Legal Business Structure of UK Companies and Recommendation for IOM Solution

This report discusses the legal business structures of UK companies, including sole trader, general partnership, limited liability partnership, and limited liability company. It also provides a recommendation for IOM Solutions to opt for a limited liability company for business expansion. The report emphasizes the importance of operating within business laws and making effective managerial decisions.

Business Law

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
The legal Business Structure of UK Companies ........................................................................4
Sole Trader .................................................................................................................................5
General Partnership ....................................................................................................................5
Limited Liability Partnership .....................................................................................................6
Limited Liability Company ........................................................................................................6
RECOMMENDATION FOR IOM SOLUTION........................................................................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
A business may be defined as an tangible entity which engage in many activities such as
commercial, professional and industrial with an aim to earn profit by offering products and
services to the customers. Every businessman wants to maximise its profit make a favourable
position in the market among its competitors. Business deals in marketplace in which new
business entities emerge and some collapse due to various factors. It facilitates in monetization
by exchanging the goods and services. The new entrepreneur seeks the opportunity in start up
business in order to make their life secure and better. People sets up their business entity based
on the availability of capital which defines the nature, type and structure of business such as
small, medium or large enterprise setup (Zallaghi, 2017). In order to understand the different
legal business structure, business laws plays an important role by providing several guidelines
and limitations in UK. This report will cover various business structures along with their
advantages and disadvantages. It also includes recommendation for Sam so that it may provide
with suitable business expansion for IOM Solutions.
TASK
The government of UK has formulated several rules and regulations for the operations of
business. The business is carried out in UK is according to companies Act 2006. It defines all the
provisions that must be considered in order to function the business activities effectively and
smoothly. Employees are the assets of the company and their absence may collapse the business
(Solomon, 2017). There are various legislations that has passed for the employee behaviours that
provides with the provision of standards and their action. Company laws have some sections that
defines the liabilities of the companies that arise by not fulfilling the obligations. While
introducing a new business in market, it has provided as a professional identity and further with
certain identity such as common seal, artificial company or perpetual existence which consist of
rights and responsibility of suing someone or be sues by someone for non compliance of the laws
which are formulated by government. Various agreements are made at the time of
commencement of a new business under different heads and sections that makes differ from one
another like sale agreement or purchase agreement or any other agreemental deed.
Liabilities can be arise due to
the inability to carry out business operations and unprofessional manner of workforce. The

business entities that operates its functions in large scale creates Vicarious liability. This may be
arise due when the employees behaves in an unprofessional manner or being dishonest while
working in an organisation (Dungan, 2017). On the other hand the employers are also
responsible for the actions of their employees and must take some action in order to eliminate
such issue in future. There are various issues that business suffers such as improper or negligent
behaviour of employees in relation to their job roles and their duties. The management of the
company has provided employees with these opportunity to carry out their roles and duties with
honesty and integrity. The legal liabilities may arise due to non fulfilment of the legal formalities
towards the management. The management should formulate all the key decisions and ensures
that all the functions are carried out according to pre determined plans, if not what action should
be required in order to overcome with these type of barriers. The management should ensures
that there should be harmony among the employees and if any conflict arise then immediately its
must be resolves by taking corrective measures. The behaviour of management employees must
be ethical and if not then it may lead to termination from that post and may impose the penalty
for such type of behaviour (Harrison, 2018).
Partnership Act provides with several provisions that defines how
a company is formed and in what condition it may lead to termination of its operations due to
unfair means of trade or malpractices.. At the time of commencement of business, it is
mandatory to fill Memorandum of Article and Memorandum of Association which defines the
purpose, capital invested and internal company structure. MOA is said to be valid only after the
signature of all the shareholders and guarantors. Articles of Association consist of rules and
regulations which should be followed by the company along with carrying out its operations. It
is needed to be consented by the directors and owners before the implementation in company.
The legal Business Structure of UK Companies
The business structure of IOM considers sole traders as sole proprietorship in relation to
Sam's business. Its almost 8 years working and in past 2 years it had successfully increased its
business. As he is the single owner, he has several duties and responsibilities along with risk and
uncertainties in the dynamic business world. Curerently, Sam is planning to expand its business
operation as he is looking to opt for another business structure that may be suitable in order to
generate higher revenue. Following are the business structure that Sam is looking for.

