Key Sources of Laws for Business Organizations in the UK

This report describes the key sources of laws as the legal context for business organizations in the UK. It covers various types of business structure and necessary recommendations for future growth and enlargement.

Business Management
BMP4002Business 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................................................................................................................................2
Businesses & Organizations in the UK......................................................................................2
The legal business structure of UK companies..........................................................................3
Sole Trader.............................................................................................................................3
General Partnership................................................................................................................4
Partnership..............................................................................................................................4
Limited Liability....................................................................................................................4
Recommendations for IOM Solutions...................................................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................7
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Introduction
Business laws are the set of rules and regulations in order to operate business in a
particular country. These laws are implemented in order to run a business in a systematic
way. The present study is based on the scenario where Sam is going to start a new business of
selling electric parts to the local garages. Due to the growth of business, Sam is looking
forward to expand the business. The report will cover various types of business structure and
necessary recommendations for the Sam’s business to ensure the future growth and
enlargement.
Businesses & Organizations in the UK
Nature and management of company: In the given scenario, Sam is running a
business as a sole trader. The business is related to selling the electric parts to the local
garages. In business, all the decisions are taken by Sam without interference of any external
party. The entire profit belongs to Sam and he is responsible to bear the potential loss as well.
Different types of laws: In a business, various types and laws are followed. Some of
them are given below:
Employment Rights Act 1996: This is concern with the right of employees including
the wages, right in context of dismissal and more.
Equality Act 2010: It is about treating each and every employee fairly. Here, every
employees needs to give a fair chance to get growth and enhancement at workplace.
Health and safety at work, 1974: This is the principle act to govern the health and
safety at workplace. In addition, it comprises ample of other laws related to the health &
safety within the organization (Brummer, 2018).
Director’s role: Directors are the most important stakeholder of a company. If a
director breach the duty, it is required to compensate the losses of the organization due to the
breach. While a director commit something with an intention of fraud, the director will be
personally liable to bear the losses of the company.
Termination of partnership: An existing partnership can be terminated with consent
of all the partners. In addition, it can be terminated by the contract between the partners. A
partnership is formed by a contract or can be terminated by using the agreement.
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Memorandum of association: It is a highly important document for a company. It is
a legal document that is prepared during the formation or registration process of a company.
Basically, it defines the relationship of a company with its stakeholders and specifies the
objectives for which the company has been formed (Knoke, 2019).
Article of association: The content of article of association can be differ from
jurisdiction to jurisdiction. Generally, it contains the information regarding purpose of the
company, share capital, provision, name of the company and more.
The legal business structure of UK companies
Sole Trader
Sole Trader is a person who starts a business in order to earn profit. Here, the entire business
is handled by a single owner who is also responsible to take the necessary business related
decisions. If a person has a business idea, a sole business can be started with that idea.
Generally, there is no requirement of registration to start a such kind of business. Here, an
Individual can easily become a sole trader with limited amount of investment (Pinna, 2017).
Taxation: In UK, a sole proprietor record the earning as personal income and pay the
ordinary income tax. Basically, the tax is paid on the profits earned by the business.
Liability: In terms of liability, the liability of a sole trader is unlimited. Here, a sole
trader is responsible to pay the debts of the business personally. If the sole trader does not pay
the liability timely, it might create risk for their personal assets.
Dissolvent: For this, one needs to inform IRS and the tax authotities at regional and
state level. Due to lack of legal status, it can be dissolve by simply ceased the business
operations.
Advantages:
 The main advantage is the freedom of taking business related business.
 There is no requirement to share the profit with other people as there is no involve in
the business expect the sole trader.
 Sole trader can enjoy the maximum privacy due to no or minimum intervention of any
external person (Sadiq, 2021).
 Legal structure of a sole trade entity can be changes easily.
Disadvantages:
 Being a sole trader, the person needs to bear the entire losses as there is no one to
share the loss.
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 Sole proprietor business often faces the issue of lack of efficiency as all the business
decisions are taken by the individual person solely.
 The assets of sole traded business are also limited which restrict the future
enhancement and expansion.
General Partnership
It is an unincorporated business which has two or more business owners who are likely to
share the responsibilities of business. Every partner has unlimited liability for debts of the
business organization. In addition, the each partners has own share of profits and losses on
their personal tax return. This is a common type of partnership as it is easy to start (Fletcher,
Pierre and Tham, 2019).
Liability: The partners have unlimited liability in respect of other partners and the
firm as well. Here, all the partners are agreed on the unlimited personal responsibility for the
debts or legal liabilities the partnership might occur.
Dissolvent: The general partnership can be dissolves when there is change in the
relation of partners in terms of partnership business.
Advantages:
 It is an easy form of partnership that can be started with limited legalities.
 All the partners are likely to combine their skills, resources, knowledge that is
important to run the business in significant manner.
 There is tax advantage as the income they generated is taxed only once.
Disadvantages:
 Unlimited liability of partners is the major disadvantage of general partnership as it
created burden on the partners regarding the repayment of liability (Graesch, Hensel-
Börner and Henseler, 2020).
 The personal assets of the partners are unprotected as these assets can be used for the
repayment of debts of the firm.
 The partners are liable for each other’s action which might create constraint in
running the business in an efficient manner.
