Nature and Management of Business Organizations in the UK

This report covers the nature and management of a company, different types of law, business transactions, vicarious liability, business liability in negligence, director's roles, liabilities and duties of a director within a company, termination of partnership, Memorandum of Association and Articles of Association. The report also covers the legal business structure of UK companies like sole trader, general partnership, partnership and Limited liability.

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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Table of Contents
Introduction ...............................................................................................................................3
Businesses & Organisations in the UK........................................................................................3
Nature of a company- ...........................................................................................................3
Management of a company- ................................................................................................3
Different types of laws for a company- ................................................................................4
Business transactions management of a company- .............................................................4
Vicarious Liability- .................................................................................................................4
Roles of a director in a company- .........................................................................................5
Liabilities of a director of a company- ..................................................................................5
Duties of a Director in a company- .......................................................................................5
Termination of partnership- .................................................................................................5
Memorandum of Association (MOA)-...................................................................................6
Articles of Association (AOA)-................................................................................................6
The legal business structure of UK companies..........................................................................6
Sole Trader.............................................................................................................................6
General Partnership...............................................................................................................7
Partnership............................................................................................................................8
Limited Liability......................................................................................................................9
Recommendations for IOM Solutions......................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................12
Online-.................................................................................................................................12
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Introduction
Organization is a separate entity which means it has its own identity which is different
from its owner. It is essential for every company to manage their business operations
effectively to achieve their overall organizational goal (Götz and Jankowska, 2020).
The following report covers nature and management of a company, different types of
law, business transactions, vicarious liability, business liability in negligence,
director's roles, liabilities and duties of a director within a company, termination of
partnership, Memorandum of Association and Articles of Association. The following
report also covers the legal business structure of UK companies like sole trader,
general partnership, partnership and Limited liability.
Businesses & Organisations in the UK
Nature of a company-
 Separate legal entity- The company has its own identity and existence which
is differ from its owner (Yuniningsih, Pertiwi and Purwanto, 2019). A company
and its owner are two different identity. A company can buy it's assets and
perform business transaction from its own name.
 Perpetual succession- The company continues even after the death of its
owner. The company does not dies or exit the industry unless the task is
completed for which the company is formed.
 Common seal- The company is considered as artificial person which does
not have any physical presence (Definition and nature of a company, 2021).
Hence, board of directors help the company to make major decisions for its
growth and perform agreement.
Management of a company-
It is essential for a company to get effectively managed by hiring skilled and talented
workforce who will perform their day to day task. It is also essential for the company
to manage their data effectively so that the data will be used to make decisions. It is
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also essential for the company to use modern and updated tools and machines as
well as software within their organisation for conducting their daily task smoothly.
Different types of laws for a company-
 The Health and Safety at Work Act 1974- This is the law which covers that
the employer of every company must focus on maintaining the health and
safety of their employees. Most of the companies in UK provide insurance
facilities and pay compensation in case of any injury to employees at
workplace or while performing any official task.
 The Maternity and Parental Leave Regulations 1999- According to this law
in UK, the employer is required to allow paid leaves to those employees who
are going to become parents in near future.
 The equality Act 2010- According to this Act in UK, the employees have the
right to complain about any discrimination they face within their workplace (A
Comprehensive List of Employment Legislation in the UK, 2020). No one is
having right to discriminate the employees on the basis on of their religion,
skin color, gender and many other factors.
Business transactions management of a company-
Business transactions are those transactions which are done for the main purpose of
running the business effectively and efficiently. It does not include the personal
transaction of employees (Lee and Kim, 2022). It only cover those transactions
which are done by company's name like cash sales of goods, interest paid, rent of
office building and many others. It is essential that the business transactions are
measurable in monetary terms. There are various financial accounts are made to
manage these business transactions such as Profit and Loss account, Cash Flow,
Balance Sheet and many others.
Vicarious Liability-
Vicarious Liability is the terms of liability where a employer is responsible for any
misbehave or uncertainty done by the employees under that employer even when
employer is not involved in wrongdoing behavior of employees (Sharkey, 2018). In
context of UK, if a employee has done anything wrong to harm third party then
his/her employer is fully liable to third party and have to pay the loss faced by the
third party.
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Roles of a director in a company-
 Agent- The Directors of a company plays a important role as the agent of
shareholders which further promote the objective of the company so that the
shareholders will gain maximum profit (Boivie and et. al., 2021).
 Employee- Directors also plays a important role as the employee of the
company. They make sure the company will run in an effective manner.
Hence, they make decisions for the benefit for both organisation and
employees.
 Trustee- Director of a company is also treated as trustee of the company
(Roles & Responsibility of Directors, 2022).
Liabilities of a director of a company-
Personal liability of a director may arise due to-
 environment health and safety of employees.
