Legal Structures of UK Business Organizations: A Comprehensive Report

This report provides an overview of business organizations in the UK, focusing on their legal structures and compliance with relevant laws such as the Companies Act 2006 and the Insolvency Act 1986. It discusses various business structures, including sole proprietorships, general partnerships, limited liability partnerships, and limited liability companies, detailing their formation, liability, taxation, advantages, and disadvantages. The report also touches on business transitions, negligence liability, vicarious liability, and individual employment rights. Ultimately, the report recommends general partnership as a suitable structure for operating a business in the UK, highlighting its benefits regarding profit sharing, taxation, and leadership diversity.

BUSINESS
ORGANIZATIONS

Contents
INTRODUCTION:..........................................................................................................................3
TASK:..............................................................................................................................................3
BUSINESS LAWS AND ORGANISATIONS IN THE UK:.................................................3
THE LEGAL BUSINESS STRUCTURE OF UK COMPANIES:.......................................4
CONCLUSION:...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION:
Business organisations can be defined as the type of structure which any business choose to
operate upon. The business structure not only helps the organisation to accomplish their
organisational goals but also helps to run their business smoothly in the market place with a good
brand name (Ince, 2022). Mainly there are two types in which businesses can divide their focus
to run the business. Its either profit making or it’s for society’s welfare. The basic category of the
business organisations structure can be sole proprietor ship, partnership and the corporation. In
this report however, all the business structures has been discussed with the nature and
management of a company. Commercial laws on the other hand can be defined as the structure
of law which basically helps in governing all the business entities and they have to follow the
rules and regulations that are being made by the government (Tripathi and et. Al., 2022). In
addition to this, the concept of business liability and in negligence, and the vicarious liability of
an employer in the organisation and also the individual employment rights that they enjoy while
working has also been discussed in this respective report.
TASK:
BUSINESS LAWS AND ORGANISATIONS IN THE UK:
Every organisation that runs in the UK is being regulated by the company’s act of the year 2006
and is also being governed by the insolvency act of the year 1986. The first modern cooperation
was outlined by the United Kingdom. The nature of the management of every organisation and
running businesses is however indefinable. The working management of the company changes
from firm to firm. When we talk about the goals of the firm, it also varies. However, most of the
organisations operate in the market place with the focus and motive to maximise the profits and
at the same time to accomplish its organisational goals. Business transitions of any company can
defined as the financial transaction that takes place between the two parties including two firms
or two individuals of the firms that involves the trade of monetary value or some goods, assets or
even services in exchange (Rivera and et. Al., 2022).
Negligence liability in any business organisation can be defined as the employee or other
member of the company fails to accomplish the responsibilities that are being given to him or

fails to do the task at the required standard or with required skills. This liability ultimately results
in the financial loss or physical damage of the client of the company.
Vicarious liability can be defined as the situation where one employee which has been somewhat
responsible for the actions of any third party or the other employee in the organisation.
Individual employment rights refer to the rights which employee enjoy and they are the basic
rights to every employee in the company. Like parental leave and pay, national origin and many
more.
THE LEGAL BUSINESS STRUCTURE OF UK COMPANIES:
SOLE TRADER:
Sole trader which is also called the sole proprietorship refers to the business organisation which
is basically unincorporated, that means that the business has only one owner who is the sole
person and is responsible for all the activities that are being done in the business like for paying
taxes and for the task of decision making for the business and also the liability of the business. It
is considered as the easiest business structure among all the others as it is very easy and at the
same time very quick to set up and this is because of the minimal regulation of the government
on the business (Lai and et. Al., 2022). The sole trader business structure is very popular among
the individual of the society which involves self- constructors and the consultants. However
people generally give their own name or the family name to the business so that it can be well
recognised in the society and can also be separated from the others. This structure does not
require a lot of documentation at the time of setup. When we talk about the liability in UK, the
sole owner is the one who has unlimited liability towards the business which means that the
personal assets of the owner are at a high risk if the company or business hits the situation of
insolvency in future. The sole owner is however responsible for paying taxes as well as for the
decision making for the business. The dissolvent of the business is also easy and quick as there is
only one person for the process.
Advantages of this structure would be that the profits or the gain of the business doesn’t get
distributed but instead the sole owner gets it all. Also the decision making is also not time
consuming and it is very cheap to set up.

