Types of Business Organizations and Recommendation for IOM Solutions

This report discusses different types of business organizations such as sole proprietorship, partnership, corporation, and limited liability company. It also provides a recommendation for the most suitable type of organization for IOM solutions.

Business
Organizations

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
About the company..........................................................................................................................3
Different types of organisations.......................................................................................................3
Sole proprietorship.................................................................................................................3
Partnership organisations........................................................................................................4
Corporation.............................................................................................................................5
Limited liability company......................................................................................................6
Recommendation for the most suitable type of organisation for IOM solutions.............................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
Books and Journals.................................................................................................................8

INTRODUCTION
Business organisation refers to the formal entity or structure which is created to carry out
commercial activities. This form of structure based on laws such as property rights,
incorporation, exchange and contract which is mandatory to follow for all the organisations.
There are various types of business organisation such as partnership, sole proprietorship,
corporation, limited liability company and cooperative (Abdulaali, 2018). All these types of
organisations work according to their structure and liability so that they can achieve goals and
objectives. This report is based on IOM solution which is involved in selling and distribution of
electronical parts to their local garages which is located in UK from last 8 years. This report
includes type of business organisation along with their sources of laws and their nature of
management which is carried out by the members of UK. It will involve the most appropriate
form of business structure for IOM solutions along with their legal consequences.
MAIN BODY
About the company
IOS solution is operating their business as a sole trader from 8 years by the operator Sam.
They deal with local garages by selling them electrical parts and they have grown their business
to large extend in last two years. Sam is planning to expand their business but he is confused that
what type of organisation he has to opt for their operations.
Different types of organisations
There are majorly four types of organisations which can be discussed in brief. IOM currently
operates as sole trader which is carried out by the individual person (Ashkenas and Manville,
2018). Discission of all the types of organisations can help IOM solution in finding the most
appropriate type of organisation to reorganise the business. Types of organisations are discussed
below:
Sole proprietorship
The legal business entity which is fully Managed and owned by an individual is referred to
sole proprietorship. All the profits and losses are bear by an individual in this type of
organisation and all the activities which are carried out in accordance to achievement of goals are

formulated and implemented by that individual only (Schuhs and et.al., 2020). Taxation policy in
this type of organisation is very simple because it is work on the smaller level. In this, owner
have to pay only income tax, national insurance and value added tax and they are not liable to
pay any corporation tax. Sam commences their operations according to the sole proprietorship
organisation because they work on a smaller scale which involves only local garages of the UK.
There are no as such complex tax and policies for the sole proprietorship. It does not involve
large capital for the establishment of company and the owner and company represents same
entity. Owner is responsible for all the legal laws and regulations. They possess unlimited
responsibility and liability for all the debts and losses which incur during operations. It is the
safest and simplest type of legal organisation one can commence on by their own.
Partnership organisations
In this type of organisations, it involves two or more people to carry out the operations so
that they can achieve common goals. Organisations of UK establish their partnership companies
according to the Partnership Act 1890 which is mandatory to follow (Gurmeet, Jyoti and Soni,
2021). All the rights and liabilities are mentioned in the partnership agreement which is prepared
before the commencement of the operations. It includes all the legal policies, rules and regulation
which is followed during the activities of the business. Profits and losses are shared by all the
partners in the ratio which is mentioned in the agreement. Legal entity of an individual is
different from the company and there is limited liability to the extend which is mentioned in the
agreement. Limited partnership can commence their operations with the help of Limited
Partnerships Act 1907 (the 1907 Act). Partners involved in limited partnership do not take part in
most of the operations of business. All the day to day operations are carried out by general
partners of the company. Some of the professional service providers use limited liability
partnerships which is governed with the help of Limited Liability Partnerships Act 2000 along
with the Limited Liability Partnership Regulations 2001. Various features of partnership
company y can be discussed as follows:
Agreement: An organisation can opt for the partnership on the basis of the particular
agreement which can be written, oral or implied. It is essential to create or formulate an
agreement because it involves all the legal laws, policies, rules and regulation of the organisation
which is followed by all the partners who are involved in the business.

