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 governing them. It covers different business structures, their advantages and disadvantages, and their legal implications. The report provides recommendations for IOM Solutions and suggests a limited liability company as the most suitable type for Sam. The report is relevant for BSc (Hons) Business Management students taking BMP4002 Business Law and PRO297 Business Law.

BSc (Hons) Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of
laws as the legal context for business
organisations in the UK
Submitted by:
Name:
ID:
Contents
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Table of Contents
Introduction ...............................................................................................................................2
Businesses & Organisations in the UK........................................................................................2
The legal business structure of UK companies..........................................................................3
Sole Trader:............................................................................................................................4
General Partnership:.............................................................................................................4
Partnership:...........................................................................................................................5
Limited Liability:.....................................................................................................................5
Recommendations for IOM Solutions........................................................................................6
Conclusion..................................................................................................................................6
REFERENCES...............................................................................................................................7
Introduction
Business is a type of industrial or commercial activity which tries to gain profit. It
mostly works towards producing and selling goods or providing services for the benefit of the
company. Business can range from a small scale business to a large scale business. They
require a range of planning, policies and strategies to form a proper legal business structure
for themselves like sole trader, corporation or a Multi National Organization. In order to be
successful, they need to reach their goals and objectives so that proper revenue can be earned
by them. Business activities take place anywhere in any environment by one person or by
several people who try to expand their business so that they can sustain for a longer time in
the market while also creating profits for the company(Adamou, Kyriakidou and Connolly,
2021). These organizations while following a set of rules and regulations can have a greater
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financial gain among its competitors. The business laws govern the business environment and
the people involved in it by providing legislation and properly stating how to form and run a
business. These provisions are essential for a business to run smoothly. This report will cover
in detail about Sam and his business as a Sole Trader, various forms of business structure,
legal obligations, director's role in a company and will provide suitable advice to Sam for his
Business.
Businesses & Organisations in the UK
The Companies Act of 2006 governs the business environment of United Kingdom. It
provides provisions which helps different business structures to operate effectively according
to the law. Various Employment laws also provide how a business treats its employees that is
why the companies need to comply with these laws as well. Companies are referred to as
artificial person by having a distinct identity of a professional entity. They as a company have
a distinct nature of having a separate identity, everlasting existence, distinct properties,
common seal and stamp and rights and responsibilities of suing any company or getting sued.
UK companies and their business transactions includes various agreements with their heads
and non disclosure clauses (Baillie, 2019). They also include selling and purchasing various
shares and assets, letters of intent, etc.
The companies also have certain liabilities called as Vicarious liabilities wherein it has
been established that if any employee while working in an organization commits any
incorrect act against any other person then the employer will be held liable for that act and it
will be his responsibility to act upon it. Business negligence is also conducted by some
businesses while operating wherein the business can be held liable if it fails in the
performance of its responsibilities in accordance to the set of norms which are prescribed for
the performance of its duties. The proper conduct and running of a business is in the hands of
the Director of the company who has various roles and responsibilities which need to be
performed by him. If obligations are not performed they can lead to liabilities which are
proper decision making by acting within the powers assigned to his post, he has to make
judgments which lead the company to success while also resolving the disputes which arise
within the organization (Flögel and Gärtner, 2018). The other directors of a company can hold
any director liable if he breaches any of the duties or responsibilities assigned to him. If the
company or business suffers any loss because of him he can be asked to make compensations
for the same while his contract with the company can also be terminated. His breach can also
lead to his disqualification from the post, he can also be held for offence of criminality if any
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serious breach is done by him and he can also be asked to return company's property if he is
in possession of some, etc.
The Partnership Act 1980 provides provisions regarding partnership in any company
and what leads to its termination. Both Memorandum of Association(MOA) and Articles of
Association (AOA) are essential for the proper conduct of a business. A company's formation
and its operation are governed by these two wherein MOA is a type of a statement which is
legal and is signed by the shareholders or guarantors or by anyone who is involved when the
company is formed. On the other hand, AOA is a statement which is written which involves
all the rules and regulations of a company which help in its operation and these are agreed by
the shareholders, owners and directors of a company.
The legal business structure of UK companies
IOM solutions operates under Sam who is the single person who manages his
business as sole trader. Due to him being the sole decision maker in his business he has all
the liabilities which the company incurs while operating its activities. But he has the benefit
of not sharing the profits with anyone else. Sam wants a business expansion thus the type of
business structures which can make his business even more successful are:
Sole Trader:
Sole Proprietorship are several times called as self employed business which operates
under a single person and is referred to as a simple business type which can be opened by
anyone who wants to operate a business. It is easier to open, set up and operate it. The single
person being the sole owner of the business, it makes him the only beneficiary of all the
revenue and profits which are generated in the business (Johnson, 2018). As being the head of
the business, the person has various rights and responsibilities which also brings liabilities
with the legal obligations. It is a very popular form in UK for anyone who wants to establish a
new business with all the ownership control in a single hand. This type is cost friendly when
the business is setting up. It has certain advantages which are no profit sharing, privacy is
observed, operation and management is easier in relation to other types. But there are certain
disadvantages which are seen they are a single person has to bear all the losses and debts,
self-time is not available, it is impossible to fulfill all the responsibilities related to the
business. The sole person also has to bear all the costs of buying equipment and materials for
the company which can lead him towards financial risks.