Disadvantages of this structure would be that the owner has unlimited liability towards the
business. And they will only have limited amount of funding at the start or in the middle of the
running business and also they don’t enjoy the legal benefits (Tutam, 2022).
GENERAL PARTNERSHIP:
A general partnership can be defined as the type of business structure which basically has two or
more partners or investors who come together and form the business with the motive of profit
maximisation (Tan, and Julian, 2022). All the partners share the profits or the gain of the
organisation into parts of which they have invested their capitals at the time of the business start.
When talking about the formation of this structure, mainly in the UK, partners are not strictly
required to have it registered in the eyes of law but in general they do as in the results they enjoy
some legal benefits and also get a legal arrangement done for the situations like the death of the
partner, or if the partner steps back, the other partners can sue him with the help of the law
(Diez-Busto and et. Al. 2022). If we talk about the liability of the business, the partners generally
have unlimited liability toward the company and hence their personal assets become at a high
risk if the company becomes insolent and faces loss. The taxation in UK has been equally
divided between the partners and talking about the dissolvent of the business it can be due to
many reasons like stepping back of the partner or the death of any partner and it will be done
according to the agreement they make.
Advantages of this business structure can be pass- through taxation and the diversity with the
leadership. The switch to any other business structure is also easy.
Disadvantages of this structure would be that the partners have unlimited personal liability and
there is an easy process for the dissolution of the company and the license for the setup is
necessary and there is no transfer of interest.
LIMITED LIABILITY PARTNERSHIP:
Limited liability can be refers to as the business structure which has a very flexible environment
in the department of tax and entity which basically helps its partners to have limited liability. By
the name it can be concluded that the partners enjoy limited liability in this kind of business
structure that means their personal assets are not at high risk if their company faces the situation

of insolvency or any kind of loss in the future. To form a limited liability company at least two or
more partners are being required who are ready to run the business with the motive of profit
maximisation. The partners or the owners are advised to get their firm registered in the
company’s act of the year 2006 in UK to enjoy some legal facilities (Patterson, 2022). Partners
are responsible for their part of tax to pay to the government and it has been decided on the share
they have invested. The dissolvent of the company is however due to many reasons like death of
the partners and other reasons but the process takes place according to the agreement which the
parents have made at the start of the business.
Advantages of the limited liability partnership would be that there is no restriction in the entry of
partners to which means there can be unlimited partners to the company. In addition to this, it is
also least expensive when it comes to other business structures keeping in mind all the other
factors the partners enjoy.
Disadvantages of this structure would be that the partners have to penalty for the non-
compliance and they have to pay high income taxes (Bonamigo and et. Al., 2022).
LIMITED LIABILITY COMPANIES:
Limited liability company refers to a business structure which basically all its partners and
owners from the unlimited liability that means it protects it partners personal assets not to be
responsible for paying the debt amount of the company if it becomes insolvent or faces any kind
of loss in the future. However, the regulation of this structure varies from country to country.
This structure acts as a hybrid as it is a good mixture of the general partnership and the sole
trader. The profits and the taxation amount have been divided into the sharing ratios of the
partners in which they have invested in the company at the start. Articles of organisation have
been required for the formation (Buhalis, 2022). The process of dissolution of the company in
this structure can be due to many reasons hence voting or to follow the agreement is advisable in
between the partners.
Advantages of this structure would be that there is no restriction in the entry of number of
partners of the company and at the same time the partners only have limited liability. Flexibility
in the management is also enjoyed by the employees and the partners.

The disadvantages of this business structure would be that the formation amount is very
expensive when compared to other ones (Blanke and et. Al., 2022). There is a limited lifespan of
this structure and the ownership becomes a little complex because of the huge number of
partners at the same time in the company. Also the decision making is also hard because of the
same reason and hence is very hard to switch to any other business structure and to the
corporation.
RECOMMENDATIONS FOR IOM SOLUTIONS:
Any individual when going to start a new business or is ready to switch to some another business
structure has to keep some important factors and points in mind that the business ahs to run in
long term and the same time to expand the business on a very large scale. When talk about all the
factors they include that how the taxation amount to be paid by the partners or how the profit
should be divided between. The process of dissolvent and the main factor which is the liability of
the partners or the single individual is also considered. Hence, by analysing all these business
structures and the important actors which has to be keeping in mind while choosing one of the
structures, general partnership is the most appropriate structure to operate any business in UK.
As the profits and the taxation are being divided into the sharing ratios and the financial
background is also strong in this structure (De Vries, 2022). There is also the diversity with the
leadership. The switch to any other business structure is also easy. However the partners are not
strictly required to have it registered in the eyes of law but in general they do as in the results
they enjoy some legal benefits.
CONCLUSION:
From this respective report of business organisation, it has been concluded that the business
organisations refers to as the type of structure which any business choose to operate upon. The
basic category of the business organisations structure can be sole proprietor ship, partnership and
the corporation. Later on, the business laws and the organisation of the UK has also been
discussed and the legal business structures of the UK along with their advantages and
disadvantages, their dissolvent and their liability have also been discussed in this report. Lastly,
the recommendation has also been given in which the best business structure has been told to run
any business in the UK has also been discussed in this respective report.

REFERENCES
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