Nature Formation and Management of Business Organisations

This report covers various forms of business organisation and its procedure for formation of a business. It also recommends the best alternative to the IOM solutions in order to expand their sole trader business into other potential business. The report discusses the advantages and disadvantages of different forms of business organizations such as sole trader, partnership, LLP and LLC. It concludes that each kind of business organisation has its own advantages and disadvantages that help an individual to make a better choice from available options for the growth of business.

Project 2 Nature
formation and
management of
Business Organisations

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Businesses & Organizations in the UK.......................................................................................3
The legal business structure of UK companies...........................................................................4
Recommendations for IOM Solutions........................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The English legal system is complex and unique. It is based on law of equity that provide
the equal protection to all individual. Law is defined as the legal principles and standards that
ensure the safety and security of an individual. The concept of business law is wide and covers
all the rights and responsibilities of an employee and employers within the organisation.
Business law provides provisions related to company, contract and employment related provision
that safeguards the general interest of an employee and protect them from all kinds of
discrimination that may violates their legal right (Al-Shabatat, 2021). The business structure is a
legally formed organisation that ensure the medium of raising capital, impose certain liability on
the owner and provide procedure for incorporation of a business and other standards that are
required to govern the activities of a business. This report will cover various forms of business
organisation and its procedure for formation of a business. Further, it will recommend the best
alternative to the IOM solutions in order to expand their sole trader business into other potential
business.
TASK
Businesses & Organizations in the UK
The UK business law is a comprehensive and detailed document that provides the procedure
for incorporation of company. It also provide legal compliances to an organisation so, that they
can effectively run their business. A company is a separate legal entity that has their own legal
existence as per the Corporate Act of 2006. A company has several unique features which
includes common seal, perpetual succession, separate legal existence, transferability of shares
etc. The management of a company is responsible for the effective decision making of an
organisation. They are authorised to bring transparency in the working system so, that growth of
an organisation can easily be achieved. The executive authority frame policies and plans to
sustain growth and success of an organisation. The company Act of 2006 defines the various
kinds of companies and their power to transfer share to the public. The liability of the members
of company has limited and not required to use their personal assets to pay off debts.
A company formed by the Act of 2006, are empowered to ensure the safety and security of
the employees within an organisation (Bouchoux,2022). They owes certain duties and

responsibilities towards employees and employers, and establishes the positive relation among
them. The Employment law aims to secure the interest of the employee so that their efficiency
can be increased at workplace. The Employment law provides necessity to form a contract
between the employers and employees that that are binding on both the parties. The employment
contracts obliged both the parties to comply with terms and condition that are prescribed by the
law. The Equality Act of 2010, provides the equal protection to employees from all kind of
discrimination irrespective of their caste, sex, religion, origin etc. It's main objective is to create a
positive environment that encourage the employees to achieve the desired goal. It avoids the
conflict and misunderstanding among the employees and enhance the productivity of the
employees.
The contract law of UK is uncodified legislation that create legal relationship between the
parties. Both the parties are obliged to perform their part of duties according, to the clauses
mentioned under contract. If any of the parties fails to perform their duties, then liability will be
arising on them for conducting breach of duty (Flint, 2020). In company law, there is a provision
of vicarious liability, that makes liable to an employer for the act of his employee. The Act of
2006 also provides provision for the act of negligence that arise tortious liability for committing
any civil wrong against the company. The directors and shareholders are the crucial part of an
organisation that plays significant role in setting up of goals and objectives. They are formed the
legal documents known as AOA and MOA for internal management of a business. However,
MOA defines the power and objective of an organisation whereas AOA, defines the rules to
govern the activities of the management. It ensures the better administration of business activities
and generates higher profit to achieve the goal of expansion of a business.
The legal business structure of UK companies
Sole Trader
This form of business organisation is easy and simple to incorporate a business. A sole
trader is a self employed person that are responsible for all the profit and gains of a business. He
has full control and flexibility over their business (Teague and Donaghey, 2018). This form of
business organisation secure the privacy of the owner than other kind of business structure and
there is no directors and shareholders like a company.
Advantages of Sole Trader:

