Nature Formation and Management of Business Organisations in UK

This report discusses the four main business structures in the UK - Sole Proprietorship, Partnership, Limited Liability Partnership, and Limited Liability Company. It provides an overview of the UK business environment and the Company Law that regulates business companies. The report recommends Limited Liability Partnership as the best structure for expanding the business of IOM solutions.

NATURE FORMATION
AND MANAGEMENT OF
BUSINESS
ORGANISATIONS

Contents
INTRODUCTION...........................................................................................................................1
Business Overview of UK...............................................................................................................1
Four Business Structure of UK........................................................................................................2
1. SOLE PROPRIETORSHIP....................................................................................................2
2. PARTNERSHIP.....................................................................................................................3
3. LIMITED LIABILITY PARTNERSHIP.............................................................................4
4. LIMITED LIABILITY COMPANY....................................................................................4
Recommendation.............................................................................................................................5
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Doing business is not an easy task, it requires a lot of skill and knowledge about the
business environment. Business is a wide term under which many sectors are dealing with their
individual products and services or using sources of others to run the business. The only motive
to run the business is earning profit and make the company well known in the business market.
Business can't be done with the individual rules and regulations, to run the business smoothly
there is an Business law or the company law of UK which regulates the functioning of all the
business companies. The company act decides the rights and duties of the business company and
also assist the company in paying tax and to aware the company from other rules and regulations
which is required to build before starting the business like; Memorandum of Association and
Article of Association. Before entering into the business companies, it is require to select the
type of business which they want to establish and make it control (Almeida, and Wasim, 2022).
There are some structure of business which person can choose according to the investment and
their goals. In this report, all four business structure i.e. Sole proprietorship, Partnership, Limited
Liability partnership and Limited Liability Company will be discuss. After discussing all four
business structure, recommendation will be made to the sole trader for expanding the business
and give suggestion to select other business structure for IOM solutions.
Business Overview of UK
The business environment in the United Kingdom is very comfortable and also its easy.
There are no such restrictions like other countries which gives difficulty to the people to entering
in the UK business environment. The business environment of UK attract people from different
countries to invest and doing business in the territory of United Kingdom. For every sector and
for every private and public opportunities, laws are enacted to give a smooth flow and remove
difficulties for the employee's. Similarly to run the business in UK, there is a Company law
which regulates all the functioning of business company and put the company within the
framework to prevent it from business environment. It is not necessary to incorporate the
company in UK, business like partnership and sole proprietorship is also get welcome in the
United Kingdom. This will become the reason of improving the economy of UK, business sector
enhance the economy and become that sector which contribute the most in the economy. People
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have to follow the proper guideline of company law and most importantly make registration of
the company at companies house. The registration separates the identity of company and its
owner, after registration company become the separate legal entity it means, anyone can sue the
company and also company ha sits own name in through which it can sue to other company or
people (Cowling, 2021). After registration, there are two documents which have to prepare by
the incorporated company i.e. Memorandum of Association and Article of Association.
Memorandum describes the relation and duties of the company with other company and its
external affairs. Whereas, Article of association describes the internal affairs of the company.
Four Business Structure of UK
In UK there are four main business structure which people will choose according to their
need and capacity. Doing business is not an easy task but in UK many people feel better to
engage themselves in any kind of business. Whether it is sole proprietorship, partnership or any
incorporated business company, in UK every business is beneficial. Its depend on the person
that, in what structure of business they feel comfortable and it can be run according to their
desires. People can't see the future its obvious but it is up to the person to choose that structure
which gives more profit to them as per their investment. There are four business structure i.e.
sole proprietorship, partnership, limited liability partnership and limited liability company. In out
of these structure people choose their area to do business, each one of them has its merits and
demerits in the business environment. Some are very easy to run like sole proprietorship and
partnership while some are tough to handle like limited companies. According to the requirement
of Sam in this report who is a sole trader wants to expand the business and want suggestion on
different structure of business which helps to expand the business. To provide the suggestion, all
four business structure will be discuss briefly along with advantages and disadvantages.
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1. SOLE PROPRIETORSHIP
It is one of the most easiest form of business to access and to run. The reason behind its
easiness is, it would run by the single owner which means, only one mind will apply in the
business and that single mind will take decisions according to its benefits. Before starting this
business structure it is essential to provide the information about the business to HMRC and also
get register for self assessment tax returns. It is beneficial because the single owner is the only
one who got all the benefits from the business there is no one between them profit of the business
get share (Hill, 2020). But, if the business got establish and the owner started earning high level
