Key Sources of Laws for Business Organizations in the UK

This report discusses the legal context for business organizations in the UK, covering different legal business structures and their advantages and disadvantages. It also provides recommendations for IOM Solutions to expand their business. The report includes references and is relevant for PRO338 Business Law, BMP4002 Business Law, and BSc (Hons) Business Management.

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:
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Contents
Table of Contents
Introduction ...............................................................................................................................2
Businesses & Organisations in the UK........................................................................................2
The legal business structure of UK companies..........................................................................4
Recommendations for IOM Solutions........................................................................................6
Conclusion..................................................................................................................................6
Introduction
Owners of a company or organization open the business with the aim of production
and distribution of goods and services which help build up the business environment in the
marketplace. It leads to competitions in the market area which leads to emergence of new
business and their expansions in various industrial sectors. This helps the economy in the
longer run where trade and money is exchanged between the people. Entrepreneurs open
business as a form of startup to make their opportunities become profits so that they can
improve their quality of life while also increasing their standard of living. According to the
investments and capital that are available with the owners they open the business on small,
medium and large scale. Different legal business structures defined in the business law help
in the proper selection of one type(Arslan and Alqatan, 2020). This project will cover in
detail the different legal business structures, giving their advantages and disadvantages which
will help in recommendation of the best type to Sam for his business expansion of IOM
Solutions.
Businesses & Organisations in the UK
Companies Act 2006 of UK guides the functioning and operations of a business while
providing detailed provisions of it. It helps in business management to run effectively.
Employees are the main source of an smooth business operation . They are the assets of a
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business thus their behavior should be according to the set standards by the employment
legislation. For companies to stay away from legal obligations they should abide by the
companies law. In this, business gets the identification of a professional entity. It has a
distinct legal identity which comprises various components like perpetual existence, separate
properties, a common seal in the name of the business and the rights and responsibilities of
suing a body or getting sued in case of professional misconduct and wrongful act. Various
agreements get concluded in the name of the business which has various heads and clauses
which makes them different from each other and also guides the sale and purchase of shares.
Liabilities arise when a business does not function up to the mark or its employees
don't behave professionally (Bakhtiari, 2020). A business includes Vicarious liabilities which
arise among the large scale businesses where when the employee acts with dishonestly or
commits any wrongful act while still being a member of the organization then the employer is
held liable for the actions of the employee and they have to act within a stipulated time.
Negligent behavior on the part of business gives rise to business negligence which occurs
when a business does not comply with the roles and responsibilities prescribed for it.
Organizational position of a head is given to a director who has various roles and
responsibilities which they should carry out with honesty to ensure fairness in the business.
When the duties assigned to the post are not performed well in accordance with the legal
obligations then a director gives rise to liabilities. They are expected to perform well within
the authority assigned to them by taking proper decisions and making judgments on behalf of
the company. It is their duty to ensure that the employees within the company work in peace
and harmony. They should resolve disputes and conflicts which arise within the organization.
When the duties are not performed ethically and up to the mark by the director then other
directors involved in the company can hold that director responsible for breach of duties. The
company should not suffer due to a director's irresponsible behavior. If this happens then a
director can be asked for remedies as payment of compensatory damages for the company's
loss. Serious breach circumstances can also lead to end of the contractual agreement created
between the director and company. They also have the authority to disqualify the director and
also charge them with criminal offence for serious malpractices. The possession of company's
property can also be taken from the director (Cooke, 2019).
The Partnership Act 1980 has different provisions due to which this law governs the
agreements created in Partnership where it also lays down procedures for forming a company
and its termination in case of malpractice and unethical behavior. The management of a
business environment is done effectively by Memorandum of Association(MOA) and Articles
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of Association(AOA). A company is formed and managed with the help of a legal statement
which is known by the name of MOA that is created at the incorporation of a company and it
is implemented when signed by the shareholders and guarantors of the business. On the other
hand, an AOA is a written statement which defines the rules and regulations of a company
which should be followed. Hence, it is agreed by the directors, shareholders and owners
before its implementation.
The legal business structure of UK companies
Sole proprietorship also known by the name of sole trader is the business structure
under which Sam has been working for 8 years for his business of IOM Solutions. It was
beneficial for him due to the business earnings coming directly in his hands. But as he is the
single owner and manager of the business thus he has to take burden of all the risks and
liabilities. The recent increase in demand from the customers has made Sam think of
changing his business structure so that it can expand and generate more profits. The different
types of business structures available to him are:
Sole Trader
It is the type of business structure managed by a single person as means of self
employment (Cribb, Miller and Pope, 2019). This business is easier to open, establish and
operate due to low cost of establishment. Thus it is very popular in the market among the
emerging entrepreneurs who want to set up their business on a small level due to low
availability of investments. It is generally preferred for small startup business where a single
person acts as the owner. Due to involvement of a single person in the affairs of the business
they become the sole earner of all the generated revenues and profits. But there also
disadvantages on the part they have to bear all the debts, losses and liabilities which can
financially drain them. Bust its cost effectiveness and the ownership control is what that
attracts the owners in opting for this structure. The decision making is independent and thus
there is no problem of disagreements of opinion. There is privacy in the management due to
no sharing of data with any other person. But getting personal time out is often difficult and
the personal professional affairs get mixed up. The owner has to file self assets tax returns on
his business and has to pay income and corporation tax. They have to remain up to date by
keeping data of their customers in accordance to the General Data Protection regulations.
