Key Sources of Laws for Business Organisations in the UK

This report describes the legal context for business organisations in the UK, including the Companies Act and Insolvency Act. It explores different types of businesses such as sole proprietorship, general partnership, limited liability partnership, and limited liability company. The report recommends a limited liability company for IOM Solutions due to its benefits for expansion and growth.

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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Table of Contents
Introduction:...............................................................................................................................3
Businesses & Organisations in the UK........................................................................................3
The legal business structure of UK companies..........................................................................5
Sole Trader.............................................................................................................................5
General Partnership...............................................................................................................5
Limited liability Partnership...................................................................................................5
Limited Liability company......................................................................................................6
Recommendations for IOM Solutions........................................................................................6
Conclusion..................................................................................................................................7
References:.................................................................................................................................8
Introduction:
The term business can be defined as an activity of buying and selling of goods and
services by the businessman. The law that governs all the businesses in the country are
known as business law. The business law specifies the provisions that all the businesses are
bound to follow in the country(Bawah, 2019). No business is allowed to not follow the
provisions of the business law of the country. There are generally two types of statues in UK
that applies on every type of businesses. These two statues are Companies Act, 2006 and
Insolvency Act, 1986. All these two laws majorly governs the business in UK. The
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Companies Act provides the provisions for the incorporation, taxation and winding up of the
companies. It further provides about the duties and liabilities of the director and the company
as a whole(Berry, 2019). The companies act was firstly drafted by UK in all over the world. It
provides with the rules and regulations that have to be followed by the companies. It provides
company t separate legal entity in the eyes of law. Moreover, the Insolvency Act act provides
for the rules that deals with insolvency of the company or a person. There are specific rules
that must be followed by the companies in order to regulate the procedure of insolvency in
the courts of UK. This report concludes about the different types of businesses that can be run
in UK. It also explains about the merits and demerits of these types of business. It further
explains about the taxation and liability involved in these types of firms. Further more, it also
explains about the best type of business that will suit to IOM Solutions for expanding its
business. It also explains about the consequences of choosing that specific type of business.
Businesses & Organisations in the UK
The company is a separate legal entity in the eyes of law. It has perpetual succession.
This means the company will go on irrelevant of the the fact of change of members in the
company. The company will carry on its business until it has legal existence. The
management of the company is controls by its board of directors. They all the long term
decisions for the company in the general meeting of the company (Bruner, 2018). The term
vicarious liability means the liability of the principal for the acts done by his agent. It is a
type of master servant relationship. This means that the master is responsible for the wrong
acts done by his servant. This is the type of liability present in tort law in UK. All the legal
actions will be taken against the master for the incorrect acts done by the servant. Any
negligence done by the business would result into recovery by the aggrieved from the
business. For instance, any negligence done by medical practitioner, doctor is liable for
compensation to the innocent party(Butturini, 2020). Likewise other professionals are also
liable for compensation to the aggrieved party. Moreover, the director is the person that
controls the company. Director is the highest authority of the company. The long term goals
of the company is formulated by the director of the company. The director is responsible for
various roles and duties assigned to him for the smooth functioning of the company. It is the
prime duty of director to be loyal towards the company. The director must not reveal the
confidential information of the company that can put the company into huge loss. One of the
other duty of the director is that he must take efficient and effective decisions. This is because
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on his decisions the growth of the company will depend. There are various legal liabilities
that are applicable to the director of the company(Parry, 2021). The director must ensure that
there is no existence of discrimination among the employees of the organisation. Moreover,
the director must also make sure that there is no conflicts between the employees of the
company. Further more, if there is any conflict between the employees then the director must
resolve it and also establish the harmony at the workplace. If the director is involved into any
serious malpractices or breach of duties, then he must be disqualified from being a director of
the company.
There is a specific statue that governs the partnership in UK namely the Partnership
Act, 1890. this act provides for the provisions that governs the different types of partnership
in the UK. This act provides for the creation and winding up of the partnership firm in UK.
The partnership can be terminated by any partner by giving notice to all the other partners at
any time. The notice may or may not be in written format. Moreover, there are also two main
types of documents of a company namely MOA and AOA of the company. The
Memorandum of Association (MOA) is a mandatory document as per the Companies Act,
2006. The MOA outlines the basic details that are necessary for the establishment of the
company. It is the supreme document of any company. All the other documents come after
this document. Whereas the Article of Association is a document that is subordinate to
MOA. The AOA basically outlines the rules and regulations that are applicable to each and
every employees of the company. It is a document designed by the company to maintain
peace and discipline in the country.
The legal business structure of UK companies
Sole Trader
The sole trader is a type of businessman who solely runs the business. This type of
businessman is the sole owner of the business. There is the existence of unlimited liability in
this case. The tax imposition is also efficient in this type of business. This is because the
profits of the business is taxed personally as the income of the sole proprietor. There are
various merits and demerits of this type of business. The merits includes self control. It means
the sole proprietor is free to make its own rules for the business. He is not bound by any other
person while formulating policies for the business. It is very easy to operate and run in the
present world(Regulation, et.al, 2019). Its demerits includes lack of managerial skills present
in one person. There is also lack of investment and employees in this type of business. The
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owner get very less time for his personal life as he has to manage all the work of the firm. It is
best for the startups done by the people of the country.
