Key Sources of Laws for Business Organisations in the UK

This report evaluates the legal business structures of UK companies and provides detailed guidelines to IOM solution. It explains the concept of taxation, liability, advantages and disadvantages of different business structures. The report discusses four types of legal structures, namely sole trader, general partnership, partnership, and limited liability. It recommends limited liability partnership as the most suitable structure for IOM solution.

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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Introduction
To start or expand any business in economy businesses need to follows
several legal legislature and structure to establish their operations. The business
structure that choose by the individual and group influences every aspect. From daily
operations to taxes slabs and the risk of personnel assets that incurred due to
structural nature of business. In this given report an evaluation of such legal
business structures of UK will be evaluate to provide the detailed guidelines to IOM
solution. In instance to this a proper explanation of such structure with the concept of
taxation, liability and their advantages and disadvantages on business will be
provided in this detailed report. At last a suitable recommendation will also provided
to the mentioned business owner in order to enhance its operational activity
(Andersen, 2018) .
Businesses & Organisations in the UK
A company is an formation of two or more persons that performs the
operations in the market In order to achieve the business objectives. A company is
know as a separate legal entity in which business has its own identity in regard to the
partners. There are different type of business entities such as public company,
private limited company, sole proprietorship, limited liability company as well as one
person company (Anderson, and Gupta, 2019).
The vicarious liability is know for the no fault liability in which one person
action or decision liable for the result of other one. In the company functions any
decision or act of single partner reflects on all the partners as well as on the
operations of the company.
Vicarious liability is the aspect in which a company fails into perform their
responsibility in regard to their operations due to this company face the financial loss
and operational damage.
The role of director in the company is to manage and evaluate the operational
task of company in an effective manner in order to gain the desired redult according
to the set of company goals. Director is liable of Any losses and project failure in
company operations.
The termination of partnership is known for the dissolution of partnership and
relation between the partners. After the termination of partnership all the assets,
liability of business is disposed off.
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A memorandum of assassination the legal document that created at the time
of registration of a company as well as article of association is a legal document that
used by the company in order to classify their rules and regulation.
The legal business structure of UK companies
Sole Trader
The sole trader is one of the easiest form to register the business. A sole
trader is an separate entity who runs the business on their own. Their is no
partnership included in this mentioned business structure. The business and owner
does not have any separate legal entity. They have all the rights to take the decision
for its business. This type of business entity don't need any legal formation to
registered with the legal house. It includes only single person as a sole trader in
business activity without any director or partner to run the business. Their are no
active or legal partners attached with sole trader (Anderson, 2020).
Taxation
The current taxation criteria of taxation for sole trader in UK.
Personal allowance: the first £12,500 = tax-free (unless income is above 100,000, after
which you lose £1 of personal allowance for every £2 earned).
Basic rate tax: £1-£37,500 (after taking off personal allowance) = 20% tax
Higher rate tax: taxable income over £37,500 = 40% tax.
Additional rate tax: taxable income over £150,000 = 45% tax (Daly, 2020).
 A sole trader pay the taxes on its net profit that earned through the business
operations in the market.
 The owner of the business need to pay income tax, 4 national insurance as
well as class 2 tax on the business profits.
 The respective trader can easily withdraw liquidity or cash from the business
operations without any tax deduction.
 monetary gain as well as profits earned by the selling of business assets
come under taxation policy.
 Sole trader in UK can apply for tax relief on their exempted charges and
interest, if they have separate business and personnel account.
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Liability
sole trader faces the unlimited liability on their business operations. All the
personnel assets of sole trader are on risk to pay the debt to the creditors of
business. Hence, the risk of personal bankruptcy is way much higher in compare to
other business structure. This is due to business in mentioned structure don't have
any separate legal identity (Gerber, 2021).
Dissolvent
As mentioned in the above discussion the sole trader structure didn't need
formal registration to start the business. In regard to this it is easy to dissolve as its
started. By just paying the debts and maintenance of records in regard to the tax
feeling is needed to dissolve such structure
Advantages
The mentioned structure is easy to form as well as required less capital to
start the business. The owner of the business is free to take the decision without any
clashes of thoughts. All the profits earned in the business has the ownership of Sole
trader without any profit splits (Marshall, and Barclay, 2019).
Disadvantages
One of the major disadvantage of such mentioned business structure is the
responsibility. All the decisions and operations are manged by single person.
Secondly the sole trader need to deploy extra working hour in the business to
perform its business activity smoothly. The risk of self bankruptcy is higher in case
not capable to pay the debt to their creditors.
General Partnership
The general partnership includes the arrangement in which two or more
persons agree to share the profits, losses, liability and assets of the business. The
mentioned business structure provide the flexibility to partners in order to control the
business operations according to their needs and concerns. A partnership
agreement is created in this type of structure with all the mutual concerns of the
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partners. To form such type of structure minimal two persons are required as well as
agreed on partnership deed. All the partners were entitled with
Taxation
In general partnership the businesses don't pay any taxes due to pass to the
entities. All the partners pay their individual taxes according to their share of
partnership in the business operations. In general partnership the income of all the
partners are treated as self employment income (McAdam, 2018).
Dissolvent
The mentioned partnership dissolved if a partner exits the partnership, dies or
becomes disabled. The dissolution also occurs when there is any conflicts or change
in the relation between the partners. At the time of dissolution the business partners
need to wind up all their affairs and notify all the interested entities in the partnership
agreement.
