corporate social responsibility. The stability of the company is totally depend
on the profits which are earned by them, if they not earn the profit then the stability of the
company are in danger. This report provide solution to SAM for his organisation IOM solution.
The following report is going to cover the different types of business structure with their legal
obligations and the role of company directors within the company(Bennett, Smith and
Montebruno, 2020).
MAIN BODY
Business and Organizations in UK
Companies Act of 2006 of United Kingdom helps in effective management of the
business activities in the country. It is a type of business law which lays down standards which
help to carry out functioning of the business and to operate it smoothly. Employees are
considered the greatest asset which is why their behaviour and conduct should be properly
regulated and their interests are protected by the employment laws. With respect to companies,
they must abide by the companies act to follow legal obligations that are stated in order to avoid
legal liabilities. Business while operating amongst their market competitions get a distinct
professional individuality which helps in getting a legal identification. It includes components
like perpetual existence, differentiating properties, same stamp for the whole business and the
rights and responsibilities on the members to comply with the laws because non- compliance
gives rise to the business suing someone or getting sued for professional misconduct. While
starting any form of business various agreements are concluded for its formation in its name.
These are concluded under differentiating heads and clauses which make them different from
each other like an agreement formed on sale and purchase of assets or on shares of the business,
etc(Brown, Hall and Davis, 2019).
When a business is operating on a large scale there are several times that the employees
behave unprofessionally which gives rise to different liabilities and one of such is Vicarious
liabilities which arise when there is dishonest or wrongful behaviour by the employee while they
are still working in the organization, then for their actions the employer is held responsible and
liable and they have to act on such situations within a stipulated time so that legal problems can

be avoided by the business. Several times there are situations where negligent behaviour causes
problems for the business when the members or employees behave negligently while carrying
out their duties. On the organizational level, director is the head who has various roles and
responsibilities to perform being on that post. These duties must be performed with care and in
honest way so that business can operate with fairness. When the director does not perform the
duties well, then legal liabilities arise because legal obligations are not carried out up to the
mark. When a director is working they are expected to carry out their role duties within the
authority which also includes making proper judgements and taking required decisions on behalf
of the company(Singh, 2021). They are expected to resolve conflicts which arise among the
employees and also promote harmony. When a director behaves unethically they are held
responsible for breach of duties which make them responsible towards other directors who all
can make this director pay. They might ask the director to compensate for the damages suffered
by the company. The directors contract can also be terminated and can lead to disqualifications
for serious criminal breach and malpractices. Company's property that is in possession of the
director is also taken from them with end of the contractual agreement (Miller and Pope, 2019).
UK for governing the agreements of partnership has created the Partnership Act 1890
which lays down provisions about the formation of a company based on partnership and how the
partners work with respect to the their roles and responsibilities and what can lead to their
termination. A business can be managed effectively with application of Memorandum of
Association (MOA) and Articles of Association (AOA). MOA is a type of legal statement
created when the company is formed which related to its incorporation but its implementation is
dependent on the signatures of shareholders and guarantors of the company. On the other hand,
an AOA defines the rules and procedures of a company in the written form which are required to
be followed after getting consent for its implementation from directors, shareholders and owners.
The legal business structure of UK companies
Sam has been relying on Sole trader as the type of business structure for his IOM
Solutions business since a long time. Sole trader is advantageous in respect of earning profits
because they come directly in the hands of Sam and in respect of taking independent decisions
for the business(Goworek, 2020). But it also burdens him with responsibilities which can be
mentally and financially draining. With the growing demand of customers, there is a need for the

expansion of the business which is why he requires recommendations on a suitable business
structure type. The different types of legal business structures are as follows:
Sole Trader
This form of business are also known by the names of single owner business and the sole
proprietorship. It is considered as one of the most simplest and most prevailing form of business
in the country which has become the choice of most of the new emerging ventures. Here the only
person who stands accountable for the management, control and regulation of the activities of the
business is the owner themselves who are known by the name of trader or proprietors. There are
many advantages which are attached to this form out of which some one are that the proprietor
enjoys the sole control over the activities and affairs of the business. And also because of the
same benefit there stands no concern of leakage of any crucial information of the business as the
owner is the only to whom all the informations are known. The other benefit is of the
reattainment of all the profits of the business which owner enjoys alone. Also, with respect to the
process of incorporation and dissolution there lies minimum obligations as compared to the other
forms. The legal existence of the business is said to take p,lace only by the mere registration of
the company in the companies house. Other than this there also lies certain demerits which are
that as similar to that of the profits, owner alone is subjected to the all the liabilities which arise
out of the business. Also the task of management and control of the business can at many times
can become tired some for the owner. Moreover, as the part of part of some mandatory legal
obligations, the trader is required to pay the taxes on the total revenues of the business on timely
manner in order to escape from any further legal actions(Hemingway and Gunawan, 2018) .
General Partnership
This form of business is an arrangement where two or more individual having similar
objectives comes together in order to acquire certain desired revenues out of the business. This is
more or less similar to that of the form of partnership firm and the only variation lies with
respect to the one being the more formal in nature and required the compulsory formation of the
partnership deed. In general partnership form there stands no such compulsion and the same can
also be formulated via oral agreements. The members which enters into the agreement are
addressed as the partners of the business. All the said partners share the profits and losses in

