Key Sources of Laws for Business Organizations in the UK

This report discusses the legal context for business organizations in the UK, including the management of UK companies, duties of directors, and different types of partnerships. It covers the advantages and disadvantages of sole trader, general partnership, partnership, and limited liability. The report also provides recommendations for expanding a business from sole trader to a company.

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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TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
BUSINESSES & ORGANIZATIONS IN THE UK..................................................................3
THE LEGAL BUSINESS STRUCTURE OF UK COMPANIES.............................................4
Sole Trader............................................................................................................................4
General Partnership...............................................................................................................5
Partnership.............................................................................................................................6
Limited Liability...................................................................................................................7
RECOMMENDATIONS FOR IOM SOLUTIONS..................................................................8
CONCLUSION..........................................................................................................................8
REFERENCES...........................................................................................................................9
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INTRODUCTION
Business law is a body of law that governs the trading activities related to business and
commerce. It deals with the issues with issues related to the private as well as the public law
systems. It is also known as commercial or mercantile law. It is concerned with the rights and
liberties among the individuals and resolving the disputes that arise among the parties related to
business matters (Mallor and Barnes 2020). The rules regulate the trading activities of the
companies in the commercial matters.
The report illustrates the management of the companies of UK, duties of the directors.
The concepts of sole trader and various types of partnership and its management is discussed.
BUSINESSES & ORGANIZATIONS IN THE UK
Management refers to the process of planning, organizing, staffing, controlling and
coordinating. It involves leadership and techniques which helps in decision-making in the
company. It also refers to the coordination of all the resources which is required in the process of
management in order to achieve the goals of the company (López-Robles and et.al, 2019). The
concept of the managements:
Management as an activity: Management is defined as the activity that defines as the art of
getting things done through the efforts and the contribution of people. As a process it involves
social, integrated, continuous and interactive process.
Management as a resource: The company involve the labour and capital and the management
acts as productive factor and combine all; the resources in order to achieve the goals of the firm.
Management as a team: Management of the company helps to guild the employees at work and
coordinate the efforts of the employees and managers are given the responsibility to give
directions to the employees.
Different types of law
The laws of UK are Banking law, Commercial law, Constitutional law, Construction law,
contract law, corporate law, criminal law etc. Criminal law and Civil laws are two types of law in
UK and there are various categories which has different courts and procedures.
According to the English legal system, Vicarious liability is a principle of tort law which
imposes strict liability on the employer for the wrongful act done by the employees in the course
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of the employment (Schwöbel-Patel, 2018). The rule says that employer will be held responsible
for the wrongful act committed by the employee while conducting the duties. Tort of negligence
occurs when the business fails to perform its duties or breaches a duty of care and this poor
conduct can cause financial loss to the party.
The management of the company acts on two basis shareholders and board of directors
and the directors are the in charge of the management of the company. The directors of the
company make strategic decisions and make sure that the firm meets the legal obligation of the
business. Under the companies act there are various duties that is the directors should act within
the powers given and should promote and work towards the success of the company. It is the
responsibility to handle the affairs of the company and mange to avoid the conflicts that can arise
within the organization which can affect its working.
According to the Partnership Act 1890, any partner in a partnership firm can terminate
the partnership by giving the notice to the other partner and the effect of the notice will affect
instantly and it is not mandatory that it should be in writing.
Memorandum of Association: Under the Companies Act, memorandum is a legal document
which contains the names of the shareholders and the guarantors of the company (Harris, 2020).
It is written in a prescribed form and the format of MOA cannot be changed and remains for
lifetime. The changes are made regardless of the new members entering the company.
Articles of Association: The articles of association define the constitution of a company and hoe
the company operates. It is considered as company's guide that specifies the structure of the
company and the management of the company. It includes the member’s duties and
responsibilities, director’s appointment, profit distribution etc.
