Nature, Formation and Management of Business Organisation in the UK

This report discusses the legal context for business organizations in the UK, including key sources of laws and different business structures such as sole trader, partnership, limited liability partnership, and limited liability company. It also provides recommendations for IOM Solutions. The report is relevant to BSc (Hons) Business Management course under BMP4002 Business Law.

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:
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Contents
Table of Contents
Introduction ...............................................................................................................................3
Businesses & Organizations in the UK...................................................................................3
The legal business structure of UK companies......................................................................5
Sole Trader.............................................................................................................................5
General Partnership...............................................................................................................5
Partnership............................................................................................................................6
Limited Liability......................................................................................................................7
Recommendations for IOM Solutions...................................................................................7
Conclusion..................................................................................................................................8
REFERENCES...............................................................................................................................8
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Introduction
Company Law or Business Law is the branch of the United Kingdom law that
gives importance to all types of business include all type of companies. The business
law of UK is entirely based on different statutes and especially the most important act
passed by the parliament of UK to safeguard the businesses companies known as
“Companies Act, 2006”. It is one of the best and also the longest act passed by the
UK parliament which consist of more than 1300 sections with 16 schedules. The
company act of UK is applicable to the whole of the nation, its sources are from
European Union Law and from common law decisions (Beynon-Davies,2021.). This
report will cover the sources of law, nature and management of a company, liabilities
in a different kinds of companies, vicarious liability of the employer. Apart from all
these topics, one case has been cover related to legal business structure in which
the recommendation has been given to the person name Sam who is operating a
business as a sole trader. To expand the business needs an advice about the
business structure which is beneficial for business.
Businesses & Organizations in the UK
The characteristic of every business has been clarified by its nature, the
nature of business describe what type of business it is and for what goals the
company is running and performing the business operations. Nature of the company
describes its legal structure, its form of industry, products and services in which the
company is dealing. There are some aspects which determine the nature of business
such as; Regular process, it means the company has profit generating process which
is regularly repeated. Economic activity, the functions and operations of the company
which maximize its profit. Utility creation, it means kind of product or services
provided by the company for the customer's to maximize their utility. Capital
requirement, the fund which company raise at the starting of business. Goods or
Services, it means the type of goods and services in which the company deals with, it
can be tangible it can be intangible. Risk, level of risk factor included in business.
Motive of business, whether company is running for profit or it is just a non-profit
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organization. Each and every business require the management, and it can be done
by different different department fro each activity (Choochotkaew, Yamaguchi, 2018).
Like there is a department of marketing, manufacturing, selling, human resource etc.
By dividing the company In various department makes the management of the
company easier and effective. Management of the company means to take care of its
operations and its not an easy task, to manage the business all the stakeholders,
managers even board of directors plays a crucial role in managing the business
activities.
Business law or the company law is a parent law in UK which controls the functions
of the businesses, there are various other laws which are also applicable in business
like; Employment law, Intellectual Property Law, anti-trust laws, tax law and
bankruptcy and insolvency law (Higashino, 2018 ).
To rum the business for a long run it requires clear vision to see the future
opportunities and threats which clarify the way to perform the business operations.
As the business company is a separate legal entity but there are some relation In
the company which held liable for the actions performing by their partner or members
of the company, it is known as vicarious liability. Negligence in a business will makes
the business company suffer as it a separate legal entity. However the negligence in
a company would be done by its employers or employees but they are not held liable
if the company got registered.
The main heads of the company are its Directors, who established the company and
choose the form of origination to run the business, decides its nature. All the
responsibilities of raising fund and the rules and regulations of the company would
made by the director of the company. In different business structure companies there
are different number of director present (Downey, and Westermann, 2021).
There are few different business structure such as; sole trader, partnership, limited
liability partnership, limited liability company etc. in which the partnership is kind of
business in which there can be more than one owner. Because its a business
concept to distribute the profit according to the share capital and also bare losses of
the company as per the share. Partnership is form by mutually agreeing to do
business and it got dissolved through various reasons such as; revocation of a
partner, death of any partner, mutually also the partnership came to end.
To start the business company the two documents which are really necessary to
frame is the company Memorandum of Association and Article of Association.
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Memorandum of the company contains the relations which it has to maintain with
others companies and the Article of Association contains the rule sand regulation of
the company itself which helps the company to maintain its internal affairs with all
employers and employee's.
The legal business structure of UK companies
Sole Trader
Its a type of of business which considered to be self- employed. There is only
single person who is the owner of the company and also responsible to fulfill the
legal requirements before starting the business. As a single person in a company, all
the profits would be kept alone after tax deduction there is no distribution of profits as
well as the loss of the company would also bare alone. The registration is required in
such type of business organization, sole trader has to inform to HMRC and get
registered for self assessment tax returns. The registration is for the benefit of an
owner, it entitled the sole trader for £1000 tax free allowance per annum (Nesterova,
2021). Sole trading is beneficial for a person who wants to continue the business for a long
run at the same profit rate. But, trader like Sam who wishes to enhance the business and
increase the profitability then, it is of no use. To expand the business person have to switch
some other kind of business structure.
Advantages:
 It has a simple set up, it doesn't require typical process to establish the business.
 The responsibilities of administration is very low in this business structure.
