Nature, Formation and Management of Business Organisation

This report discusses the nature, formation, and management of business organizations in the UK. It covers the legal business structures of UK companies, including sole trader, general partnership, limited liability company, and limited liability partnership. The report provides recommendations for expanding a business and suggests choosing a limited liability company for growth. The subject is business law, and the course code is BMP4002.

Business law
Title:
Nature, formation
and management of
business
organisation

Table of content
Introduction...................................................................................................................3
Business and organisation in UK...................................................................................3
The legal business structure of UK companies.............................................................4
Sole Trader...........................................................................................................5
General Partnership.............................................................................................5
Limited Liability Company ................................................................................5
Limited Liability Partnership..............................................................................6
Recommendation for IOM Solution..............................................................................6
Conclusion.....................................................................................................................6
References.....................................................................................................................7
Introduction:
An organisation that is established by the group of people or may be even by an individual
with a similar intention or motive is said to be a business. There is an interest of earning money and
making profits and collecting the revenues by providing services and by producing new goods in

the market that attract the customers. The business owner wish to have the name of the company be
known in the market among the competitors such that there is friendly working environment within
the market. There is a area where new businesses gets established very frequently and this creates a
growth in the industrial sector, such area is known as the market place. The economy gets affected
by increase in the import and export of the product in the business and even rise the money profit
within the people in the market. (Coe,. 2019. )The entrepreneurs believe in start up of the new
business is way to make changes in their standard of living life and taking life seriously. The
business can be registered as a small, middle or large scale businesses. There are various laws to
have a clear vision about the rules and regulations. In this report it will be discussed about the
different business structure, their profits and loss and even provide recommendation to Sam about
which type of business can help him in expanding the business.
Business and Organisation In United Kingdom:
All the working and operation of the companies completely depends on the rules and
regulations provided under the Companies Act,2006. This act is beneficial in guiding the companies
with all the provisions to be followed while working. A business is incomplete without any
employees and staff giving their hundred percent for the company and they are even the main asset
for the company. There must be a proper conduct and process according to various act, the
employment legislations act is the main act that states all the rules and describes all he required. The
companies are liable on the companies law and follow all the mentioned rules in the act. There shall
be a proper monitoring of the employees that they are operating on the basic of the provisions
mentioned in the act. The business are provided with there personal identity for their company, this
gives them legal identity that has its own components shall as perpetual existence, separate or
distinct properties, a seal that has the name of the company. (pia-Meza, et.al,.2022.)And after
registering the company can be sued or can sue another company. There are several agreements
signed at the time of establishing a business that end up giving with lot of responsibilities.
When there is unprofessional behaviour done by the employees while working in the
company and not following the rules and regulations they end up getting in various liabilities. There
is a common type of liability that is vicarious liability (Lewis,., 2019. )that occurs in a large scale
business. When the employees does not follow the code of conduct, or showcase dishonestly and
may be by doing wrongful act, the liabilities are be faced by them only till the time being in the
organization. And after causing trouble in the company the employee becomes responsible for the
mistakes done by him/her, that is why the employees are asked to follow at the guidelines provided
to them by their team leader. A business be in lose due to negligence of the employees in the
company or may be by not providing the promised services by the organisation to the clients. In the

company, there is a Director who is the head of the organisation and is the face of the company. The
post of the director is the position which has a lot of responsibilities and liabilities on the shoulder
and will be legally entitled to answer all the questions asked to them after the company is being
sued by any other company. The Director has to look that the company is working according to the
guidelines provided under the act and has to ensure of taking a proper decision at the time of
emergency in the company. An unethical behaviour made by the director done is also not
acceptable, he will also have to face all the similar conscious as a employee of the company might
even have to drop the position of directorship. It is said that in any organisation where there are
group of people working together everyone should be treated equally so that the company does not
get effected due to unwanted behaviour of any employee in the company. When there is breach of
conduct done by the director, he is liable to pay the remedies to the company in the form of paying
compensation to the organisation. The director is given the possession of the company and at time
of his misconduct this power can also be taken away.
There is an act which states all the legal regulations that governs the agreement of the
partnership that mentions all the clauses that describes how to form a company with all the legal
formalities and how the operation of the company , this act is known as the partnership act, 1890.
There are two basic sources that help in the having a managed operation of the company, the
sources are Memorandum of Association(MOA) and Articles of Association.(AOA). A legal
statement that is used while formation of the company and manage during the time of its
incorporation but gets in course of action after it gets signed by the guarantors and shareholders., it
is called a MOA. And the AOA is a written document in which all the clauses regarding the
formation of the company is mentioned and those should be followed by the company.
The legal business structure of UK companies:
There are various type of companies registered in the United Kingdom. And Sam has
registered his business as a Sole trader which is also known as the Sole Proprietorship. IOM
solution the organisation that is operated by Sam from last 8 years and from the past 2 years the
solution is growing the business.(Shardlow,. 2020.)This type of business structure is beneficial for
Sam as he receives
all the profit by his own and does not require to share it with any third person. The type of
companies are mentioned below:
 Sole trader: A business structure which is managed by a single individual as per his
capabilities is sole trader. It is beneficial to establish such kind of employment as it is cost
effective which can be start, function and run easily. Those who want to establish and run