General Partnership
The general partnership is governed by the Partnership Act, 1890. the partnership
firm is constituted two or more partners as per the provisions of the act. The liability of the
firm is unlimited. It is easy to form. There are many advantages and disadvantages of the
partnership firm. The first advantage is sharing of liability. The partners share equal liability
for the partnership firm. It helps in managing the activities of the firm as now more than one
person is involved in the business. It is also helpful in decision making efficiently. The
partners have now more time for their personal and social life. The demerits include lack of
confidentiality in the business. The other partner also has to bear for the losses done by the
other person.
Limited liability Partnership
There is another type of partnership that is limited liability partnership as per the laws
in UK. The essential part of making a limited partnership firm is that it must have a registered
office. In this type of partnership, the partners are limited with their liability towards the firm.
This type of partnership is very significant as other partner is not bound for the wrongful acts
done by the other partner due to its limited liability(Repiquet, 2018). The taxation is also very
efficient. The partners have to pay individually tax on the income earned by the partnership
firm. The merits includes the limited liability, sharing of management,etc. The demerits
includes lack of confidentiality and effective decision making in the firm. This is because
thew partner have to discuss with other partner for the decisions which will consume more
time.
Limited Liability company
The management of the company is governed by the Companies Act, 2006. the act
provides for the provisions of incorporation and dismissal of the partnership form. The
company must be firstly incorporated for its existence. There is separate legal entity for a
company. It also has limited liability. It is also known as private limited company. Its head is
known as director. When there are more than one owner of the company, then it as a whole is
called as Board of Directors. The company has to pay tax separately. The company issues its
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share capital. The persons who invest in the shares of the company are called as shareholders
of the company. The company also has many merits and loopholes. One of the merit is that
the management of the company is more efficient as many employees are hired for it. It
works perfectly. The company faces very lack of financial crisis as the shareholders invest in
the company (Singh, et.al, 2021). So no individual have the burden to invest in the company.
It has very efficient tax management. It also helps in making huge profits for the company as
a whole. It also provide time for personal life of the member of the company. The demerits
includes lack of decision making power to one individual. This is because all the members of
the company is involved in making decision for the company.
Recommendations for IOM Solutions
The IOM Solutions must go for the Limited liability company. This is because it is
very growing firm and needs expansion. The LLC will best fit in this scenario. This type of
company will be best for this dynamic market. The company will provide limited liability
which will result into less stress and more output from the business. It will also help Sam in
gaining more and more profits from the business. The company will also provide a better
source for raising the capital for the business. This is so because the company will have to
pay less return to investment done by the shareholders as compare to interest payable for any
type of loan. It will further require less documentation. This will also help the Sam from
investing him time more in business and raising more profits from the firm. This will also
help Sam in management of the company as now Sam can hire more employees for the
company. Further more, more shareholders will assist the company towards its growth and
development. It will also assist in gaining more time for personal life to Sam. Moreover,
more minds is involved in business for retaining more profits for the business. Hence, Sam
must do opt for limited liability company.
Conclusion
This report concludes about the types of business that can be run in UK. The report
summaries different types of business like sole proprietor, limited liability partnership,
limited liability company and general partnership that can be established in United Kingdom.
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The acts that govern these businesses are Companies Act 2006 and Partnership Act, 1986.
there are various provisions that deals with the governance of these types of the business as
prescribed by the law of the country. It also concludes about the merits of these types of
businesses. Further more, Sam is advised to convert his firm into Limited Liability Company
due to its various benefits that best fits in the present case scenario.
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References:
Books and Journals
(Bawah, 2019) (Berry, 2019) (Bruner, 2018) (Butturini, 2020) (Parry, 2021)
(Regulation, .et.al, 2019) (Repiquet, 2018) (Singh, .et.al, 2021)
Bawah, A.S., 2019. A Comparison of the Statutory Provisions of the United Kingdom (UK)
Companies Act 2006 and Ghana's Companies Act 1963 (Act 179), to the Rule in
Foss v Harbottle. Beijing L. Rev., 10, p.153.
Berry, E., 2019. Limited partnership law and private equity: an instance of legislative
capture?. Journal of Corporate Law Studies, 19(1), pp.105-135.
Bruner, C.M., 2018. Opting out of fiduciary duties and liabilities in US and UK business
entities. In Research Handbook on Fiduciary Law. Edward Elgar Publishing.
Butturini, P., 2020. Written Resolutions in UK Companies Act 2006 and Their Possible
Relevance beyond UK Borders. European Company and Financial Law
Review, 17(6), pp.760-784.
Parry, R., 2021. Insolvent partnerships: development of a normative framework based on a
contractual paradigm. In Research Handbook on Corporate Restructuring. Edward
Elgar Publishing.
Regulation, M.A., et.al. , 2019. Table of Legislation and Regulation. Exchange (Revised in
2019), 4(2), p.412.
Repiquet, M.D., 2018. Report from United Kingdom: UK Private Fund Limited Partnership
2017-Preserving UK Reputation Post-Brexit. Eur. Company L., 15, p.97.
Singh, C., et.al ., 2021. Reimagining the Role, Duties and Liabilities of Non-Executive
Directors in 2020; 15 Years of the Companies Act 2006 and the Pathway to the UK
Corporate Governance Code 2018. Part Two: The Most Current
Approach. International Company and Commercial Law Review, 32(2), pp.89-103.
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