Key Sources of Laws for Business Organisations in the UK

This report discusses the legal context for business organisations in the UK, including the Companies Act of 2006 and employment laws. It explores various forms of business, such as sole proprietorship, general partnership, and limited liability, and provides recommendations for the best-suited option for a business owner looking to expand. The report concludes that a limited liability partnership is the most appropriate choice for the given scenario.

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:
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Contents
Introduction 3
Businesses & Organisations in the UK 4
The legal business structure of UK companies 4
Recommendations for IOM Solutions 7
Conclusion 8
References 9
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Introduction
Business law is a subject which comprises of all the related legislation's which dictate
that how the businesses are formed and run. All Business enterprise have to engage
themselves into number of different activities in order to conduct the day to day chores of the
business with the aim of gaining maximum earnings. The form of business depending on their
workings can range from sole proprietorship to corporations to international companies. Also
there lies various liabilities of which the enterprises are bound to comply in order to escape
from legal obligations. Moreover, the commercial laws are the one type of legislation which
regulates the companies from their born to birth. Which means that from their incorporation
to managing to their dissolution(Baillie, 2019). The following report is going to cover in
detail about all the various forms of business along with their advantages, disadvantages,
legal liabilities and appropriate recommendation to Sam regarding the best suited option for
his business.
Businesses & Organisations in the UK
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In United Kingdom, the primary source which governs the companies is of the
Companies Act of 2006. other than this, the companies also need to comply with the
provisions of Employment laws and contracts laws as reason being the peaceful working of
employees In is the key to successful business. Depending on their nature and type, the
companies enjoys several rights such as perpetual succession,title of separate legal entity,
common seal and right to sue and to be sued. Also in UK, there also exists the concept of
non- disclosure agreements and letter of intent, etc. similarly, the employment laws also
bounds both the employer and employees for the commitment of any erroneous act on their
part against company or any other person. Moreover, the business can also be made liable, if
one fails to perform their part of obligations as per the norms and standards given in the
statutes. The directors are the one who stands responsible for the management and conduct of
the company therefore there stands certain liabilities on part of them if there occurs the non
compliance of certain prescribed duties. Also they are required to take timely decisions and
measures for the affairs of the company while acting in their authorized capacity. But if there
occurs the scenario where the directors is found at some fault then they can be held liable by
any of the shareholders or any other authorized directors where one can be asked to make
certain compensation for the occurred losses or can be terminated from the company or can
be declared further ineligible for the post(Begum, 2020). Mainly for the partnership firms,
the deed of partnership can be made ineffective by the provisions of Partnership Act, 1890.
The two primary documents, which are required by every organization are of Memorandum
of Association and Article of Association. These helps in guiding how the company needs to
formed and further operated. The said memorandum of company further need to be signed by
its shareholders while at the time of incorporation. Whereas Article of association is a written
statement which comprises of all the rules and regulations as agreed by all its directors and
shareholders for the conduct of the business.
The legal business structure of UK companies
There lies the various forms of business but each implies there own merits and
demerits. Therefore in order to know the best suited option one needs to have a thorough
knowledge about all the existing forms. Here, as Sam who wants to expand his business
which he has been operating since past eight years. Till the time he has been managing as a
sole trader where he was the only person who need to fulfill the liabilities alone(Giupponi
and Xu, 2020). But now as he is interested in exploring more available options of business
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forms for his company who deals in selling electrical parts. The recommendations along with
their pros and cons, for Sam is as follows-
Sole Trader
This form is also known as the sole proprietorship, which is considered as one of the
most simplest way to start a business. Also there lies least formalities in terms of
incorporation, management and dissolution. The person who operates such business is named
as proprietor or owner of the same which solely and independently entails all the profits and
liabilities. This type of businesses are very much prevailing in the country due to its flexible
workings and benefit of individual control. These also result in the option of pocket friendly
on the part of its owner. There are number of advantages of this form out of which some are,
the whole control of business, which means that owner have all the rights to keep the profits
with themselves. The concern of privacy which is usually a major issue which prevails in
other forms, does not arise here as the proprietor is the only one who have the knowledge
regarding the internal dealings of the business. Also the incorporation of this form of business
is said to be most simplest one and does not required any further registration. The
disadvantages of this are of the that the one have to bear all the liabilities on their own which
very often can become a drawback. Also the equipment and material charges lies entirely on
the one person where with respect to that the banking and financial risks also arises. Similar
to other things there also lies certain legal implications which one needs to comply with, here
for this type are that the filing of taxes such as corporate and income tax are required to be
paid by the owner themselves on timely basis out of their earnings. Also in order to keep the
data of its customers they need to abide by the general data protection regulations. These
regulations comes with the certain penalties in case where one fails to make their act in
accordance to them. Also it is requisite to be in national insurance and to obviate any legal
consequences by filing proper self assessment tax returns on time(Hemingway and Gunawan,
2018).
