Key Sources of Laws for Business Organisations in the UK

This report by Desklib discusses the legal context for business organisations in the UK, including the Companies Act of 2006 and various employment legislation. It covers different business structures such as sole trader, general partnership, partnership, and limited liability company, and provides recommendations for IOM Solutions. The report also highlights the importance of business law in ensuring smooth and effective functioning of businesses.

Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of
laws as the legal context for business
organisations in the UK
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Contents
Table of Contents
Introduction ...............................................................................................................................2
Businesses & Organisations in the UK:.......................................................................................3
The legal business structure of UK companies:.........................................................................4
Sole Trader-...........................................................................................................................4
General Partnership-.............................................................................................................5
Partnership-...........................................................................................................................5
Limited Liability-....................................................................................................................6
Recommendations for IOM Solutions:.......................................................................................6
Conclusion:.................................................................................................................................6
References:.................................................................................................................................7
Introduction
Businesses create a competitive spirit among the market industries by playing a major
role of improving the quality of life and standard of living of people by producing goods and
providing services to all. The owners of the business have a primary goal which aims at
generating revenue and profits by also improving the economy. Young and emerging
entrepreneurs have a lot of opportunities in any given business environment(Begum, 2020) .
Thus business can operate on a small level like a start up or on a large scale like a Multi
National Corporation. It all depends on the type of business structures that are chosen by the
owners of a business. Proper plans and strategies are needed while expanding the business so
that legal obligations can be followed. Thus business law clearly states how a business is
established and how it should work and operate. The following project will cover in detail the
various different types of business structures and will provide recommendation to Sam for his
business of IOM Solutions so that he can expand his business and earn profit.
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Businesses & Organisations in the UK:
Companies Act of 2006 governs the businesses of United Kingdom so that they can
operate smoothly. It states different provisions regarding different business structures so that
they are managed effectively. Business is made by the owners and operates because of its
employees thus management of employees also becomes necessary. They are governed by the
various employment legislation so that standards of behavior can be followed. Companies in
order to run for a longer period should comply with the companies law. These businesses are
granted the identification of an artificial person which implies that they have a separate legal
identity. There are also various components that a company needs to follow to maintain a
distinct identity they are perpetual existence, separate properties, common stamp and seal
and rights and responsibilities regarding suing somebody for non compliance with the
norms or regarding getting sued by other company(Bennett, 2019). There are also various
agreements that are concluded in a business under different heads and clauses which govern
their functioning. These also include sale and purchase of shares and assets and also letters of
intent, etc.
Vicarious liabilities also arise in a business when the company is managed and
operated on a large scale. They are referred to as liabilities which arise on the owner of the
business when any employee commits wrongful conduct while still being a member of the
organization. In this case the employer is held responsible for the actions of the employee and
that burdens the owner with responsibilities according to which he has to act within time.
Business also have problems which they face due to negligence in behavior that is termed as
Business negligence. It arises when duties and responsibilities are not performed according to
the provisions and procedures of the business. But how an organization functions and
operates is in the hands of the head of a organization who is generally a Director. They have
various roles and responsibilities which should be performed by them with honesty and
fairness. When these are not performed well, it gives rise to liabilities due to legal obligations.
These obligation include proper decision making while acting within the authority, making
proper judgments on behalf of the company, ensuring success of the company and resolving
disputes and conflicts by promoting harmony in the business environment. If the director does
not perform these duties well, the other directors are given the authority to hold the director
liable and responsible for misconduct and breach of duties. The company should not suffer
loss due to the negligence of the director, if this happens then they can be asked for
compensations as a measure of damages and remedies, serious misconduct can also lead to
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termination or end of contract (Chua, 2020). The director can also be disqualified from the
post for breach and can be held under the title of criminal offence for serious dishonesty and
unethical behavior. Company's property can also be confiscated and taken from the director if
they are in possession of some.
Partnership is governed by the provisions of Partnership Act 1980 which states how
a company is formed and terminated. Proper operations of the business happen with the help
of Memorandum of Association (MOA) and Articles of Association (AOA). A company
is formed and managed when MOA is created at the time of formation which is generally a
legal statement which gets active when it is signed by guarantors or shareholders whereas
AOA is a written statement agreed by the shareholders, directors and owners stating the rules
and regulations which should be followed while operating a company.
The legal business structure of UK companies:
Sam operates his business of IOM Solutions as the sole trader. He manages it without
any help as the single owner of the business (Cribb, Miller and Pope, 2019) . Thus when any
risks or liabilities occur on the business he has to handle them himself. But since he has been
operating it for eight years he is earning profits as the sole owner and is looking for
expansion by changing the type of business structure to meet the growing demand of
customers. The types of business structure which he can choose are:
Sole Trader-
Sole trader is the type of business which is opened by a single person as a method of
self employment. It is a very simple structure of business which is easier to establish and
operate. It can be opened by anyone who wants to start up a business. Thus it is a very
popular structure among the emerging entrepreneurs. The person opening up the business is
the sole owner of it and thus earns all the profits and revenue which are made(Parentoni,
2018). He is also liable and responsible towards the risks, losses and liabilities that occur in
the business. It is cost friendly while setting up and the ownership control rests in one hand
who takes all the decisions independently. The owner enjoys privacy in the operation and
management of business. There are also disadvantages because the person gets burdened with
debts and responsibilities and is unable to get personal time. Financial risks also increase due
to difficulty in getting funds and investments. It has various legal obligations that are taxation
on earnings of the business by the name of income tax and corporation tax which should be
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paid within the stipulated time. Under the General Data Protection Regulations, the owner
should maintain the data of its customers and must register themselves so that they can avoid
problems. Filing Self assessment tax returns are also essential on the part of the owner so that
legal consequences can be avoided (Rupasingha and Goetz, 2013) .
