Key Sources of Laws for Business Organizations in the UK

This report discusses the legal context for business organizations in the UK and the key sources of laws that regulate them. It covers the different legal business structures of UK companies, including sole trader, general partnership, partnership, and limited liability. The report also provides recommendations for IOM Solutions, a sole trader entity that wants to expand its business, and suggests limited liability partnership as the most suitable option. BSc (Hons) Business Management BMP4002 Business Law Assessment 2

BSc (Hons) Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of
laws as the legal context for business
organizations in the UK
Submitted by:
Name:
ID:
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Contents
Table of Contents
ntrod ctionI u ...............................................................................................................................3
ine e r ani ation in t eBus ss s & O g z s h UK........................................................................................3
T e le al ine tr ct re o companieh g bus ss s u u f UK s..........................................................................5
ecommendation or M ol tionR s f IO S u s........................................................................................7
oncl ionC us ..................................................................................................................................8
Introduction
The government of United Kingdom follows the legal system which is prescribed as English
law. The people of England and Wales follows and abides by the legal principles of law.
There are specific laws which are especially made for regulation of business in organizations
that are Contract law, Company law, Employment law, Business law, etc. The administration
and control of business is regulated through the practices of business which operates its
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activities in consideration of legal system of justice in organizations. The companies or
organizations does its operational functioning in the context of legal objectives and criteria to
have a valid contract or business for actual functioning of business in the market (Baillie,
2019). The businesses are conducted through various structures in which the legal business
structure of UK companies Sole Trader, Partnership and Limited liability. This report will
cover the recommendations made for IOM solutions in order to expand its sole trader
business into potential business with sources of law in business organizations, formation and
organization of business in UK and legal business structure of UK companies.
Businesses & Organizations in the UK
An artificial legal person or entity that is registered under the Companies Act, 2013 is known
as company. A different and valid recognition is given to companies that are registered and
are operated through separate identity. A natural person thus creates the company which is
presumed to be an artificial person by the maker who makes it. Under the Company Act 2013,
a company is considered to be a legal entity that operates the functioning of businesses in
various organizations. The most important practice in any business is the management of a
company which operates and controls the key representatives for smooth functioning of the
organization (Brown, Liñares-Zegarra and Wilson, 2018). The directors, shareholders and
promoters are the part of management that manages the entire functioning of the company.
The appointment of executives and execution of necessary policies is conducted through the
department of management which performs the activities of business for smooth functioning
of its operations. There are different departments in a company that collaboratively helps in
running the business and those departments are management department, marketing
department, finance department who collectively help in running a company.
There are various obligations, rights and duties imposed on employers and employees through
companies that are registered which are known as registered companies. According to the
Employment law of UK, the employees are protected and safeguarded under the
implementation of this law and the employees are protected from any kind of discrimination
and misconduct towards them. The formation of a company is depicted through the making of
various provisions with the aid of doctrines for operational functioning of the company under
the Company law. A separate legal entity that has separate identity is referred as company
under the company law. A person can sue a company in case of any illegal activity and a
company can also sue a person or other company, if any illegal activity is recognized by the
company. The systematic business operations of company are regulated through the
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commercial activities and transactions done to manage the functioning of an organization.
Vicarious liability involves the principle of stating the employer responsible for the mistake
of the employee in a company. The individual who does the mistake is not individually liable
towards the company but it is the employer who will be held liable for the mistake or
negligence of the employees (Knapp, 2020). Tortuous liability dictates the misconduct of
employees in a company that are regulated through other Acts and Laws due to frequent arisal
of issues in the company. There are provisions related to the role of directors in a company
which dictates their functioning for operational work of the company. The mind and soul of
the company is constituted in Directors of the company. Therefore it is very important for the
directors to execute intellectual decisions for the welfare of company. The growth and
development of the company is the main aim of the directors. They are responsible towards
the company as it is their duty to direct a right and progressive way for development of the
company. A director must act in the interest of the company and must not attain any
advantage by having the position in company. Under the Partnership act 1890, there can be
termination of partnership by the partners but the only requirement is of serving of the notice
period prior to termination. A partnership can also be terminated through oral intimation
which is sufficient aspect to terminate the partnership.
A document which states all the necessary terms and conditions which are required for the
official registration of a company is known as Memorandum of Association; whereas a
document which has all the essential provisions for administration of a company is known as
Article of Association.
The legal business structure of UK companies
Sole Trader
An individual that solely by himself manages the operational functioning of a business with
no separate legal entity and solely owns the business is known as Sole Trader (Agstner,
2020). A separate legal entity does not require any kind of limitations or formalities for its
establishment. Management and Ownership needs no bifurcation as the operational
functioning of management are solely managed and operated by the sole trader. The owner is
liable to pay the tax through the profit earned from the business and the liability of tax is on
the sole trader itself. Tax is derived from the income generated through the operational
functioning of business that is operated by the sole trader. The sole trader is himself liable for
the whole functioning of the business and is wholly liable for all the activities conducted in
business.