Partnership
In partnership, two or more people come together with an aim to earn higher amount
of profit. The main aim of partnership is to earn profit significantly. Here, two or more people
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come together to attain a particular goal of profit maximization. The partnership firm is
governed by the agreement between two people (Cohen, 2017). Generally, all the partners
share the liabilities and profits equally. In addition, it can be done on the basis of ratio
mentioned in the partnership agreement.
Liability: In traditional partnership all the partners have joint liability. In this, all the
partners are liable jointly with other partners and also for the acts of firm. Now, the partners
can have limited liability for their pre-agreed contribution in the firm.
Dissolvent: The partnership firm can be dissolved by mutual agreement of the
partner. In addition, there is compulsory dissolution and dissolution might based on certain
events. In addition, the partnership firm can be dissolved by the notice of court and more. In
case of dissolution, all the assets are sold and the remaining amount can be distributed among
the partners.
Advantages:
 Partnership firm is less formal with limited amount of legal obligations.
 It is easy to start a partnership firm as it can be started by the formal agreement
between two people.
 In partnership two or more share the liability which minimizes the burden on a single
person (Delmon, 2017).
 There are several people work together in a partnership firm hence they can share
skills, knowledge, experience with each other which is important for the growth of
partnership firm.
Disadvantages:
 In general partnership, the partners are exposed with unlimited liability. They have
liability for the actions of other partners.
 In partnership, there is no clarity regarding authority which can create an ambiguous
environment within the firm.
 There is difficult to maintain the autonomy in partnership firm.
Limited Liability
It is a business where all the partners have limited liability. In LLP, each partner is not
responsible for the action of the other partner. Here, every partner has own responsibility and
they are not required to bear the loss incurred due to the negligence and misconduct of the
other partner. It is a structure of business where all the partners are responsible only for the
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amount, they have put in the business (Armstrong, 2020). Basically, it is a separate legal
entity which has a separate identity from its members. The operations of the partnership firm
and distribution of profit is based on the partnership agreement.
Liability: In this, each and every partner has limited liability in terms of the
investment, they have been made in the business. They are not liable for the misconduct of
any other partner.
Dissolvence: It is the liquidation stage where all the assets of business are sold in
order to end the partnership. LLP is a legal entity that has separate legal identity. It can be
dissolved by the legal process that is called dissolution.
Advantages:
 To start an LLP is highly convenient as it can be started by a simple agreement
between two or more people.
 In LLP, the liability of every partner is limited at the extend of the money they have
invested in the business.
 LLP is a legal entity which has separate identity (Bower, 2018).
 There is no minimum capital requirement to start a limited liability company.
Disadvantages:
 For LLP, there is rigid tax rules which can create constraints for the partners while
managing the business.
 In LLP, there is lack of privacy than sole trader as there are two or more members
involve in the business.
 There so no option of equity investment in case of LLP.
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Recommendations for IOM Solutions
In the given context, IOM solution is a sole business which is being run by Sam who is a
sole trader. Now, Sam is looking forward for expansion hence there will be requirement to
change the existing legal structure. In this context, the necessary recommendations for the
respective business entity are mentioned below:
 It is suggested that Sam needs to select LLP as there is limited liability of each
partner. For this purpose, the business owner need to find two or more people to start
an LLP. Here, the business firm will have a separate identity than partners. Here, all
the partners will responsible for the amount, they have invested in business. By this
way, it is possible to expand the business in an efficient manner. In addition, it will
also allows to enjoy the benefit of limited liability.
 To expand the business, there is requirement to choose well-qualified and efficient
partners who will contribute in the success of IOM solutions. All the partners will
come with new and advance skill set and resources which will allow them to
contribute in the success of the business firm in an efficient manner.
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Conclusion
Through the above-mentioned information, it is concluded that there are various types
of legal structure present in the market place. These legal structures are partnership, LLP,
sole trade and more. It is analyzed that LLP is the best suitable structure for IOM solution as
it will help in expanding the business in significant manner.
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References
Books and journals
Armstrong, D., 2020. Power and partnership in education: Parents, children and special
educational needs. Routledge.
Bower, D.J., 2018. Company and campus partnership: supporting technology transfer.
Routledge.
Brummer, V., 2018. Community energy–benefits and barriers: A comparative literature
review of Community Energy in the UK, Germany and the USA, the benefits it
provides for society and the barriers it faces. Renewable and Sustainable Energy
Reviews, 94, pp.187-196.
Cohen, E., 2017. CSR for HR: A necessary partnership for advancing responsible business
practices. Routledge.
Delmon, J., 2017. Public-private partnership projects in infrastructure: an essential guide for
policy makers. Cambridge university press.
Fletcher, K., Pierre, L.S. and Tham, M. eds., 2019. Design and nature: A partnership.
Routledge.
Graesch, J.P., Hensel-Börner, S. and Henseler, J., 2020. Information technology and
marketing: an important partnership for decades. Industrial Management & Data
Systems.
Knoke, D., 2019. Organizing for collective action: The political economies of associations.
Routledge.
Pinna, S., 2017. Alternative farming and collective goals: Towards a powerful relationships
for future food policies. Land Use Policy, 61, pp.339-352.
Sadiq, M., 2021. IMPACT OF MAKING TAX DIGTAL ON SMALL
BUSINESSES. Kuwait Chapter of the Arabian Journal of Business and Management
Review, 10(3), pp.123-134.
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