 Simplicity: It is easy and simple to establish sole proprietorship form of business
organisation. It involves less legal compliances and has no requirements to register a
business.
 Confidentiality: The vital information of the owner in relation to their business, remains
confidential and has less chances of violation of his privacy rights. Sole trader is not
required to give their financial details for public record and can easily work
independently.
 Retain of Profits: All the profits earned by the sole trader remains with them. They are
not required to share their profits and gains with others.
Disadvantages of Sole Trader :
 Unlimited Liability: The liability of the sole trader is unlimited due to which their
personal assets are used to repay their debts (Giliker, 2018). This is on of the major
drawback of this form of business organisation.
 Difficulty in rasing funds: It is quite difficult to manage the funds and raising the capital
from different sources because the single ownership of a business.
 Less chance of expansion: Growth is difficult in the sole trader form of business
organisation because resources are less and liability over the owner is more as compared
to company and other kinds of businesses.
Partnership
Partnership consists of more than two members who are comes together to form a
business. This form of business organisation are very common in UK, as it requires less legal
formalities and easy to start a business. An agreement between the partner is made known as
partnership agreement that defines the share of the partners, their rights and responsibilities
towards each other. All the important decision of partnership firm is taken by mutual consent of
each of the partners.
Advantages of Partnership
 Less expensive: This form of business organisation involves simple legal procedure and
no obligation to register a business. It is less expensive and easy to start.
 Opportunity to grow: Each partners has contributed to join a partnership firm . The
more partner resulted into more chances to raise funds and use such sources for the
expansion of a business.

 Tax benefit: Partners can easily enjoy their profits and gains earned by their business and
their profits are generally taxed once. However, partners can freely use their earnings
without any restrictions.
Disadvantages of Partnership
 Unlimited liability of Partners: The liability of the member is unlimited due to which
they are liable to use their personal assets to pay off their debts. This one of the major
drawback of partnership.
 Chances of conflicts: Each partners are responsible to take decision for the management
of a business (Johnstone and Dobbins, 2021). Sometimes, difference in their views and
thought may cause conflicts and dispute among them.
 Joint accountability: Each partners is not liable for their action but also for the actions
of other partner. Trust and confidence among the partners can help them to succeed in
their business.
Limited Liability Partnership
The limited Liability partnership is quite different from general partnership as the liability
of its partners is limited due to which they are not entitled to use their personal assets to repay
the creditors. An LLP must have at least two members to start a business and there is no limit in
maximum partners. It is generally formed by professionals to earn profit such as doctor, lawyer,
Chartered Accountant etc. It is governed by the Limited Partnership Act, 1907 that gives them
special feature of separate legal existence that are always distinct from its owner. It is carried out
with the objective of earning profit and revenue to achieve the growth of LLP form of business
organisation.
Advantages of Limited Liability Partnership
 Liability Protection: It provides protection to the partners from unlimited liability and
they are not personally liable for the debts and other kind of obligation.
 Flexibility: Limited Liability Partnership offers more flexility to partners so that they can
contribute effectively in the operation of a business.
 Legal Recognition: Limited Liability Partnership Act gives more protection to such form
of business structure and treated as a legal person who are capable to being a party to a
contract.
Disadvantages of LLP