of profit like Sam the, it will be no longer beneficial. Because the amount of tax paying got
increase in income of the owner, the tax brackets got higher and it will not be profitable business
in the future. Some advantages and disadvantages of this business structure are;
Advantages
 It has easy access and process of setting up the business
 Very less administrative responsibilities
 No registration fess
 Only person who takes all the profit
 No confusion and easy decision making
 Self-assessment tax return has to be paid only
Disadvantages
 Held liable alone for the debts and losses
 No support in the businesses
 High level of risk
2. PARTNERSHIP
This is also the easiest form of business to deal with, it is just like the sole proprietorship
where sharing of profits will be there among the partner's but as per their capital share they bring
in the starting of business. Unlike sole trader there is not an one owner of the company, it can be
minimum two or maximum twenty in the general partnership. It requires the agreement between
the partners about sharing of profits and losses according to their capital share they brought in
the company. Like in sole trader, partners are independently liable for their negligence and also
they paid their personal tax and national Insurance contributions. Before indulging in the
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partnership it is necessary to get register the partnership firm at HMRC. There is a nominated
partner in the partnership who is responsible for administration task to perform annually.
Advantages
 It has easy process of setting up the businesses
 There is a moral and emotional support
 Risk would be distributed among the partner's
Disadvantages
 Partnership liabilities is on all the partner's
 Partner's are liable for the losses in the company and for their individual debts also
3. LIMITED LIABILITY PARTNERSHIP
It has a similar structure like partnership in which there were minimum two members and
there is no limit of maximum members. This business structure will get registered and it is
mandatory to do it at Companies House. After registration the company got separate identity and
partners have different, the company can use word LLP after the name and after it got registered.
Unlike partnership, partner's are not held liable for others negligence, they held liable for their
own mistakes and misconduct (Januarita,2021). Partner's got liable in business loss at the amount
only which they bring as a capital share at the starting of the business. In this structure also and
being a relation of partner's, an agreement will be made between the partner's for clarity and to
avoid chaos.
Advantages
 Partner's held liable for their own negligence
 Partner's pay corporation tax and it beneficial rather to pay income tax
Disadvantages
 It involves high administration responsibilities
 High fee is required in registration
 partner's has to submit end year accounts
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4. LIMITED LIABILITY COMPANY
Its a most complex form of business structure which requires high registration fee at
Companies House. After registration the company can use the word LTD after the name of the
company and registration creates the separate identity of the company with the members. The
liability of the company is only suffer by the company, it burden is not on the members of the
company (Koehn, and Kerns, 2022). Members of the company are liable for their own mistakes
and debts. Company will adjust its debts with assets of the company. Because of high
administration responsibilities company consist of board of directors who fulfil all the
administration responsibilities and also file an audit of the company every year. It is beneficial
for the members of the company to get register themselves for the corporation tax.
Advantages
 Partner's are liable for their own debts and losses and it should be paid according to the
share capital they brought in the starting of the company
 Registration create separate legal entity
 Registered themselves to pay corporation tax is beneficial for the members rather to pay
income tax.
Disadvantages
 Registration fee is very high
 High level of administration responsibilities
Recommendation
As a sole trader it is very beneficial in the starting of the business, because there Is no one
between them the profit will get share and the liabilities wee also less as compare to other
business structure. But, in this type of business structure after some point of time the income of
the owner got deduct in income tax. After, discussing all the business structure the
recommendation can be made to Sam to select the best business structure which gives growth to
the business in long run (Rajanahalli, 2020). Before suggesting the form of business it has to be
cleared in the mind of Sam that what capital share he wants to invest or bring to start the
business. To expand the business the best option for Sam is Limited Liability Partnership. In this
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form of business the business can easily expand with the efforts of the partner's, therefore the
profit as well as losses of the company will share according to their share in the company. Its the
best structure of business for IOM solutions and for the growth of business (Sinaga, and Maulisa,
2022).
CONCLUSION
It is very cleared from the above report that, there are mainly four business structure to do
business i.e. Sole proprietorship, Partnership, Limited liability partnership and Limited liability
company. These business structure got discuss above in the report along with their benefits and
disadvantages. The business structure of the United Kingdom got briefly discussed above with
the business environment. At the end of report the recommended was made to Sam for its IOM
solutions business to expand the business.
REFERENCES
Books and Journals:
Almeida, F. and Wasim, J., 2022. Eco-innovation and sustainable business performance:
perspectives of SMEs in Portugal and the UK. Society and Business Review, (ahead-of-
print).
Cowling, M., 2021. The Forgotten Cost of Borrowing on Public Small Business Lending
Schemes: Evidence from the Fee Structure of UK Enterprise Finance Guarantee
Lending. International Review of Entrepreneurship, 19(3).
Hill, A., 2020. Manufacturing Operations Strategy: Texts and Cases. Bloomsbury Publishing.
Januarita, R., 2021. The Newly Sole Proprietorship as Limited Liability Company in Recent
Indonesian Company Law. MIMBAR: Jurnal Sosial dan Pembangunan, 37(1), pp.221-
231.
Koehn, A.J. and Kerns, K.A., 2022. Validating the supervision partnership as a phase of
attachment. The Journal of Early Adolescence, 42(4), pp.482-513.
Rajanahalli, K., 2020. Limited Liability Partnership as a Better Alternative to
Incorporation. Issue 5 Int'l JL Mgmt. & Human., 3, p.514.
Sinaga, E.P. and Maulisa, N., 2022. The Rights of Creditors of Guarantee Holders in a Limited
Liability Company Declared Bankrupt. SIGn Jurnal Hukum, 4(1), pp.72-86.
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