Key Sources of Laws for Business Organizations in the UK

This report provides an overview of the different types of business organizations in the UK, including sole trader, partnership, general partnership, and limited liability. It describes the legal business structure of each type and discusses the key sources of laws for business organizations in the UK. The report also provides recommendations for IOM Solutions, an electronic organization that supplies electric parts to local garages, on which business structure would be best suited for their business expansion.

BSc (Hons) Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of laws
as the legal context for business
organizations in the UK
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Submitted by:
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Contents
Introduction
Business law is the set of legal law that governs business regarding the issues related
to the commercial activities. In the business there is necessity of the consideration for the
civil laws to regulate the commercial activities such as corporate contracts, hiring practices,
consumer rights, production and manufacturing laws and much more (Dalevska, Kravchenko
and Kwilinski, 2019) . Different countries has different code of conducts for the business law
that helps to protect the rights of employer, employees and consumers. In simple terms the
business law is body of legal laws that are applied to the relations, rights and conduct of the
persons and businesses engaged in trading and sales. In the business environment mainly
there are two types of businesses operating, one that has key focus of earning profit and other
is for the social welfare. The basic different types of organizations are sole trader,
partnership, limited liability and general partnership. The present report is based on IOM
solutions a electronic organizations that supply electric parts to local garages. The Sam is the
sole owner of the company and has decided to expand the business. For this report will cover
the brief description of the types of business organizations in UK and their legal business
structure.
Businesses & Organizations in the UK
Every enterprise that runs pr operates in the UK is being managed and articulated
under the Company's act of the 2006. the businesses and organization in UK are governed by
the insolvency act of 1986. the united Kingdom is the first country that has outlined the
modern cooperation. The nature of management of every running organizations of UK is
obscure and intangible. The employed management of the organizations changes from the
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firm to firm as per their size, mission and scope (Wirtz, 2020). Moreover, the large number of
the organizations operating in the market place has focus and motive of maximizing the
profits and consecutively achieves their organizational goals. Business transitions of the
company are commonly are commonly termed as the financial transaction in the business
language that is done between the two parties involved in trade of monetary value or goods
and services or assets in exchange. These two parties can be two individuals or two firms.
Negligence liability is type of the business in which the employees and other
stakeholders of the company fall short in achieving the goals with responsibility for which the
person is appointed as per the required standards and skill set. However, such liability later
results as the financial loss or damage of the brand image among clients and customers.
Vicarious liability is stated as the circumstance in which one employee is responsible
for the actions of any third party or the other employee within the organization. Individual
employment rights are one of the rights through which employee can feel leisure and enjoyed.
These rights are every employee in the company (Koval, 2020). There are parental leave and
pay and many such enjoyable traits under this right.
The legal business structure of UK companies
Sole Trader
The sole trader is the enterprise that has ownership of the single person. Basically it is also
referred as the sole proprietorship organization which is unincorporated, and a sole person is
responsible for the decision making and activities carried out in the organization. The single
owner of the business is solely responsible and accountable for paying taxes, decision
making, liabilities and profits. This is highly common and easiest business structure for the
entrepreneurs as it is easy to set up as not documentation is required and also there is no kind
of dependency on other person. The government has also set minimal regulation for such
business structure. The sole trader structure is highly preferable and popular among the
people that are involved into the businesses like consultancy, small bakers, self constructors
and much more (Jonathan, 2018). In such case the mist of the Sole traders is the family
business, entrepreneurs and many more. In such business types the people mostly name their
enterprise with their own name or family name to make the business recognizable in their
own community and also to create differentiation. For the sole trade organizations there is
requirement of minimal legal documentation during the time of set up. In relation to liability
in UK, the sole trade owner has to bear unlimited liability towards their business which
defines the risk caused to their personal assets in case of situation where business hits to
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solvency in upcoming future. The individual owner of the business is required to pay taxes as
well. But in this case dissolvent of business due to failure is easy as person doesn't have to
think of others, thereby making it easy and quick process.
Advantage: this structure allows the owner to enjoy full ownership of the business. Also, the
sole trader has full rights on decision making and profits of the business are not being
distributed to others.
Disadvantage: this business type would provide the owner with unlimited liabilities.
Moreover, the owner will have no support in better decision making, there is access to limited
bootstrap funding. Also in middle of the business where the business is growing there will no
second trustable helping hand.
General Partnership
A general partnership is another business type or legal structure that has two or more
partners or investors. In this aim of the investors or partners coming together is to maximize
the profit and form a large enterprise (Wieland and Fill, 2020). All the partners and investors
share some part in the equity of the business, means profits of the business are shared as per
the agreement signed in the starting of the partnership in business. In terms of formation of
this legal business structure, in UK the partners are strictly required to register themselves as
the partners in legal norms. The benefit of this legal registration is that some legal facilities
are enjoyed, also at the time of death of partner, step of back of partner or sue other partner
the legal arrangements done previously help in gaining justice and fair deals with the help of
law and jurisdiction. In relation to liability of the business, the partners generally has
unlimited liability for the organization and also the personal stakes of partners are also at risk
in case of failure of the company or heavy debt or loss. In UK under this business structure
the taxations are equally divided between partners that is on the basis of the equity % they
hold in company.
