Commercial Law and Its Importance

UNIVERSITY
Commercial Law
Kinds of Organizations
Student Credentials
3/23/2020

Commercial Law 1
Question 1: Types of Organizations
Organization
Few of the kinds of organizations that shall be discussed here are: Sole trader, Partnership
and a Charity. There are different laws and processes to follow through in each country to
incorporate any one of the above mentioned organization.
Question 2: About these Organizations
Sole trader
In any country, becoming a sole trader is the easiest way one can become self -employed.
This kind of business provides all the independence and full share of profit to the individual
running the business. It is all in the hands of the sole trader to carry out the business on its
own or hire a person to do it for them.
Formation and Funding of a Sole trader
In order to become a sole trader, the funds have to be invested by the sole trader himself also
he holds the right to gain and keep all the earnings and profits from the business. There are
two options for the sole trader while investing, either he/ she can invest all his own
investments or take a loan from the local bank to assist him /her with the finances. Individual
opting for a sole trading business is personally liable for all the losses and responsibilities
incurring in this kind of business (Gov.UK, 2020).
Requirements for registration
In order to proceed with idea of sole trading in United Kingdom, one needs to fulfil a certain
criteria as in he needs to have an NI or the National Insurance, along with which he needs to
register with the HM Revenue and Customs (HMRC) for a self –assessment, for tax purposes.

Commercial Law 2
Apart from this, name of the business needs to be chosen. Now this name can be the sole
proprietor or trader’s own name in order to incorporate a sole trading business (Mygov.scot ,
2019). One can opt for a name that individual has or anything but, it cannot include, LLP,
Limited Liability Partnership, Limited, LTD or PLC , Public Limited Company or even any
kind of offensive names or anything identifying the trademark or symbolizing government or
nation or demeaning religious intent or as such (Korchak, 2019). If any of the following
conditions apply, one can set up a business as a sole trader in United Kingdom; when an
individual’s earning amount to a rough 1,000 British Pound in the last financial year through
any kind of self –employment; or one proves to be a self –employed person through any
document or as such; or one wishes to make the Voluntary Class 2 National Insurance
Payment so as to get assist the individual opting for sole trading qualify for the benefits
(GOV.UK, 2020).
Partnership
There are various types of partnerships that can be opted for as per the convenience or the
goal of the people who are going to be partners. A partnership is a kind of business in which
the members or the partners have the authority to take decisions as well as responsibilities of
the business according to their own choice, for instance, if a partner wants to handle
management and the other wants to take care of the financial aspects, then they mutually can
agree on the same and get that mentioned in the agreement of partnership as well. In
partnership, funding is done by the partners as in the partners bring in the finances on their
own and these partners can also invest an amount they took as loan from a bank as well.
Some governmental organizations also provide assistance with the finances if required for
setting up a business in order to promote a certain kind of business. Partners in a partnership
can distribute the losses as well as all the profits amongst them based on the profit sharing
ratio they have decided amongst them. In scenario, where no profit sharing ratio is decided,

Commercial Law 3
then it is assumed that the partners have agreed on equal profits sharing ratios (Entreprenur,
2020). In a partnership, the taxes on the profit earned are paid just once, when each partner
pays off their taxes over the profit each of them has earned through the organization. This is
why partnership firm does not need to pay the taxes again.
Setting up a partnership
In order to set up a partnership firm in the United Kingdom, there are a certain aspects that
need to be taken care of, as in the partner or the partners have to share the responsibilities
personally for the business which includes, any of the losses that have incurred in the
business or any of the bills or expenses regarding the business that have been made such as
any kind of equipment purchased for better functioning of the business or any kind of stock
for the same purpose (Fox Williams LLP, 2019).
Charity
Charity is a non -profit organization that has been formed not for earning profit but for social
welfare. The funds that are obtained or keep a charity running are all gathered from various
sources as in through people funding them, or the cause that the charity supports or even
when a few people or trustees come together for a particular goal to be satisfied. Apart from
trustees, funding for charity can be obtained through various options such as grants, or fees
that are being charged by the members or even individual or in –kind donations people make
on their own level and also areas like corporate sponsorships help charities out in order to
assist them.
Setting up a Charity in United Kingdom
In United Kingdom, when a charity is to be formed, there is a need for at least three trustees
who can fund the charity. Apart from this, a goal or purpose needs to be made sure behind the
whole thing.