 Customer protection
 ant- corruption/ bribery
There are various reasons for which a director can be disqualify like-
 Performing any criminal offenses while running the business (Liabilities of
directors, 2022).
 Making personal profit while having power as Director.
Duties of a Director in a company-
 This is the major duty of the director that he/she will make decision for the
benefit of organizational growth
 To promote the success of the company (Engelhard and et. al., 2018).
 To resolve the conflict between
 To avoid accepting benefit from third party
Termination of partnership-
It consist of dissolving the partnership agreement due to various reasons like conflict
between partners, early retirement of a partner and many others. It is essential for a
partner to notify their other partners that he/she want to dissolve partnership firm
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from his side. In context of The Partnership Act 1890, any partner can terminate the
partnership at any time by giving notice to others (Main termination issues affecting a
Partnership Agreement, 2022).
Memorandum of Association (MOA)-
It is the legal document of the company which specify the scope of business
activities. The main purpose of this document is to provide those information and
content to reader which will help them to analyze that the company will not conduct
any fraud in future.
Articles of Association (AOA)-
This is the document which contain all required rules and regulations to run a
company. It also include process for appointing directors and the ways to manage
financial records.
The legal business structure of UK
companies
Sole Trader
Definition- Sole trading or sole proprietorship is the form of legal structure of
business where a single owner rum and manage the whole business (Reel, 2020).
This form of business is basically seen where the business operations are held on
smaller scale and the earning of overall organisation are less.
Formation- There is a easy formation process of a sole trader which is explained
below-
 Decide a name of business which is not taken earlier by any other business.
 Register the business name with local, state and federal government.
 Obtain all necessary business permits.
Taxation- The tax rates for sole traders are divided in different categories which are
mentioned below-
 Personal allowance- If the firm earn less than £12,500 then they have to pay
no tax to government.
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 Basic rate tax- If the firm earn £1-£37,500 (after taking off personal
allowance) then they have to pay 20% tax.
 Higher rate tax- If the firm earns over over £37,500 then they have to pay
40% tax (Definitive Guide to Sole Trader Tax, 2017).
 Additional rate tax- If the firm earn over £150,000 then they have to
pay 45% tax.
Liability- The sole trader is having unlimited liability which means they are supposed
to pay their debts at any how even after selling their personal properties.
Dissolution- This is very simple to dissolve sole trading business by stop dealing
and making aware to all suppliers and clients that the business will be dissolving
soon. It is essential for the business that they will pay their all creditors before
dissolving.
Advantages-
 The single owner can share all profits alone.
 The power to make decisions are only in the hands of owner.
Disadvantages-
 The single owner is required to bear all losses of business.
 A single owner is not possible expert in all functioning areas of business. For
example, a owner may have expertise in finance but may did not have
marketing knowledge. Hence, a single owner alone can not make decisions
for all functional area of business appropriately.
General Partnership
Definition- General partnership is consist of managing and running a business with
minimum two individuals who agreed to come together to manage the business.
Here, all partners take active participation in managing all business activities.
Formation- It is essential for the general partners to agree upon the contracts of
partnership where all partners signature is required (Adamou, Kyriakidou and
Connolly, 2021). This partnership agreement consist of all terms and conditions for
running the business, distributing the profit and bear losses.
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Taxation- Here, general partners are taxable on their shares of partnership's profit
and gains.
Liability- They are also have unlimited liability.
Dissolved- While dissolving general partnership, the partner is required to notify
other partners by telling the reason. Other partners are required to pay all amount of
profit to the partner who is leaving the firm as per their shares mentioned in
partnership agreement.
Advantages-
 losses can be shared among partners.
 Two or more partners can manage different functioning of the business
appropriately.
Disadvantages-
 loss of power.
 Profit is shared among partners.
Partnership
Definition- partnership is the form of business where two or more people agree to
share their profits and losses according to the percentage they made investment in
the company (Peters, 2018). Here, it might be possible that few partners will not
actively participate in managing the business activities on daily basis but they invest
and involved in decision making process.
Formation- Same as General partnership where a partnership agreement is
essential to make and signed by all partners.
Taxation- Partnership in UK are not taxed on their profits. Individual partners are
chargeable to income tax based on their income gained by their partnership firm.
Liability- They are also having unlimited liability.
Dissolved- There are five ways to dissolve a partnership-
 dissolving a partnership by agreement
 dissolution by notice (Dissolution of a Partnership, 2021)
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 termination of partnership by expiration
 death or bankruptcy
 dissolution of partnership by court order
Advantages-
 It can be formed easily with less obligations.
 Better decision making by all partners due to different level of expertise.
Disadvantages-
 Unlimited liability of partners.
 Limited ability to raise capital.