 No registration fee
 Owner is the only one who enjoy all the business profit.
Disadvantages:
 Like profit sharing sole trader is alone liable for all the business debts and losses
 Risk can't be share
General Partnership
It is similar to sole trading business structure but, its better when the business
is in big scale. In the partnership business structure there can be at least two
members or partner's who signed the agreement of sharing profit and loss as per
their share capital they brought in business. In this business structure partner's are
liable for their own liabilities. Individually, partners paid their tax and National
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Insurance contributions (Roberts,2018). It is not necessary in this type of business
structure that an actual person is become a partner, there is a limited company who
have different legal entity it can also become a partner. In setting up the partnership
firm it requires; name, nominated partner and the main step to get registered with
HMRC. That nominated partner would responsible for managing the partnership's tax
return and for record keeping. There is an agreement between the parties in which
they outlines the liabilities, ownership, distribution of profit and how it get distributed
between the partner's and also the leaving process and situation from the
partnership business structure. In this general partnership structure all the partner's
are responsible for the companies debts.
Advantages:
 It has a easy process of setting up the business.
 Emotional support is there
 Risk would get shareholder's
Disadvantages:
 All the partner's were liable for the company negligence, debts and also they
were liable for their own debts and negligence.
 Liabilities of sharing loss of the company is on all the partner's.
Partnership
It has a similar structure like partnership but, there is a positive point of this
business structure which is not present in the general partnership is that, this
structure has limited liability. In this type of business companies use the word LLP
after their company name, and it can be use when the company got registered itself
with the Companies House. It also get registered fro corporation tax and notice has
been given to HMRC regarding the registration. Like a general partnership there is
also at least two members who were liable for their negligence but not for others
negligence and debts. The sharing of profit and loss is decided by the agreement
made at the time of setting up the business like in general partnership.
Advantages:
 There is a liability on each partner for their own negligence.
 To get registered for paying corporation tax is more beneficial to pay income
tax
Disadvantages:
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 Its really have high administration responsibilities
 To registering the business high fee is required as compare to others
business structure
 Two partner's were responsible to submit the business account at the end of
the year.
Limited Liability
Its a business legal structure which is incorporated and limited by shares.
After registration the company uses the word LTD after the name of the company
which shows company has separate legal entity and also set limited liability to their
members. It is necessary for the company to get registered the business at
Companies House (Rydvalova, and Skala,2021). This business structure has board of
directors who are responsible for all the activities in the company along with the
shareholder's of the company. The director of the company has a duty to fulfil all the
administration duties like filing an audit of each and every year. Like LLP, it will be
better for the members of the company to get registered the company for corporation
tax.
Advantages:
 Liability of the partner's are limited, they were liable at the level of their
shares bring in the business.
 By registration the company at companies house members of the company
become legal partner's of this business structure.
Disadvantages:
 High fee fro registration the businesses and
 high administration responsibilities
Recommendations for IOM Solutions
If the business has been set up to just living a normal ife and there is no
desire to expand the business then the soe tarder business structure is best. The
person can run the business according to the desire and need. But like sam who
have a desire tro expand the business and enhance the profitability then, after
discussing all business structure it can be said that liomited liability partnership is
best for expanding the business (Schaltegger, and Burritt, 2018). It is a kind of structure
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which helps Sam in gaing more profit and also helps in sharing the debts, loss and
risk in the business operations. By choosing LLP, Sam will be able to expand the
bsuiness and it will be give higher profit to Sam business. Thi sstructure of business
will assist IOM solutions to get success in the market (Slorach, and Ellis, 2021).
Conclusion
Frpm the above report it is concluded that, every business structure is beneficial according to
the situation and desire of the person. The four business structure was discussed in the above
report i.e. sole trader, partnership, limited liability partnership and limited liability company.
All business structure got explained thoroughly with their advantages and disadvantages. In
the end of the report it requires the recommendation for sole trader Sam in IOM solutions. In
the recommendation for IOM soution, the LLP is suggested.
REFERENCES
Beynon-Davies, P., 2021. Designing Organisation. In Business Analysis and Design (pp. 53-
73). Palgrave Macmillan, Cham.
Choochotkaew, S., Yamaguchi, H. and Higashino, T., 2018, October. A Motivation-based
Partnership Decision Model on Event-Stream Knowledge in Real-time Business.
In 2018 Eleventh International Conference on Mobile Computing and Ubiquitous
Network (ICMU) (pp. 1-6). IEEE.
Downey, D.H. and Westermann, K.D., 2021. Challenging global group audits: The
perspective of US group audit leads. Contemporary Accounting Research, 38(2),
pp.1395-1433.
Nesterova, I., 2021. Small firms as agents of sustainable change. Futures, 127, p.102705.
Roberts, J., 2018. Multinational business service firms: The development of multinational
organisational structures in the UK business services sector. Routledge.
Rydvalova, P. and Skala, M., 2021. Innovation and innovation partnership. In Innovation and
Performance Drivers of Business Clusters (pp. 47-57). Springer, Cham.
Schaltegger, S. and Burritt, R., 2018. Business cases and corporate engagement with
sustainability: Differentiating ethical motivations. Journal of Business
Ethics, 147(2), pp.241-259.
Slorach, J.S. and Ellis, J., 2021. Business Law. Oxford University Press.
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