General Partnership-
When two or more individuals operate a business it is referred to as General
Partnership. Here the partners share the profits and losses which are incurred in a business.
They also create an agreement where they share the establishment costs, financial risks and
benefits of the business. Managerial responsibilities of the organization are also shared among
them. This is termed as unincorporated entity between the partners. Partners are jointly
responsible for all the debts that are incurred in the name of the business and they are also
responsible and accountable towards each other. In the business when a partnership is formed
the partners are made unlimitedly liable personally for the actions of the business. In a
Partnership type, it is easier to get capital due to reliable nature of business. The decision
making in the business is also improved due to the knowledge and skills of partners which
enhances the productivity of business. But the diadvantage in this type is that the partners
have joint and severe liability when wrongful acts or misconduct happens in the business.
Partnership Act 1980 governs and provides provisions for this type. It implies that partners
must act with honesty and good faith. The responsibilities must be shared among the partners
while following the procedures laid down in the act. Partnership agreement also involves
provision of dissolution of partnership. When there is no agreement, it can also be dissolved
in the situations of illegality, death or bankruptcy of a partner(Rus and CORDOȘ, 2021) .
Partnership-
This can also be termed as a Limited Liability Partnership. These have only certain
differences which make them different from a General Partnership. In this there are
obligations with respect to the limit on the amount of money that is spent by the partners on
the business. This partnership can be incorporated by two or more partners. They are
personally responsible for their negligent act and behavioral misconduct in business due to
limited liabilities. Collective responsibility is absent in this business structure(Sharma, 2020).
While operating in United Kingdom they must have a registered office according to the
regulations of the government. As partners in the business they are given protections for
smoother operations. These partners are governed under the Partnership Act 1907. In this
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partnership, the partners are legally jointly liable for all the finances, debts and obligations
which are within the business environment. The partnership is constituted by a written
agreement.
Limited Liability-
A company with private management and operations is termed as a Limited Liability
company. The directors act as the head and they run the company whereas the real owners are
the shareholders. The company acts as a distinct legal entity while also having its own lawful
rights and obligations(Vorachith, 2019). The company retains all its profits due to its limited
liabilities. This business structure provides separation in personal and business affairs relating
to finances. These are registered under the Companies Act 2006. They get an image of
corporate personality where shareholders are paid profits by dividends. The duties of director
are codified in the act.
Recommendations for IOM Solutions:
Business expansion helps in the growth of the business. So it becomes necessary to
change the business structure in order to expand. Sam can choose Limited Liability Company
as the business structure for expanding his business. It offers a range of benefits like
distribution of responsibilities by recruiting employees for the business. It has efficiency in
tax planning. The business owner gets the benefits of limited liabilities and enjoys the
identity of a legal company (Yeoh, 2019). As the company gets the status of professional
entity it is easier for it to get loans and investments which helps in capital formation. The
personal liabilities of the owner are protected in this type. Thus, Sam must opt for Limited
Liability Company to get a separation in personal and professional affairs and also to be
financially safe and sound in the time of crisis. It offers advantage on the part that the
members have the flexibility in structuring the management of the company. Thus this option
is the best structure of business for Sam.
Conclusion:
It can be summarized from the project that business law is essential for smooth and
effective functioning of the business. It lays down provisions on how a business is formed
and how it should be operated. Businesses are generally established with the aim of making
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profits. Thus these laws govern their legal rights and obligations. Businesses vary in their size
and structure. Different types of structures that are set up in the business are Sole
Proprietorship, General Partnership, Partnership and Limited Liability company. According
their benefits it has been concluded and recommended that Sam must expand his business by
forming Limited Liability Company to earn profits and run for a longer period.
References:
Begum, A., 2020. Corruption in business: A critical appraisal of the Australian regulatory
regime in the light of the UK Bribery Act 2010. Journal of Financial Crime.
Bennett, R.J., et. al., 2019. The Age of Entrepreneurship: Business proprietors, self-
employment and corporations since 1851. Routledge.
Chua, W.R., 2020. The Legal Status of Daos in Singapore: Company, Partnership, or
Business Trust?. Sing. L. Rev., 38, p.213.
Cribb, J., Miller, H. and Pope, T., 2019. Who are business owners and what are they
doing? (No. R158). IFS Report.
Parentoni, L., 2018. Limited Liability Company–LLC: Some Major Differences between
Brazil and the US Legislation.
Rupasingha, A. and Goetz, S.J., 2013. Self‐employment and local economic performance:
Evidence from US counties. Papers in Regional Science, 92(1), pp.141-161.
Rus, M.I. and CORDOȘ, A., 2021. The Limited Liability Company Vs. The Joint Stock
Company. Swot Analysis. Fiat Iustitia, 15(1), pp.164-170.
Sharma, J.K., 2020. Limited Liability Partnership as a Better Alternative to Incorporation. Jus
Corpus LJ, 1, p.440.
Vorachith, S., 2019. Building a Government-Citizen-Business Partnership: Linking Business
with Government in Laos. In Governance Innovations in the Asia-Pacific
Region (pp. 127-140). Routledge.
Yeoh, P., 2019. Corporate governance codes in the UK: The risk of over-reliance. Business
Law Review, 40(1), pp.19-27.
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