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Advantages of Sole Trader
 A sole trade company requires no formal formalities for its constitution.
 The set up of business in sole trader requires very low investment for its operational
functioning.
 The business of sole trader is the best option for doing small scale business.
Disadvantages of Sole Trader
 There is no separate legal identity of sole trader.
 He is the single and sole owner in business with solely addressing of whole
responsibilities of business.
 A sole trader is associated with unlimited liability and is personally liable for the loss
of business.
General Partnership
The mutual association of two or more living persons for functioning of business through
partnership determines the general partnership (Enwukwe, 2020). The partners intends to
carry the business to earn revenues for generation of profits with the joint association of
partners. A separate legal entity is not made or created through general partnership. The
Partnership Act, 1950 governs the partnership among partners and partners enter into an
agreement to be be officially stated as partners through general partnership.
Advantages of General Partnership
 The responsibilities is divided among partners with the dividing of loss in the
company which enables to bear limited liability.
Disadvantages of General Partnership
 There is unlimited liability of each member in general partnership.
 No separate legal identity is formed in general partnership.
 The mistakes and negligence done by the partners in operational functioning of
business makes them individually responsible.
Partnership
A partnership where there is no separate legal identity is a partnership in terms of Limited
partnership (Graesch, Hensel-Börner, and Henseler, 2020). The Limited Partnership Act,
1907 showcases the functioning of limited partnership. The person who takes the whole
control of the company with its management is responsible through partnership attained from
partners and these partners have the unlimited liability in partnership. A limited partnership
avails the option to limit the liability in order to expand the contribution n partnership. This
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limited partnership is somewhat similar to the general partnership. These partnerships are
established in the companies or organizations to establish business in order to attain profit
from it.
Advantages of partnerships
 A business is easily established through partnerships and the cost of investment is also
reduced through it.
 It is always profitable for a business to have more than one owner in order to share the
responsibilities of business.
 The income derived through partnership is separated from the tax given as it is
distributed with the income of partners.
 The partners have more capability to lend money and have monetary benefit through
partnership.
Disadvantages of partnerships
 The partners can disagree on different functioning and activities of business which
may create issues in partnership.
 The partners have the unlimited liability to pay debts in partnership.
 The partners in partnership are made liable till their investment in partnership by
which they have to pay their debts.
 The valuation of partners needs to be done in partnership which is very costly while
joining or leaving of partner in a partnership.
Limited Liability
It is the legal identity that is incorporated through an operative body that is separated from its
partners (Idris, Saridakis, and Khan, 2022). The partnership of limited liability is derived
from the Limited Liability Partnership Act, 2000 which is its hybrid form. An individual in
limited liability can either be a company, person who is commonly known to be a corporate
member. Limited liability is not a partnership or company that has a member in partnership.
In limited liability, the liability of the partners is less and the private agreement between the
members depicts the relation of partnership with imposition of limited liability. The
shareholders or directors of the company has no scope in limited liability. The payment of tax
is to be equally given by the partners according to their share and investment in the company.
There is no personal liability of partners in limited liability.
Advantages of Limited Liability
 The requisition of capital maintenance is very low.
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 The investment of the partners determine their liability in partnership.
 The partnership of limited liability is separate legal identity.
Disadvantage of Limited Liability
 The incorporation of companies is the main requirement in limited liability.
 A regular filing is very necessary in limited liability partnership.
 The incorporation of companies derives high fees or expenses during limited liability
partnership.
 There are certain limitations and restrictions derived through the incorporation of
companies.
Recommendations for IOM Solutions
IOM solutions is the company which is run through sole trader and which deals in the
business of electrical parts at local garages. The sole trader at IOM solutions is Sam, who is
doing the business for almost 8 years. There is high demand of employees in IOM solutions
due to the growth in business and this has created a pressure for expansion of business on
him. It is therefore recommended to use the method of limited liability partnership as it has a
separate legal identity and the owner is separate from the liability of business (Kriz, and
Welch, 2018). The success of IOM solutions would derive various persons to invest in the
business by attaining partnership. The idea of partnership is always beneficial as it helps in
reducing the pressure so Sam can even consider having partnership in his business. The
partner in partnership is liable till the extent of his investment which is a beneficial feature.
Conclusion
From the above report, it is concluded that there are various options for doing a business in
the market. The concept of business is very wide and there is wide availability of expansion
of business in different forms which can be expanded through the option of sole trader,
partnership and limited liability. The IOM solutions is a sole trader entity which wants to
expand its business due to the the growth of company and which also required employees for
the development of business. Limited liability partnership is the most suitable option
available for IOM solutions for expansion of its business as it is less risky in nature and
provides limited liability over the partners. It is an alternative potential business structure that
helps them to overcome the challenges that were faced by them due to high demands of
employees for sustaining growth in their business. However, it is recommended to IOM
solutions to gain the advantage of limited liability partnership.
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