General Partnership
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The owners in this business structure are two or more than two individuals who get
involved as partners. They are referred to as General Partners who create an agreement
between them for carrying out the business which states that they will share profits and losses
equally which occur while running a business (Henry, 2020). This agreement also states that
the partners will share all costs of establishment, financial risks and all the benefits that made
by the name of the business. They are collectively responsible for the management of the
business. They also have joint liability while managing risks and should remain accountable
to maintain transparency among them. The partners have unlimited personal liabilities for
their actions in the business. But it offers more reliability due to easy creation of capital.
There is creative decision making due to different knowledge and skills of the partners in
taking them which helps in enhancing the productivity level of business. But joint liability in
case of wrongful action proves to be a disadvantage. Partnership Act provides provisions
regarding the operation and dissolution of business in case of illegality, death and bankruptcy
of the partner.
Partnership
This can also be called as limited liability partnership due to lower no. of liabilities in
it. It is different from a general partnership in context of obligations where there is limitation
on the amount of money that is spent by the partners while running a business. In this, two or
more partners incorporate the business where they are personally held responsible for all the
negligent and wrongful activities. It is also different when it comes to being collectively
responsible because this is absent in it. But for an LLP having a registered office is a
necessary requirement which should be set up according to regulations of the government.
Thus it protects the interest of the partners where they and their business is governed by the
Limited Partnership Act 1907 which lays down that a written agreement is a must for smooth
functioning without giving rise to any legal problems. Partners are jointly held responsible for
financial risks and legal obligations that arise in the business environment (Lord, Wingerde
and Campbell, 2018).
Limited Liability
This type of company involves private managements of its affairs due to nature of
limited liability. A company with limited liabilities is governed by the Companies Act 2006
where it is duly stated how a company is formed, what are the requirements and how it will
be dissolved so that it creates legal rights and obligations which the heads and employees of
the company abide by while working in the company. Head of any company is usually a
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director who has his roles and duties defined by the Companies legislation. While a company
is maintained by the directors, it is owned by the shareholders. It enjoys the status of a
corporate personality while maintaining a distinct legal identity. All the profits are retained
by the company due to its limited liabilities. Its merit is that the owners enjoy minimum
personal liabilities when it comes to maintaining personal assets, they also have limited and
minimum financial risks, getting investments is easier (Ndubuka and Rey-Marmonier, 2019) .
But establishing and setting up a limited company is a long procedure which is time
consuming because it also takes time in creating account sheets of a big company.
Recommendations for IOM Solutions
For a business structure to grow and develop changing it with time and moving
towards expanding it is essential so that it adapts to the market circumstances. Sam is
recommended to choose Limited Liability Company for his IOM Solution business so that his
expansion can be successful(Rosenow, 2018). It offers various merits like distribution of
responsibilities in the management which does not burden a single person because of having
more than one owner in the business. It offers efficiency in tax planning which makes it
easier to maintain balance sheets and retain profits. It can help Sam earn the identity of a
corporate personality for his business. It is also easier to get investments due to the fact that
investors get attracted to invest in a company which is reliable(Peters and Mathias, 2018) .
There is easy management of financial affairs due to the separation of personal and
professional assets. The owners thus enjoy financial safety and security due to the flexible
management of the business. Sam is thus recommended to opt for this type.
Conclusion
It can be summarized from the following project that business law helps in efficient
and effective functioning of a business. A business is formed with the help of provisions
which are detailed in the business laws. Most businesses have the primary goal of earning
profits. Thus businesses can operate on a small or large scale ranging from a sole trader to a
Multi National Corporation. Sam is recommended to expand his business in Limited Liability
Company structure due to its benefits. It has been recommended after duly analyzing the pros
and cons of each type.
References
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Arslan, M. and Alqatan, A., 2020. Role of institutions in shaping corporate governance
system: evidence from emerging economy. Heliyon, 6(3), p.e03520.
Bakhtiari, S., et. al., 2020. Financial constraints and small and medium enterprises: A
review. Economic Record, 96(315), pp.506-523.
Cooke, P., 2019. World turned upside down: Entrepreneurial decline, its reluctant myths and
troubling realities. Journal of Open Innovation: Technology, Market, and
Complexity, 5(2), p.22.
Cribb, J., Miller, H. and Pope, T., 2019. Who are business owners and what are they
doing? (No. R158). IFS Report.
Henry, M., et. al., 2020. A typology of circular start-ups: An Analysis of 128 circular
business models. Journal of Cleaner Production, 245, p.118528.
Lord, N., Wingerde, K.V. and Campbell, L., 2018. Organising the monies of corporate
financial crimes via organisational structures: Ostensible legitimacy, effective
anonymity, and third-party facilitation. Administrative Sciences, 8(2), p.17.
Ndubuka, N.N. and Rey-Marmonier, E., 2019. Capability approach for realising the
Sustainable Development Goals through Responsible Management Education: The
case of UK business school academics. The International Journal of Management
Education, 17(3), p.100319.
Peters, J. and Mathias, L., 2018. Enacting student partnership as though we really mean it:
Some Freirean principles for a pedagogy of partnership. International Journal for
Students as Partners, 2(2), pp.53-70.
Rosenow, J., et. al., 2018. The remaining potential for energy savings in UK
households. Energy Policy, 121, pp.542-552.
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