Business Organisations in the UK: Legal Business Structures and Consequences

BUSINESS
ORGANISATIONS
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Businesses and organisation in United Kingdom............................................................................3
Legal business structure of UK companies......................................................................................4
Sole traders...................................................................................................................................4
General Partnership......................................................................................................................5
Limited Partnership......................................................................................................................6
Limited Liability partnership.......................................................................................................7
Conclusion.......................................................................................................................................9
REFERENCES..............................................................................................................................10
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INTRODUCTION
The business organisation represent the way in which businesses are being structured and
the use of that structure to reach till the desired goal (Al Mamun and Hasan, 2017). As every
business is being designed to create profit from the market in which the business is being
operating. This report will evaluate to provide guidance to business owner of IOM solution
named as Sam. For this the different type of businesses are explained to know which is IOM can
be in market. further the discussion of legal consequences which are being linked with the
particular business are determined. The recommendation is also provided for IOM solution.
Businesses and organisation in United Kingdom
Nature and management of company
IOM solution is run and operated by Sam which is sole trader that sells electrical parts to
local garages and it has operated business for more than eight years. Moreover it has been
identified that since last two year the company has grown both in terms of employees as well as
demand of customers. So, the nature of business is sole trader as it solely responsible for taking
all necessary decision related to organisation thereby it can enjoy high profit margin and market
share by delivering services to individuals. The company is solely managed by Sam as it only
enjoys the profit and loss related to the business (Adam, Miller and Pope, 2017). There are not
much legal liabilities that must be followed by the IOM solution. Moreover, several legal
documents that need to be maintained by the firm to get registered as per the Companies Act
2006 can be illustrated as follows:
Veil of incorporation: It can be stated that legal entity separate from its directors, shareholders
and owners so it is assume that act of company are not of its shareholder or directors. Thereby
they can be easily exempted from the liability.
Termination of partnership: the termination in the partnership is due to several reasons such as
when the partner is being died, when the partner uses to take its invested capital and go away,
partner get sick or being retired from its place in the organisation, agreement get dissolved and
many more reasons are their when partnership gets terminated.
Roles and duties of directors: the directors is one who has major responsibilities of company
and having the authority to take decision within organisation. As per the companies act 2006 the
direct role is vital in company as they act with power and make efforts to promote the success.
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Memorandum of Association: This is document as per company act 2006 that must includes
company proposed name, its registered office, liability of each member and whether it is private
and public company. So Memorandum of association is generally signed by all shareholders that
has agreed in the formulation and operation of organisation.
Article of association: It is another legal document that comprises rules and regulation
pertaining to the way company can manage its internal affairs. It outline that the company
purpose, guideline regarding the way particular task will be completed for achievement of last
goals. Furthermore it has covered information pertaining to boards of directors, general meeting
and voting right (Cribb, Miller and Pope, 2019).
Legal business structure of UK companies
Legal business structure defined the way business will be run and operated by range of
individuals so that end objectives of company can be achieved. Soles traders, general
partnership, limited liability and partnership are four different legal business structures of United
Kingdom companies that help in effective operation of business and achievement of goals. Each
of them has different liabilities, taxation, dissolvent as well as advantages and disadvantages
which can be illustrated as follows:
Sole traders
It is one of the simplest forms of business entity in which single person is responsible for
enjoying all profit and debts of the company. Moreover, it is only the boss or responsible for
taking decision for the company that can help it in earning more profit margin and sales. But the
biggest demerit of the sole trader is that it have unlimited liability as well as debt towards the
business thus its personal assets are also at risk when it incur loss in the business in order to pay
the debt due from creditors (Keers and van Fenema, 2018).
Tax implication as well liabilities: The owner of sole business needs to report all its profit and
losses earned on its personal tax return thus it tax is not charged separately. For sales traders it is
essential to maintained record related to actual sales and expense of company in order to
complete self assessment tax return so that income tax can be paid at the end of the financial
year. At the same time sole trader has to pay VAT if their annual turnover is around 85000.
Dissolution: The company can be dissolved any time by the owner of the sole trader as it is only
responsible for starting and running business with an motivate to earn a better living. So, no
much legal formality need to completed for cease of business.
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