Profit sharing: The agreement should involve the ratio which is followed to share the profit
and losses by all the partners. According to the Partnership Act 1890 it is mandatory to include
the profit sharing ratio in the agreement on the prior basis which is agreed by all the partners.
Lawful business: it is mandatory to carry out the legal business activities under the act of
partnership 1980 (Hongal and Kinange, 2020). Any illegal activity is not allowed to carry out by
the members of partnership firm because they can not avail any advantage of partnership act in
this case.
Corporation
This type of business organisation is a separate legal entity which is formulated by the
shareholders. In this organisation owners are not personally liable for any of the legal disputes
and debts because they both are separate legal entities. In comparison to other type of
organisation it is slightly Complex in terms of creation as it involves higher number of
formalities. Article of incorporation involves various information such as location and name of
business, shares issued to public and purpose of business (Ibnugraha, Nugroho and Santosa,
2021). Due to the legal entity does type of organisation have to pay state income taxes and
Federal taxes on earnings. There stakeholders are also liable to pay taxes such as cash on
dividends which is mandatory by the government of UK. There are various features of
corporation organisation which can be discussed below:
Separate legal existence: This type of organisation is separate from their owners because it
is incorporated artificially with the help of laws and regulations. It is invisible and intangible
which is associated by the shareholders. People who own this are not liable extent to their share
in the company.
Continuous life: The operations of corporation is not affected by the death, withdrawal and
incapacity of their employees and shareholders (Neelam, Sheorey, Bhattacharya and Kunte,
2020). It is separate entity which can carry out operations in its own without any disturbances.
Transferability: Owners of the corporation company possess shares which can be easily
transferable from one person to another. Stockholders or shareholders do not have to take
permission or do not have to discuss from anyone to transfer the ownership.
Government regulations: Various federal regulations are subjected to fulfilled by the
corporation in accordance to continue their operations. There are various operations such as

issuing stocks, retiring stocks, buying back them and distribution of earnings. They have to
disclose their financial affairs which is mandatory to Securities and Exchange Commissions.
Taxation: It is necessary to pay taxes by the stakeholders who inherits the share of
corporation (Ibnugraha, Nugroho and Santosa, 2021). Being a legal entity, it is the duty to pay
off the taxes at corporate level which is mandatory by the government of UK.
Limited liability company
This type of organisation refers to the company whose member’s liability are limited by
their constitution. They are liable to that extend which they have contributed in the company by
purchasing their shares. It is incorporated with the help of Companies House for the
commencement of the operations in the UK. Limited liability company have more then one
registered employee who take part in the decision making processes. It involves various
formality with the constitute and paperwork which may be complex in nature. This company can
prove beneficial because employees can easily raise the funds for the expansion and growth of
the company (Ilin and et.al., 2018). In case of IOM solutions, Sam can take initiate for expansion
of their company in limited liability. With the increase in customers and employees, they can opt
for this type of organisation because it give more creditability to the owners which is positive
aspect. Sam can also plan for effective and better taxation that can help them in improved
financial conditions. IOM solutions can work in more protected manner because limited liability
company offers opportunity in protecting the personal assets of the owner. Managing a company
is much more easier then managing a sole proprietorship because it includes number of peoples
which share responsibilities in the fixed proportion. There are various features which can be
discussed below in context to IOM solutions:
Limited liability: Members of limited liability company are not liable for the losses, legal
faults and misdeeds because they possess separate legal identity (Marashi and Hamidi, 2018).
IOM solutions can work effectively without pressure of the managing all the activities by own.
They can earn higher benefits out of their capital which is invested in the limited liability
company.
Tax ease: In this type of company, members can select the tax method for themselves which
is very attractive feature of limited liability company. They can opt tax policies of partnership,
sole proprietorship and corporation unless it is stated in the agreement. Members possess
authority in selecting the most suitable tax policy for them so that they can save money.