Limited Liability
Definition- It is a business structure where the management of overall business is in
the hands of board of directors which was elected by the members of the firm
(Harris, 2020). There are different departments in this legal structure like marketing
department, finance department and many others. This type of business structure is
seen in large companies.
Formation- A LLC company in UK is subjected to corporate income tax at 19% and
it must fill financial statements with Companies House. It is essential to have
minimum capital of £50,000, 2 shareholders, 2 directors ( who can be foreigners
living outside the UK) and a qualified company's secretary (Business entities in UK,
2022).
Taxation- They have to pay corporation tax on their profit which is 19% in UK (How
Much Tax Does a Limited Company Pay in the UK?, 2019).
Liability- The owners and company members are not supposed to pay the debt from
their personal property. Hence, the liability is limited here.
Dissolved-
 Meet the conditions for strike-off.
 Seek approval for the decision to dissolve the company.
 Notify the creditors before complete dissolution
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 Canceling local business license.
 File and pay final employee tax returns
 distribute remaining assets among members.
 File a DS01, LL DS01 or withdraw your charity via the HMRC website
(Dissolving a company, 2020).
Advantages-
 Limited liability
 better decision making process by expertise and experienced board of
directors.
Disadvantages-
 Tough to manage the company with 250-500 employees.
 Lot of government interference.
Recommendations for IOM Solutions
IOM Solution can use Limited Liability option to expand their business because it
have various advantages like Sam is not required to pay organizational debts from
his personal savings. Secondly, various departments like marketing department, HR
department, Finance department and many other departments can help the Sam to
focus effectively upon each aspect of business. On the other hand, board of directors
will also help Sam to make effective decision for his organizational growth.
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Conclusion
From the above information it is concluded that there are various legal structure of a
business such as sole trader where whole business is managed and run by a single
individual, general partnership where all partners are agree to take active
participation in managing business activities by signing the partnership agreement
and Limited Liability where a company owner is not required to pay from his person
savings.
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References
Adamou, M., Kyriakidou, N. and Connolly, J., 2021. Evolution of public-private
partnership: the UK perspective through a case study
approach. International Journal of Organizational Analysis.
Boivie, S. and et. al., 2021. Corporate directors' implicit theories of the roles and
duties of boards. Strategic Management Journal, 42(9), pp.1662-1695.
Engelhard, C. and et. al., 2018. Development of an innovative taxonomy and matrix
through examination of the director of clinical education's roles and
responsibilities. Journal of Physical Therapy Education, 32(4), pp.325-332.
Götz, M. and Jankowska, B., 2020. Adoption of Industry 4.0 technologies and
company competitiveness: case studies from a post-transition
economy. Форсайт, 14(4 (eng)), pp.61-78.
Harris, R., 2020. A new understanding of the history of limited liability: an invitation
for theoretical reframing. Journal of Institutional Economics, 16(5), pp.643-
664.
Lee, D. and Kim, K., 2022. Business transaction recommendation for discovering
potential business partners using deep learning. Expert Systems with
Applications, 201, p.117222.
Peters, J., 2018. The ‘Pedagogies of Partnership’in UK Higher Education: From Blair
to Freire?. In Paulo Freire and transformative education (pp. 175-189).
Palgrave Macmillan, London.
Reel, S., 2020. The development of the forensic gait analysis quality assurance
process in the UK. In Forensic Gait Analysis (pp. 71-86). CRC Press.
Sharkey, C.M., 2018. Institutional Liability for Employees' Intentional Torts: Vicarious
Liability as a Quasi-Substitute for Punitive Damages. Val. UL Rev., 53, p.1.
Yuniningsih, Y., Pertiwi, T. and Purwanto, E., 2019. Fundamental factor of financial
management in determining company values. Management Science
Letters, 9(2), pp.205-216.
Online-
Definition and nature of a company, 2021 [Online] available through:
<https://www.mbaknol.com/mercantile-law/definition-and-nature-of-a-company/>
A Comprehensive List of Employment Legislation in the UK, 2020 [Online] available
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directors/>
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t=liabilities&s=03-other-key-risks&c=GB/>
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Main termination issues affecting a Partnership Agreement, 2022 [Online] available
through:
<https://simply-docs.co.uk/Partnership/What-are-the-main-termination-issues-to-be-
considered-in-a-Partnership-Agreement#:~:text=Duration%3A,have%20to%20be
%20in%20writing./>
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%20Income%20Tax%20rates%20for%20sole%20traders%20are%3A&text=Basic
%20rate%20tax%3A%20%C2%A31,%C2%A3150%2C000%20%3D
%2045%25%20tax./>
Dissolution of a Partnership, 2021 [Online] available through:
<https://www.gannons.co.uk/insights/dissolution-of-a-partnership/>
Business entities in UK, 2022 [Online] available through:
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%20UK%20LLC%20is%20subject,service%20companies%20in%20the
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%20operating%20agreement./>
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