Advantage: in partnership business type there is benefit of pass through taxation and
diversity in decision making and leadership. Also losses are handled by partners this lowers
the burden from one shoulder.
Disadvantage: the dissolution process of the company in case of failure is difficult and need
great amount of paper work and legal documentation (Leminen and et. al., 2020). Also the
there can be situation of conflicts that may lead to unhealthy decision making for the
company.
Partnership
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Partnership can be defined as the business structure in which there is flexible working
environment as it is free from subject of tax and entity that provide the partners or
stakeholders of the business with limited liability. As the name of business type suggests that
in this type of business the partners have limited liability therefore, they have very low risk on
their personal assets at the time of closure or failure of the business. In order to articulate the
limited liability company, it is compulsory to have two or more partners who are willing to
run business with aim of profit maximization. In UK the owners or the partners of the
business are required to register the company name under the Company's Act 2006
(PINKOVTSKAIA and et. al., 2019). Partners are responsible for paying the tax of their part
of equity share to the government. There are many reasons for the liquidation of the company
such as death of partner, sue other partner and much more, therefore, the process of
liquidation is done as per the agreement in starting of the formation of the organization in
order to have legal procedures.
Advantage: in this type of business there is no restriction on the entry of new partners which
means there can be numerous partners for the company. Also, in addition to this it is least
expensive to form in comparison to other businesses as it has limited liability factor.
Disadvantage: In this the every partner has to depend on the other partners for the final
decision making for which it is compulsory to conduct the board meeting to have final
decision.
Limited Liability
Limited liability company can be defined as a legal entity that is formed to operate and own a
business. Limited liability is a type of business structure for private companies that provides
benefits to the members of the company. An limited liability company can start its operation
with one member and there is no limit on the number of members they may have. The
members of this company can take part in everyday operations of the business to enjoy the
benefits of limited liability (Colpan and Cuervo-Cazurra, 2018). Partnerships and sole
proprietorship business have the benefit of flexibility and free flow of taxation while
managing the limited liability status.
Advantages of limited liability company:
 There is no restriction on the entry and exit of the members
 The partners having limited liability enjoy the benefit of flexibility
 The company operates as a own legal entity which protect the members from being
held liable personally for the debts in case of inslovency.
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Recommendations for IOM Solutions
When a person is going to start a business or think of switching to other business
structure they are required to keep some important points in mind. It is recommended to the
IOM solutions to use partnership structure for the business expansion in UK market. As the
advantage of this business structure is best as the ratios of profit and loss are shared. As the
profits and the taxation are being divided into the sharing ratios and the financial background
is also strong in this structure. There is also the diversity with the leadership. The switch to
any other business structure is also easy (Ivanovich, 2020). However, the partners are not
strictly required to have it registered in the eyes of law but in general they do as in the results
they enjoy some legal benefits.
Conclusion
From the above discussion it is concluded that in UK there multiple types of
businesses are operated and all have different liability, legal structure and ownership.
Business organizations are filled with variety of structures providing individuals an
opportunity to choose which to operate first. The basic options are sole trader, partnership,
general partnership and limited liability. There are different laws for each business structure
and all has their advantage and disadvantage. The report also discusses about the liability
each structure share at the time of liquidation of the company. Lastly, recommendation is
provided that which structure should be best suited for the expansion of the business.
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References
Dalevska, N., Kravchenko, S. and Kwilinski, A., 2019. Formation of the entrepreneurship
model of e-business in the context of the introduction of information and
communication technologies.
Wirtz, B.W., 2020. Types of Business Model Management. In Business Model
Management (pp. 191-196). Springer, Cham.
Koval, O., 2020. Strategic management of economic security system of business entities:
theoretical aspects. Вісник Черкаського національного університету імені
Богдана Хмельницького. Серія Економічні науки, (1), pp.40-47.
Jonathan, G.M., 2018. Influence of organizational structure on business-IT alignment: what
we do (not) know. In 17th International Conference Perspectives in Business
Informatics Research (BIR 2018), Stockholm, Sweden, September 24-26, 2018 (pp.
375-386). CEUR-WS. org.
Wieland, M. and Fill, H.G., 2020. A domain-specific modeling method for supporting the
generation of business plans. Modellierung 2020.
Leminen, S and et. al., 2020. Industrial internet of things business models in the machine-to-
machine context. Industrial Marketing Management, 84, pp.298-311.
PINKOVTSKAIA, I.S and et. al., 2019. Small business development in Russia: results of the
assessment of sectoral structure and number of employees.
Ivanovich, K.K., 2020. About some questions of classification of institutional conditions
determining the structure of doing business in Uzbekistan. South Asian Journal of
Marketing & Management Research, 10(5), pp.17-28.
Colpan, A.M. and Cuervo-Cazurra, A., 2018. Business groups as an organizational
model. Colpan, A. and Cuervo-Cazurra, A.
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