General Partnership
In this form of business two or more than two individuals agrees to combine their
resources in order to establish a business with the purpose having earning of profits. In United
Kingdom this form is considered as one of the most prevailing one. The persons who are
involved in the affairs of the business including the task of taking crucial decisions are
addressed as the partners who works in the capacity of co workers for the business. General
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partnership is one of the form of partnership business model where the functioning of it is
almost similar to that of partnership. The process of incorporation is much easier and less
expensive. In this, all the said partners equally holds all the responsibilities together in equal
proportion and also shares the profits and losses in the same proportion. Moreover, other than
the profits the partners also hold the authority to import the labor, assets, investment and
skills to the business. Out of some of the benefits, one is of the getting of equal share of
profits while sharing the liabilities. Furthermore, the legal implications of this form are that as
according to the existing legislation the the partnership firms are not recognized as a separate
legal entity other than its owner. Because of this the partners are bound to pay their part of
taxes on the profits which has been acquired out of the total share of earnings of the
company. And the taxes on the whole of income are to be paid separately on the account of
firm itself(Henley, 2021).
Partnership
when two or more people in collaboration to each other comes together to share the
earnings and liabilities are said to be formed a partnership. The primary attributes which are
required for the formation of any type of partnership firm are very first, the existence of a
partnership deed among the partners along with the ratio in which the profits and liabilities
are to be acquired. There also lies the discretion on the part of partners to conduct the affairs
of the business either by any one of them or all of them together. The availability of number
of partners is a criteria which at many times can proved to be both advantage and
disadvantage. The positive aspect is that it provides a large number of network reason being
involvement of various owners. Whereas, the negative aspect can that individual tends to
loose the direct and whole control of the business reason being the part of broad circle.
Moreover, talking about the legal implications, the partners are not bound to pay the taxes on
the total income which have been generated out of the partnership arrangement. Instead, each
individual are required to pay the same out of their part of earnings. Therefore, accordingly
the losses and profits out of partnership are brought back into the individual partner tax
returns(Hill, 2020).
Limited Liability
Here as the names suggests the liability of the members of the limited liability
company are restricted to the extent of amount which one acquires in his name. Here the
shares are not issued in the market that is to the general public rather are acquired from the
other sources. The company and its members operates in the capacity of separate legal entity
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which can also be one of the advantages of this form. Also there lies no such mandatory
requirement of minimum capital to incorporate the business it can accordingly be decided as
per the requirements of the business. Disadvantages can be of the prescribed limit of
shareholders that is fifty in most of the cases and restriction on the issuance of company's
prospectus to the general public. As similar to the earlier stated forms, this type also entails
the status of separate legal entity, which results to the point that the liabilities of its members
is limited to the share of their invested capital even though the capital is accountable to full
extent. Also the partners are not made personally liable for the losses or the frauds which has
been committed by the other members. Similarly for the acts of negligence and criminal
offenses the others cannot be made co jointly responsible along with others as there exists no
such concept of joint liability in such cases(Lloyd and Payne, 2021).
Recommendations for IOM Solutions
The most appropriate forms form which stands most suitable for Sam as per the given
facts of the case, is of the Limited liability partnership. After analyzing all the above
mentioned various forms it can be ascertained that the attributes which Sam is looking for lies
there in the form of Limited liability model. Also as the facts clearly states that one is looking
for measures to expand his already running business while ensuring the maximum security.
The other concern is that, one being the sole controller, lacks as a reason having the
inadequate management. So for this reason also one can opt for the option of this form as it
will engage more members to look after the affairs of the business(Mallor and Barnes, 2020).
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Conclusion
The above report concludes that the major piece of legislation which governs the acts
of any company is the Companies Act of 2006. This also assists in terms of the every small to
big aspects including the formation and dissolution of the organization. It summarizes that
pros and cons of each form along with their existing legal implications. Moreover, it states
that the most appropriate choice which is available in front of the Sam for his business
according to his needs is of the limited liability partnership as it will engage more number of
members who will assist in the managing affairs and at the same time owner will also have
the direct control over the business as he desires.
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References
Baillie, K., 2019. Regulation of Crowdfunding in the UK: Past, Present and Future. Bus. L.
Int'l.20. p.147.
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.
Giupponi, G. and Xu, X., 2020. What Does the Rise of Self-Employment Tell Us About the
UK Labour Market. IFS Briefing Note, https://www. ifs. org. uk/publications/15182.
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, A., 2021. The rise of self-employment in the UK: entrepreneurial transmission or
declining job quality?. Cambridge Journal of Economics. 45(3). pp.457-486.
Hill, I.R., 2020. Spotlight on UK artisan entrepreneurs' situated collaborations: through the
lens of entrepreneurial capitals and their conversion. International Journal of
Entrepreneurial Behavior & Research.
Lloyd, C. and Payne, J., 2021. Food for thought: Robots, jobs and skills in food and drink
processing in Norway and the UK. New Technology, Work and Employment.
Mallor, J. and Barnes, A.J., 2020. Business law the ethical, global, and e-commerce
environment.
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