THE LEGAL BUSINESS STRUCTURE OF UK COMPANIES
Sole Trader
Sole Trader or Sole proprietorship is an unorganized business person who pays income tax
on the profits personally. It is considered as the easiest forms of business because the profits and
the losses are borne by one person and there is no involvement or restrictions of the government.
Lack of government interference they become popular with small business owners. The sole
trader receives all the profits and the assets is owned by the individual person and all the debts
are also of that person (Henley, et.al,2021). To become a sole trader an individual runs its own
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business and personally liable for the responsibilities and duties. The trader can trade on its own
name and can choose any name for its business.
Sole trader pays income tax of their profits and has to file self-assessment tax every year,
mentioning the income and expenses of the business (David and West, 2017). As the laws of UK
tax return is filed by all the business owners and send it to HMRC each year including the details
of the profits that business makes every year.
Liability means that amount a business person owes at one time. Sole traders have
unlimited liability that is unlike other business which has limited liability, sole trader is held
responsible for the success as well as the failure of the firm. A sole trader is a self-employed
person can dissolve its business and stop trading but it is important for the proprietor to maintain
its financial records for six years from the date of the dissolution.
Advantages
 Sole has full control over their business and running it is easy as there is lack of
government interference and no restrictions.
 All the proceeds from the business is retained by the sole trader.
 The personal data of the sole trader is kept private unlike the other business.
Disadvantages
 Sole Proprietorship is not considered as separate legal entity in the eyes of the law and if
the business goes into debts they are personally liable and risk their personal assets in
order to recover their debts.
 Sole traders who want to expand their business find it difficult to raise finance for the
expansion.
 All the decision of the business is taken by one person and no role of other people that is
the success and failure rests with the sole trader.
General Partnership
According to the Partnership Act 1890 general partnership is defined as the trading
between two people working in order to achieve the profits for the company. Every partner
contributes its share on proportionate basis (Iacobucci, 2018). In general partnership, only the
partners personally share all the responsibility that is the profits as well as the losses are shared
between the on a proportionate basis.
For the formation of the general partnership, the provisions of the Partnership Act have to
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be complied with (Eitan and et.al, 2019). The necessary restrictions related to the name of the
firm, its trading disclosures and other statutory regulations should be fulfilled in order to form a
partnership firm. In general partnership, the individual partners will prepare their self-assessment
tax return and pay tax on the share of their profits. Since they are treated as individual partners so
each partner has unlimited liability for the debts of the firm and obligation towards it.
Under the Partnership Act, the agreement specifies the terms regarding the dissolution of
the partnership and if no such clause is mentioned then all the partners can mutually decide and
dissolve the partnership.
Advantages
 It is the easiest method to operate a business because in general partnership each partner
is self-employed and are liable for their own debts.
 Unlike other partnership, in general partnership profits and losses are proportionally
distributed and are shared among the partners.
 The process to start general partnership in limited unlike other types of partnership.
Disadvantages
 In general partnership, each partner is personally liable for its debts and their personal
assets can be utilized for the recovery of the debts.
 In general partnership as the partners are personally liable for the debts and legal issue
which arise in the business as they have no formal protection and does not have any
separate legal entity.
Partnership
Partnership refers to the formal agreement between two or more parties in operating and
sharing the profits and losses which arise from the business (Hemingway and Gunawan, 2018).
In partnership business the partners share the liabilities and profits proportionally decided by the
partners in the agreement.
To form a partnership, it should be noted that all the valid elements mentioned under the
Partnership Act should be complied with in order to form a partnership business. All the basic
factors should be legal in the eyes of law and enforceable by court of law (Clinton and Whisnant,
2019). If a person forms a partnership to carry on the business it is necessary for the partners to
register with HMRC and the process of registration will involve the tax and any national
contribution before stating its trading as a partnership firm. Under the partnership agreements
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clauses are mentioned the dissolution of the partnership but there are various factors that
includes: by agreement, Dissolution by notice, on the expiry of the time period, on the death of
any one partner or insolvency and by the notice of the court.