equal share and similarly are involved in the affairs and process of decision making in an equal
manner which is also one of the advantage of this form. The disadvantage can be that the person
losses the autonomy and hence the control over the business. Moreover, with respect to the filing
of taxes, all the partners are required to pay the taxes on their own part of income which they has
acquired as a share of total generated revenues(Keeble, 2018).
Partnership
Similar to that of the earlier one it is also an collaboration of two or more people. The
Partnership Act of 1890 is one of the primary legislation which looks after the affairs of the
partnership firm. Here the constitution of a par6tneship deed is a compulsory requirement which
comprises of all the information of the firm. The profits and losses are shared in equal proportion
by all the members of the firm and hence are also entitled to carry out the activities of firm in
equal manner. The taxes are to be paid by all its members on their part of profits. The
availability of several talents, skills and experiences under on head can be an advantage of this
form. But at the same time the concern of disagreements among the partners can also result in
demerit. Other than this the process of its incorporation and dissolution are required to be
carried out in the manner as specified under the said Act of partnership and accordingly must
also be subject to the registration(Marx, Forin and Finkbeiner, 2020).
Limited Liability
The limited liability company comprises of the aspects of both the partnership as well as
of corporate firm. In this the number of people who are addressed a the partners of the company
joins together and invest certain sum of money which is used as the total capital of the company.
The liabilities of the partners in this form are limited to the extent of their share which they
invest in the business. As the company of limited liability enjoys the status of separate legal
entity therefore, for the extra liabilities of the business which cannot be settled out of the assets
of the business then in that case the partners cannot be made liable to pay the same out of their
personal belongings. And similarly because of this reason both the company and its partners are
required to pay the taxes while acting in individual capacity only for their own parts of income
(Ochinanwata, 2021) .

Recommendations for IOM Solutions
SAM is the sole owner of the IOM solutions. The owner of the business wants to expand
their business and for this he is seeking for some recommendation. From the above discussion it
has been recommended that Limited Liability Partnership structure is very suitable for the
company. In this business structure all the attributes and requirement are present which are
looking by SAM. The challenges and complexities which are faced by the company in relation to
the growth and expansion of the business has been effectively solved by opting this
structure(Salt, 2018).
CONCLUSION
From the above report it has been concluded that different types of business laws has
been made by the government and management of the company have to follow all these laws in
order to perform their activities in a very effective manner. From the above discussed report it
has been concluded that there are basically four types of business organisation i.e. sole
proprietorship, general partnership, partnership and limited liability partnership. All these types
of business organisation have their own advantage and disadvantage and also have their own
formation and dissolvent policy. A recommendation has also been given in this report to SAM is
that limited liability partnership is suitable for their IMO solutions. By adopting this structure
they can improve their stability as well as profitability in the competitive market.

REFERENCES
Books and Journals
Bennett, R.J., Smith, H. and Montebruno, P., 2020. The population of non-corporate business
proprietors in England and Wales 1891–1911. Business History, 62(8), pp.1341-1372.
Brown, D., Hall, S. and Davis, M.E., 2019. Prosumers in the post subsidy era: an exploration of
new prosumer business models in the UK. Energy Policy, 135, p.110984.
Cribb, J., Miller, H. and Pope, T., 2019. Who are business owners and what are they doing? (No.
R158). IFS Report.
Goworek, H., et. al., 2020. Managing sustainability in the fashion business: Challenges in
product development for clothing longevity in the UK. Journal of Business
Research, 117, pp.629-641.
Hemingway, R. and Gunawan, O., 2018. The Natural Hazards Partnership: A public-sector
collaboration across the UK for natural hazard disaster risk reduction. International
journal of disaster risk reduction, 27, pp.499-511.
Keeble, D., 2018. High-technology industry and local environments in the United Kingdom.
In High Technology Industry and Innovative Environments (pp. 65-98). Routledge.
Marx, H., Forin, S. and Finkbeiner, M., 2020. Organizational life cycle assessment of a service
providing SME for renewable energy projects (PV and wind) in the United
Kingdom. Sustainability, 12(11), p.4475.
Ochinanwata, N., et. al., 2021. Public–private entrepreneurial financing partnership model in
Nigeria. Thunderbird International Business Review, 63(3), pp.369-379.
Salt, J., 2018. Organisational labour migration: theory and practice in the United Kingdom.
In Labour migration (pp. 53-69). Routledge.
Singh, V.P., 2021. Directors’ Fiduciary Duties to the Company: A Comparative Study of the UK
and Indian Companies Act. Trusts & Trustees, 27(1-2), pp.132-150.