Flexibility: The operation of limited liability does not affect by the insolvency or death of
their employees and shareholders (Jelonek and et.al.,2019). Members can take decisions
regarding their operations whether they have to continue the operations or not. This will help
IOM solutions in continuation of operations according to their suitability.
Recommendation for the most suitable type of organisation for IOM solutions
In order to expand the business, limited liability company is best suited for IOM solution
which Sam can opt. They can involve number of investors in their company so that they can raise
fund for the expansion of the company (Konovalova and et.al., 2020). They should attract
customers from larger geographic regions so that they can convert their sole proprietorship into
limited liability company. It will provide them benefits because limited liability firms possess
fewer regulations in comparison to other type of businesses. They should opt this because it also
provides flexibility in operations due to the simple paperwork and easy registration. Sam can
individually also commence the operations of limited liability company because it involves
simple taxation system without any double taxations.
CONCLUSION
From the above report it can be concluded that organisations are legal structures which are
created for the commencement of the operations. Most of the organisations are created in order
to generate revenues and profits. Every organisation is different from each other due to their size
and structure. Rules, regulations, laws and policies are developed according to the structure of
the organisation which make them different from each other. There are different types of
organisations including sole proprietorship, partnership, corporation and limited liability
company. All these vary in terms of investment, capital, employees and customers. This report
includes the different type of organisation and their description which is best suited for the
expansion of business.

REFERENCES
Books and Journals
Abdulaali, A.R., 2018. The impact of intellectual capital on business organization. Academy of
Accounting and Financial Studies Journal, 22(6), pp.1-16.
Ashkenas, R. and Manville, B., 2018. Harvard Business Review Leader's Handbook: Make an
Impact, Inspire Your Organization, and Get to the Next Level. Harvard Business Press.
Gurmeet, K., Jyoti, P. and Soni, R., 2021. Challenges for Agile Autonomous Team in Business
Organization. Internet of Things in Business Transformation: Developing an
Engineering and Business Strategy for Industry 5.0, pp.211-230.
Hongal, P. and Kinange, U., 2020. A study on talent management and its impact on organization
performance-an empirical review. International Journal of Engineering and
Management Research, 10.
Ibnugraha, P.D., Nugroho, L.E. and Santosa, P.I., 2021. Risk model development for information
security in organization environment based on business perspectives. International
Journal of Information Security, 20(1), pp.113-126.
Ilin and et.al., 2018, December. Business requirements to the IT architecture: a case of a
healthcare organization. In Energy Management of Municipal Transportation Facilities
and Transport (pp. 287-294). Springer, Cham.
Jelonek and et.al.,2019, March. The artificial intelligence application in the management of
contemporary organization: Theoretical assumptions, current practices and research
review. In Future of Information and Communication Conference (pp. 319-327).
Springer, Cham.
Konovalova and et.al., 2020. Development of forms of the hotel business organization in modern
conditions. Journal of Environmental Management & Tourism, 11(4 (44)), pp.857-862.
Marashi, P.S. and Hamidi, H., 2018. Business challenges of big data application in health
organization. In Competitiveness in emerging markets (pp. 569-584). Springer, Cham.
Neelam, N., Sheorey, P., Bhattacharya, S. and Kunte, M., 2020. Organization for Economic Co-
operation and Development guidelines for learning organization in higher education
and its impact on lifelong learning–evidence from Indian business schools. VINE
Journal of Information and Knowledge Management Systems.
Schuhs and et.al., 2020, December. Business Model and Organization–Interdependencies for
Customer-Centric Continuous Innovation in Subscription Business. In 2020 IEEE
International Conference on Industrial Engineering and Engineering Management
(IEEM) (pp. 260-264). IEEE.