Advantages
The respective partnership is less expensive in compare to other structure. It
also requires minimal paperwork to form the general partnership. This is more
compliance in order to other structure because of no annual report is needed to
show or maintain. The taxes scenario are simplified and sorted in between the
partners that eliminate the complexity in the functions. It can be dissolve easily
because of minimalist paperwork requirement.
Disadvantages
All the partners in this type of partnerships faced the unlimited personal
liability due to action of other partner. This type of structure is not suitable in order to
raise the money through investor. Hence the possibility of enchaining the business
operations through funding is less reactive in general partnerships.
Partnership
The partnership is the practice that performs between the two or more
individuals in order to perform the functions of business. All the owner in such
partnership act on the behalf of each other in the operations. The decision formed in
this type of partnership are perform through voting rights or mutual understanding.
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All the assets and liability are distributed according to the agreement. It requires the
different taxation number as well as all the partners get the tax benefits. At the time
of dissolution the business partners need to wind up all their affairs and notify all the
interested entities in the partnership agreement (Ribstein, 2020).
Taxation
The taxation slab in the partnership does not implement on the partnership.
The partners pays the the individuals taxes according to their share in the business
operations. According to the allocated share of profits partners pay out their taxes.
Dissolvent
The dissolution of partnership can be perform due to several attributes. If any
partner disagree or exit the partnership agreement the formed partnership dissolves.
In relation to this due to bankruptcy of a partner can also dissolves the formed
partnership as well as if a business involves new partner in the partnership then new
partnership agreement is created which deployed the current formed partnership.
Advantages
The partnership are easy to from as well as less expensive in compare to
companies. All the decisions take in the partnership are done by mutual concerns.
All the profit and losses in this type of partnership are shared according to their share
in the partnership agreement. Unlike the companies, the partnership don't need to
disclose their annual report in the public. Hence this factor plays a major role in
business to create the greater privacy in their operations. The legal structure also
can be changed easily according to the partnership requirment.
Disadvantages
One of the major drawback of partnership is that all the partners work together
and responsible for business debt. Hence any mistake or inappropriate decision by
partners can cost all of the individuals that relates to the business operations. The
taxation charged on the according to personal tax rate. As if business earning will
increase so on the tax rate. Another factor that comply as disadvantage in
partnership is partners cannot transfer their individual ownership to someone other
outside the business. It requires their consideration to transfer such ownership.
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Hence, any individual in partnership have no right to take the decision without
consideration of all the partners.
Limited Liability
The limited liability partnership is a type of partnership in which business and
partners are concerned as separate entity. The liability of all the partners in this
structure are separate as well as limited (Rose, 2018). Due to this the partners are
not liable to pay the debt to their creditor on the verge of their personal assets
outside the business operations. Partners under this partnership shares the profit
according to their deciding ratio. The number of partners can be extended without
any limit.
Taxation
Partners in the mentioned structure pays taxes on their profit share not on business
operations.
Dissolvent
Advantages
 No limit of owners in the business operations
 It requires low registration cost
 there is no mandatory requirement of audits
 The risk of Bankruptcy of partners is exempted in this type of structure
Disadvantages
one of the major disadvantage of LLP that analyzed in the given report is
higher tax rate as well as the partners in this type of structure have to be regularly
posted their financial account in the public which shows the lack of privacy to the
business operations (Vanhala, 2019)..
Recommendations for IOM Solutions
According to the above analysis Limited liability partnership is the most
suitable structure for IOM solution. Through this type of structure they can expand
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their business smoothly as well as the risk of personal assets is also not included.
The owner of IOM can also invite number of partners in its business operation in
order to get the benefits of funds as well as their operational responsibility can also
be distributed which will help into reduce the complexity in the business operations.
Conclusion
In the above mentioned report several legal structure of businesses were
evaluated that showed the different nature and entity of such structure. To start the
business a favorable structure is needed according to the operational requirement.
As in the above report various structure were evaluated that showed the different
natures and practices. In this given report all the four type of legal structure were
discussed to proposed the suitable structure to IOM solution.
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References
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Anderson, A. and Gupta, P.P., 2019. A cross-country comparison of corporate governance
and firm performance: do financial structure and the legal system matter?. Journal of
Contemporary Accounting & Economics, 5(2), pp.61-79.
Anderson, A.G., 2020. Conflicts of Interest: Efficiency, Fairness and Corporate
Structure. UCLA L. Rev., 25, p.738.
Daly, M.C., 2020. The Structure of Legal Education and the Legal Profession,
Multidisciplinary Practice, Competition, and Globalization. Journal of Legal
Education, 52(4), pp.480-490.
Gerber, H., 2021. State, society, and law in Islam: Ottoman law in comparative perspective.
SUNY Press.
Marshall, A.M. and Barclay, S., 2019. In their own words: how ordinary people construct the
legal world. Law & Social Inquiry, 28(3), pp.617-628.
McAdam, D., 2018. Conceptual Origins, Current Problems, et al. Comparative Perspectives
on Social Movements. Cam-bridge: Cambridge University Press, pp.23-40.
Ribstein, L.E., 2020. Ethical Rules, Agency Costs, and Law Firm Structure. Virginia Law
Review, pp.1707-1759.
Rose, J.M., 2018. Corporate directors and social responsibility: Ethics versus shareholder
value. Journal of Business Ethics, 73(3), pp.319-331.
Vanhala, L., 2019. Legal opportunity structures and the paradox of legal mobilization by the
environmental movement in the UK. Law & Society Review, 46(3), pp.523-556.
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