Advantages
 According to the nature of business, partners will fund the business and the more number
of partners will have more capital to invest in the partnership business.
 It is easy to form and manage as there are fewer restrictions of the government and laws
and flexible management of the business.
Disadvantages
 The main demerit of partnership is that many times disagreements occurs among the
partners and difference of opinion can give rise to the conflicts among the partners.
 Partnership are subject to the unlimited liability that means every partner in the business
shares the liability and risk involved in the business.
Limited Liability
Limited Liability means the legal condition where the partner's liability is limited to certain
sum. In a company if a partner has limited liability that means the investors can sue that firm for
non-payments of the debts and can recover from the personal assets of the partners (Lee, and
Brown 2017). To form a limited liability company, the article of the company is filed with the
Secretary of the state.
The limited liability company has no liability to pay the tax personally and the partners can
pay tax on the share of the profits generated from the business. Approval of the owners is
required, filling the dissolution certificate with the state and settle all the debts and financial
accounts of the company and notify the creditors and by following the instructions related to the
winding up of the limited liability company.
Advantages
 No restriction on the number of partners
 Partners and owners of the company are not personally liable for the losses and debts of
the firm.
Disadvantages
 It is more expensive to form the limited liability company as compared to the sole
proprietorship and partnership firm.
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RECOMMENDATIONS FOR IOM SOLUTIONS
It is recommended that before making any changes in the business it is important to know
that the present structure of the company is right for the expansion og the business. To expand
the business from sole trader to company, Sam can save the tax because limited companies tax
lower than the Income tax. Companies can attract huge investments as sole traders cannot seek
investment. Changing from sole trader to company can limit the personal liability for the
business.
CONCLUSION
From the above report it can be summarized that business law helps ion regulating the
trading activities in a business. It is concerned with the protection of the rights and obligations of
the person and helps in resolving the disputes among the parties. The report illustrates the
management and concepts of the company of UK. It also highlights the formation, taxation
policy, advantages and disadvantages of the sole trader, general partnership, partnership an
limited liability.
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REFERENCES
Clinton, L. and Whisnant, R., 2019. Business model innovations for sustainability. In Managing
Sustainable Business (pp. 463-503). Springer, Dordrecht.
David, C. and West, R., 2017. NDIS Self‐Management Approaches: Opportunities for choice
and control or an Uber‐style wild west?. Australian Journal of Social Issues 52(4)
pp.331-346.
Eitan, et.al, 2019. Community–private sector partnerships in renewable energy. Renewable and
Sustainable Energy Reviews 105 pp.95-104.
Harris, R., 2020. A new understanding of the history of limited liability: an invitation for
theoretical reframing. Journal of Institutional Economics 16(5) pp.643-664.
Hemingway, R. and Gunawan, O., 2018. The Natural Hazards Partnership: A public-sector
collaboration across the UK for natural hazard disaster risk reduction. International
journal of disaster risk reduction 27 pp.499-511.
Henley, et.al,2021. Implications and impacts of the crisis on micro businesses and their future. In
Productivity and the Pandemic. Edward Elgar Publishing.
Iacobucci, G., 2018. Revitalising the GP partnership model. BMJ: British Medical Journal
(Online) 362.
Lee, N. and Brown, R., 2017. Innovation, SMEs and the liability of distance: the demand and
supply of bank funding in UK peripheral regions. Journal of Economic Geography
17(1) pp.233-260.
López-Robles, et.al,2019. 30 years of intelligence models in management and business: A
bibliometric review. International journal of information management 48 pp.22-38.
Mallor, J. and Barnes, A.J., 2020. Business law the ethical, global, and e-commerce
environment.
Schwöbel-Patel, C., 2018. The Core Crimes of International Criminal Law. The Oxford
Handbook of International Criminal Law (OUP 2018).
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