 Public Disclosure: It is important for Limited liability partnership, to submitted their
financial information to the Companies House in order to maintain public records. This
affects the privacy and functioning of LLP.
 Complexity: It has more complex legal procedure than other forms of business
organisation. It is quite strict legal compliances that are binding upon the owners of a
business.
 Difficult to raise capital: One of the major drawback of LLP is that it is challenging for
an organisation to raise capital and funds from investors. There is less chances of growth
and expansion of business.
Limited Liability Company
LLC is governed by the Companies Act of 2006, that provides certain unique features
to a company which includes a separate legal existence, it has common seal, power to sue or can
be sued, artificial person etc. (Oxford Analytica, 2019). It is a hybrid of partnership and
corporation. The members are not personally liable and they has limited liability in a company.
Advantage of LLC
 Easy to form: LLC can be formed with less legal formalities and easy to establish a new
business. It is less expensive form of business organisation.
 Protection from personal liability: This kind of business structure provides protection
to its members from unlimited liability and they are liable up to such extent which they
have contributed within an organisation.
Disadvantages of LLC
 Suitable for small business: LLC is most suitable for small scale businesses and not an
appropriate option for the business which aims to go public (Rye, 2020). It avoids the
transferability of shares which creates difficulty in expansion of their business.
 Diss solution: it can be dissolved easily and has no permanent existence. It comes into
end just after the death of any of the member.

Recommendations for IOM Solutions
Sam is an owner of IOM solution who is a sole trader and expected to made expansion of
their business. With the objective of expansion, demand for employees are also increased. Many
alternatives are available that may helps them to choose the potential business to achieve growth.
It is recommended to the IOM Solutions to go ahead with the Limited liability partnership as it is
the best form of business structure that helps them to earn higher profit in a business. LLP is
hybrid form of both partnership and corporation due to which it enjoys the special features of
company. LLP is a separate legal entity and has limited liability of their partners. Further, it
helps the Sam to overcome the barriers that may arise due to operation of a business. Therefore,
it is recommended to IOM solutions to take LLP as a best alternative through which Sam can
bring major changes in their business.
CONCLUSION
From this above report, it has been concluded that the business environment is dynamic and
diversified sector. Many changes has been observed in the UK legislation that has extended the
power of the companies in order to secure the rights of their employees and employers. The
rights of the employees and employers are the paramount objective of an organisation. The
employment law aims to avoid the conflicts and misunderstanding among the employees so, that
their efforts can add value in an organisation. The different kinds of business organisation such
as sole trader, partnership, LLP and LLC varies according to nature, size and type of the
business. There are few organisation that gives less return on investment whereas, many of them
are good source of expanding the business. However, each kind of business organisation have
their own advantages and disadvantages that helps an individual to make better choice from
available option for growth of business.

REFERENCES
Books and Journals
Al-Shabatat, M.A.Z., 2021. ADOPTING A LIMITED LIABILITY PARTNERSHIP FOR THE
LEGAL PROFESSION IN THE PARTNERSHIP LAW: A CRITICAL REVIEW
FROM INDONESIA'S PERSPECTIVE. Journal of Legal, Ethical and Regulatory
Issues, 24(2), pp.1-17.
Bouchoux, D.E., 2022. Business Organizations for Paralegal. Wolters Kluwer Law & Business.
Flint, D., 2020. Is the UK Adequate?. Business Law Review, 41(6).
Giliker, P., 2018. Examining English contract law in the light of Brexit–an end to the European
dream?. In Essays in Memory of Professor Jill Poole (pp. 14-32). Informa Law from
Routledge.
Johnstone, S. and Dobbins, T., 2021. Employment relations in the United
Kingdom. International and comparative employment relations: Global crises and
institutional responses, pp.29-55.
Oxford Analytica, 2019. Future of business in UK territories is uncertain. Emerald Expert
Briefings, (oxan-db).
Rajanahalli, K., 2020. Limited Liability Partnership as a Better Alternative to
Incorporation. Issue 5 Int'l JL Mgmt. & Human., 3, p.514.
Rye, J., 2020. What is the difference between a sole trader and a limited company?. In Setting
Up and Running a Therapy Business (pp. 132-134). Routledge.
Teague, P. and Donaghey, J., 2018. Brexit: EU social policy and the UK employment
model. Industrial Relations Journal, 49(5-6), pp.512-533.