Business Organizations in the UK: Types and Legal Formalities

Business organization
TABLE OF CONTENT
INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................2
Business & organization in the UK:............................................................................................2
The legal business structure of UK companies:..........................................................................3
Sole trader:...................................................................................................................................3
General partnership:.....................................................................................................................4
Formation, liability, dissolvent and advantages, disadvantages of limited partnership type......5
Formation, liability, dissolvent and advantages, disadvantages of limited liability type............6
Recommendation to Sam for IOM solution:...............................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
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INTRODUCTION
Business organization is wide term which include sales and purchase activity, every business
is a type of structure. There are four main type of business in the UK, these are sole trader,
partnership, general partnership and limited liability. Every business have to complete legal
formalities to run fairly in the country. This report will discuss business organization in the UK
and understand different type of laws and legislation to run an business. Later this report will
discuss different type of organizational structure and understand legal formalities. Later this
report will provide recommendation to IOM solution and Sam to select best type of structure for
expansion.
MAIN BODY
Business & organization in the UK:
Every country have their own rules and procedure to start and run an business
organization, these law help entrepreneur to drive business legally in the country and try to trade
fairly. To form a business in UK, an sole trader have to decide which type of business they want
to adopt. There are mainly four type of business organization in the UK, these are sole trader,
partnership, limited liability partnership and limited company (Ndzi,2017). According to
Companies Act 2006, business needs to follow every guideline and complete legislation process,
there are different type of business law in the UK, these are:
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Companies Act 2006: Companies Act 2006 cover every essential details to start, run and chose
type of business structure, this act provide clear vision to sole trader or partnership firm to
operate legally in the country and try to maintain high level of standard by following these rules.
There are many section of Companies Act 2006, for example: section 1200 highlight process of
sole proprietorship.
Commercial law: Businesses who indulge in sales and purchase activity have to follow every
guideline of Commercial Law, this legislation body drive every business to trade fairly in the
country (Clarke and et.al., 2017). Commercial law is very wide which include every details and
process that company need and perform while dealing in general public. For example;
commercial law regulates employment law which means every company have to follow
guidelines of Employment Right Act 1996.
Liability in business: every business have debt which occur due to purchasing activity, liability
means owes or debt of company. Sometimes liability become biggest challenge for company
result in failure, there are certain type of liability in business such as current liability, non current
liability, contingent liability and vicarious liability. Vicarious liability occur due to irresponsive
behaviour or action of an employee, this liability leads to loss to company (Milanez, 2017).
Liability in negligence is one of the most challenge liabilities of company which occur due to
carelessness of employee resulting in harm or damage to other people.
Memorandum of Association: MOA is legal document which highlight registration process of
company and other formalities such as relationship with shareholder. This document ensure
every objective which an business have to perform in their process.
Article of Association: AOA is document contain purpose of company and highlight regulation
in their operation, this document is one of the most important element of business because this
ensure every management process and activity which should take place in the company.
The legal business structure of UK companies:
Sole trader:
Sole trader is one of the most common type of business organization in which self
employed person start and run business, every sole trader is individual who is responsible for
business start to wound up. Entrepreneurs who want to establish their own company need to
register their self assessment at HMRC (Her Majesty’s Revenue and Customs), this is official tax
collection department of UK which tend to collect both income and business tax. Sole trader
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