Sole Trader
This type of business involves a single owner who operates and carries out the function to earn
profit. This structure does not need huge investment and easy to open and operate. The business
entrepreneurs focus on this form of entity as it does not involve others in profit sharing. The
profit remains in hands of proprietor. They choose this type of business due to limited
availability of capital and funds. The person who had opened, considered as the owner of that
business. The owner can take its decision without taking consent of anyone. The major demerit
is that he is the only person who is liable for his decisions and have to bear all the losses and
consequences (Engelhardt, 2017). In case of inflation, it requires daily working capital in order
to carry out operating expenses along with inventory management. To make some time with
family, it becomes to difficult to maintain a balance between personal and occupational life. All
the amount of capital that is needed to commence the sole business is brought by the owner only.
The proprietor should maintain and store all the data related to their purchase and sale of goods
along with customer data in accordance with General Data Protection Regulations.
General Partnership
When two or more individual who engage in the same business having the same objective
and works collaboratively as a team, known as general partnership. They have engaged by
partnership deed which defines their roles and responsibilities that should be perform in the
business. They have to share their profits equally or by the ration mentioned in the deed.. All the
partners are liable for their profits, losses and about their decisions. They invest their capital in
order to commence the business according to the availability of the capital. They consist of
unlimited personal liabilities (Sjostrom, 2019). They have to bear loss in their respective
proportion. This structure is more reliable as compared to sole proprietor as it does not need
huge amount to capital to be invested in order to expand their business. They jointly bring the
capital which helps the partners in bringing the less amount of capital. As In case of sole trader
only a single person is liable to bear all the loss but in this case it is shared among all the
partners. The decision making can be found effective as all the partners shares their views and
experience which makes the decision effective. The demerit involved in this structure is that by
consent of a single partner, if the company faces loss then it would be complex to define the
sharing ratio. In case of admission or retirement/death of a partner it becomes difficult to

redefine the partnership deed and its essentials. Partnership act defines all the rules and
regulations that helps in formations and dissolution of a partnership firm.
Limited Liability Partnership
As compared to general partnership, it provides lower number of liabilities. It does not
create any obligation but there is limitation on the capital which can be spent on the business.
When two or more individual comes together in order to run a business and are independently
liable for their actions and decisions. If any partner makes a decision and which results in loss,
then the partner will only be liable for that loss. They do not have joint liabilities. In order to
setup this form of partnership, it is needed to have a registered office who is involving in these
type of activities along with carrying its operations according to rules and regulations (Larson,
2020) . It have a written agreement which helps in managing and effective functioning of
business unit. Individual work collaboratively for the same objective but do have their
independent liability. It reduces the burden of loss of other partner to all the partner.
Limited Liability Company
This type of company can be referred as private company which is incorporate under
Companies Act 2006 which includes all the limited liabilities. It involves all those provisions
that defines how a company can be formed and operated and what are the requirements in order
to form and dissolve a company .It also involves all the duties and functions along with
responsibilities of all the company members that are abide by the legislation of the company.
This type of company is owned and controlled by the shareholders. The benefit of minimum
personal liability is enjoys in this type of business structure.
RECOMMENDATION FOR IOM SOLUTION
For the expansion of business, it requires to grab the available opportunities that are
available in the market. If the opportunities are missed then rhe company cannot take advantage
of it . There are various circumstances that affects the business operations and these
opportunities helps in adapting with several circumstances. Sam should opt the Limited Liability
company in order to expand its business operations of IOM Solutions. This helps in dividing the
responsibilities among different individuals who have expertise in their respective field. It also
helps in making the strategies effective by consulting with other people and contributes in

formulating tax planning effectively. Capital may also be raised as different investors gets
attracted towards this reliable nature.
CONCLUSION
From the above project report it was concluded that there should be optimum utilisation
of the resources in order to carry out the functions of a business effectively and efficiently. All
the operations are controlled and controlled by business laws. Every business wants to maximise
its profits for long duration of time. The profitability completely depend on the effectiveness of
the managerial decisions. If the decisions are not taken properly then the company will incur loss
. The business should operate its operations within the business laws and do not try to go beyond
them. This may lead to dissolution of the firm or court may impose some penalty for doing
unethical work. In case of Sam, he is recommended to choose Limited Liability Company in
order to expand its business. It helps in maintaining a equal balance between personal and
professional life. It also generates higher revenue if he opt this business structure.

REFERENCES
Books and Journals
Cohen, G.M., 2017. Law and economics of agency and partnership. The Oxford Handbook of
Law and Economics, 2, p.399.
Dungan, A., 2017. Sole proprietorship returns, tax year 2015. Statistics of Income. SOI
Bulletin, 37(2), pp.2-28.
Engelhardt, C., 2017. Mergers & Acquisitions. Springer Fachmedien Wiesbaden.
Harrison, L.E., 2018. The Pan-American dream: do Latin America's cultural values discourage
true partnership with the United States and Canada?. Routledge.
Larson, E.J., 2020. Franklin & Washington: The Founding Partnership. William Morrow.
Sjostrom, W.K., 2019. Business Organizations: A Transactional Approach. Wolters Kluwer.
Solomon, L.D., 2017. The privatization of space exploration: Business, technology, law and
policy. Routledge.
Zallaghi, A., 2017. Examines The Role of Media in The Prevention of Crime. East European
Business Law, 24(1), pp.1-8.