Legal implications of this type are: The owners of the business are taxed upon all their
business earnings with the name of income tax and corporation tax which is essential for them
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to pay on a timely basis. They need to keep a data of the customers and register themselves in
General Data Protection Regulations which comes with penalties for whoever doesn't comply
with it. Business should also be insured for legal fulfillment of the requirements. The owner
of the sole company needs to file self assessment tax return to avoid any legal consequences
which arise on the business.
General Partnership:
A business operated by two or more individuals is termed as a General Partnership. In
this type, the partners agree on sharing profits and losses. All the costs, risks and benefits are
shared between them. Partners fulfill the responsibilities which are acquired while managing
a business. These are referred to as unincorporated entities among the partners. Because of its
general nature, the partners are personally responsible for the debts in the operation of the
business. In the running of the organization each partner becomes liable towards each other
and is accountable in the benefits and the losses of a business. When the partnership is
formed, it makes the partners unlimitedly personally liable for all the actions of a business.
Involvement of partners makes it easier to get rich sources of capital. The distinct skills and
experience of the partners helps in proper decision making for the organization. The overall
performance of the business enhances with this business structure. But it also has the
disadvantage of joint and several liability which holds all the partners liable for all the
wrongful acts conducted in the name of the business (Maronesy, 2019).
Legal implications are- This type comes under the provisions of the Partnership Act 1980. It
is the duty of the partners to act with fairness. The partners need to share the responsibilities
in accordance to the act. Each partner has the right to make equal contributions. A partnership
agreement is created within it and a notice of dissolution dissolves the partnership. In the
absence of partnership agreement it can still be dissolved by illegality, death or bankruptcy of
a partner.
Partnership:
These are also referred to as limited liability partnerships. They are not legally treated
in UK. But they are similar to General Partnership except that here the partners have
obligation which is limited to the amount of money that is spent on the business. Two or more
members can incorporate this partnership. The limited liabilities makes them responsible for
their own misconduct and negligence. There is no collective responsibility involved in this
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type. Having a registered office is a must for them while also operating under the UK
government's regulations. Legal protections are provided to the individuals as partners. They
are not allowed to directly carry off the business.
Legal implications are- Limited Partnership Act 1907 covers this type of Partnership. There
is joint liability in the finances, debts and obligations of the partnership. A written agreement
constitutes the partnership (Moore, 2017) .
Limited Liability:
A privately managed and operated business is called as a limited liability company. Its
owners are shareholders and is run by the directors. It has its own legal rights and obligations
while operating as a separate legal entity. It makes a distinction between the personal affairs
and finances of a company. The limited liability makes the company retain all its profits.
Shareholders get their share of profits by the way of dividends.
Legal implications are- This type gets registered under the Companies Act 2006. The
company gets the image of a corporate personality under it. All the laws, roles and
responsibilities are codified in the Companies Act including the duties of a Director. It is
legally necessary for the company to file returns on accounts(Poesen, 2017) .
Recommendations for IOM Solutions
With Growth and Development in a business, expansion of a business is necessary
which requires changes in the business structure type(Tahir, 2018). A limited liability
company can be the most suitable type for Sam. Because in this hiring staff and distributing
responsibilities is easier. This type is more tax efficient in comparison to a sole trader. The
limited liabilities make it beneficial for the business owner. The law protects the personal
finances and the company gets the identity of a separate legal entity. Involvement of contract
creates liabilities in business actions (Tsagas, 2017). It is also easier to get loans from banks.
The limited liability helps the owner and provides protection from personal liabilities. The
business in this expands to various geographical locations.
Thus, Sam must opt for limited liability company because in a sole trader type the
business and legal finances cannot be separated and that option is available with type.
Limited company reduces personal exposure to financial risks.
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Conclusion
It can be concluded from the report that Business Law is essential to govern a business
environment. The legislation helps in smooth functioning of a business. Business comprises
all the activities which seek profit. These laws ensure that the rights of the people involved in
business are protected. Businesses vary in their size and types ranging from a sole trader to a
limited liability company. According to their advantages and disadvantages, Sam must opt for
a limited liability company. This type will benefit in maximizing profits and is free from
personal liabilities. Thus all the types have their pros and cons which provides distinct
identity to each one of them.
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REFERENCES
Adamou, M., Kyriakidou, N. and Connolly, J., 2021. Evolution of public-private partnership:
the UK perspective through a case study approach. International Journal of
Organizational Analysis.
Baillie, K., 2019. Regulation of Crowdfunding in the UK: Past, Present and Future. Bus. L.
Int'l, 20, p.147.
Flögel, F. and Gärtner, S., 2018. Lost diversity: Business lending in the centralised banking
system of the UK. Vierteljahrshefte zur Wirtschaftsforschung, 87(4), pp.67-86.
Johnson, M., 2018. Bermuda’s Domestic Partnership Act 2018: From'Living Tree'to Broken
Branches?.
Maronesy, Z., 2019. An analysis of the social enterprise sector in the UK.
Moore, M.T., 2017. Redressing risk oversight failure in UK and US listed companies: lessons
from the RBS and Citigroup litigation. European Business Organization Law
Review, 18(4), pp.733-759.
Poesen, M., 2017, November. EU-UK Civil Judicial Cooperation after Brexit: Challenges and
Prospects for Private International Law. In The paper was presented on the LERU
Brexit Seminar in Leuven on (Vol. 18).
Tahir, M.I.T., 2018. Evaluation of analysis of section31 (1) of the companies act
2006. European journal of law and political sciences, (3).
Tsagas, G., 2017. Section 172 of the companies act 2006: Desperate times call for soft law
Measures. Draft Paper for contribution: Tsagas, G.
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