their business which is not much larger, this is the most common type of business for those
rising entrepreneurs. Such youngsters adapt such type of structure as they do not have
enough cash and capital to invest. Those who wants to be the only owner of their business
commonly start their business as a sole trader. All the earnings and profit from the business
will be only in the right of that sole individual. He can take any decisions without
dependency at anyone as he is the only owner.(Bruwer,. 2019. ) This is the only thing which
pulls today's generation towards such business. However, it also have some bad sides as
expenses, loss and others which can be affect the management of their business. As it is
personally managed, sometimes it becomes more difficult to give time to family and friends.
The owner must maintain the information of their clients as per General Data Protection
Regulations and has to pay all the taxes as per government rules.
 General Partnership: In this there are two or more persons that get into a partnership as
partners. After becoming partners they share all the responsibilities in the business equally
and are liable for any sort off misconduct or any breach of conduct in the company. The
partners share the profit and lose of the company on equal basis. After entering in the
partnership they agree to share the cost of establishing the company, any sort off financial
risk. As being in the contract the partners agree to work towards the operation of the
organisation and maintain the liabilities in a joint venture while keeping in the mind the
risks and the accountability, due to this reason they get unlimited personal liability.
 Limited Liability Company: in this management is governed by the Companies act
2006 through which details of finite liabilities, hence it can also be considered as private
limited company. It decides how a business is established and run, what are the requirements
to establish a private company and how it can be close down. It also decides the rights and
responsibilities of heads and employees of the organization legally who should stay as per
the laws of the companies. (Mikalonienė,,.2020)The one who is the head of the business is
the director who manages the operations in the company. Shareholders are the owners of the
company It has been identified as a well-defined corporation in which shareholders have
minimum personal liabilities.
 Limited Liability Partnership: This partnership offers a lesser no. of liabilities
compared to a general partnership. It is different with respect to the creation of obligations
where there is limitation on the amount of money that can be spent by the partners on the
business. Business is incorporated by two or more partner who are personally liable for all
the actions taken in the business. But they do not have collective or joint liabilities. But for
this partnership a registered office is essential, which should be in accordance to the

government regulations. The limited Partnership Act 1907 governs an LLP by also
protecting the interest of the partners. It has a creation of written agreement which helps
effective functioning of the business.(Vigo, et. al., 2019.)
Recommendations for IOM Solution:
There shall be a timely inspection of the business, as to how is the operation going on in the
organisation and in which all area there is a need of attention and what all steps are to be taken by
the company to solve the issues that are causing trouble in the running of the solution. When a
business grows and develops it requires timely expansion so that it can take advantage of the
growing opportunities in the market. It also helps the business to adapt with the dynamic
circumstances.(Thomson,., 2022.) Thus, Sam must choose limited liability company for the
expansion of his business of IOM Solutions. This legal structures offers a range of benefits. It helps
to share the responsibilities of the management with different individuals. It also helps to retain
higher profits. It offers efficiency in tax planning. More investors are attracted to this type due to its
reliable nature, this helps in capital formation. This also offers minimum personal liabilities which
can really benefit Sam.
Conclusion:
It can be concluded from the above report that the company could have a good
organizational culture with proper management within the organization to run the business
operations effectively. To prevent businesses from any difficulty some laws are made in order to run
the business with proper guidelines and process. Earning revenue and generating profit are the
major objectives of any business to run properly. They could be different in their size and type
which will decide by the owners. Sam is suggested to choose Limited liability Company so that
there is a growth in his solution. And there is smooth running of his solution with the help of the
recommendation.
References
Books and Journals
Bruwer, J.P., 2019. Critical innovation skills required of sole trader Small, Medium and Micro

Enterprise (SMME) management and its influence on perceived business profitability.
Lewis, K., 2019. Vicarious liability. BDJ In Practice, 32(4), pp.16-17.
Mikalonienė, L., 2020. Individual Owner Compensation in a Hybrid Limited Liability Entity in a
Comparative Context: LLC (the USA), LLP (the UK) and the Small Partnership
(Lithuania). European Business Organization Law Review, 21(4), pp.915-936.
Coe, P. and Brown, J., 2019. What’s in a Name? The Case for Protecting the Reputation of
Businesses under Article 1 Protocol 1 of the European Convention on Human
Rights. Journal of European Tort Law, 10(3), pp.286-315.
pia-Meza, P., Alvarez-Risco, A. and Del-Aguila-Arcentales, S., 2022. The Circular Economy: The
United Kingdom. In Towards a Circular Economy (pp. 247-262). Springer, Cham.
Shardlow, S., 2020. Legal responsibility and liability in fieldwork. In Fieldwork in the Human
Services(pp. 117-130). Routledge
Vigo, D.V., et. al., 2019. A partnership for transforming mental health globally. The Lancet
Psychiatry, 6(4), pp.350-356.
Thomson, L.W., 2022. Is Decommissioning Liability Creating a Barrier to Deal Activity on the
United Kingdom Continental Shelf?. Aberdeen Student L. Rev.,11, p.68.