Nature and Management of Business Organizations in the UK

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:
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Contents
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Introduction
UK business structure contains majorly 4 types of business structures namely
– sole trader, partnership, limited company and limited liability partnership. These
business structures will be affecting the tax liability, personal liability, administration
tasks and the respective sources of finances. Thus, the following report will explain
the nature and management of a company along with definition, formation, liability,
taxation, dissolvent of sole trader, general partnership, partnership and limited
liability along with their advantages and disadvantages. And then finally the most
suitable type of business organization is suggested by to adopted by Sam who is
operating as a sole trader of IOM Solutions.
Businesses & Organisations in the UK
The nature of the companies means the type of business and the overall
organizational goals. the financial transaction involving exchange of goods, services
or money between two or more entities is known as financial or business transaction.
Cash and credit are the two types of business transactions. Vicarious liability is
defined as a situation under which a party is partially held responsible for certain
actions that are not lawful by third party. The companies act, 2006 regulates the
cooperation corporations that form in UK.
There are various duties and responsibilities of director like delivering annual
reports, preparation of business plan, register of shareholders, obtaining approval
from general meeting, recording transfer of shares and notifying creditors (Kousha,
Thelwall and Abdoli, 2021). There are liabilities for the directors in case of breach of
general duties and on insolvency of the company. In situations where directors allow
trading of the company when it is insolvent or near to insolvency directors are held
liable. The duties of the directors are essential as they act as the parent of the
corporation with such duties, making them liable in case such duties are not fulfilled.
The process of discontinuation of relationship between company and partner
is known as termination of partnership. Memorandum of association is legal
document specifying the business activity scope and information regarding the
shareholder of company. Articles of Association is another document stating the
regulations that regulates the operations of the company and its purpose.
The legal business structure of UK companies
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Sole Trader
Sole trader is defined as the simplest and easiest form of business to
establish in terms of registration. A person who is a self –employed trader has the
legal compulsion to register the business run by that person with HMRC. All the
profits are to be kept by the sole trader after meeting its liability against tax and
national insurance. This is done by filling self -assessment tax return. In this type of
business there is no limit regarding the amount of money that can be earned by the
sole proprietor in terms of legal aspect. Earning a large amount of profits makes the
business less efficient in terms of the tax liability amount. Such a trader is
responsible for all the liabilities (Inan-Eroglu and et.al., 2020). There is unlimited
liability, simplicity in operating the business and lesser filing duties. Considering the
different types of business structures of United Kingdom, the type of business that is
most common is the sole trader form. Individual person establishes, owns, runs and
manages the entire business making it the easiest type of business structure. Self –
assessment is the scheme under which the sole has to register himself for paying
tax. Under the law of UK there is no separation between a sole trader and the
business. It means there is no legal distinction in the owner of the business that is
the sole trader and the business itself. This makes such trader personally liable for
the loses in case of business going into debt.
Advantages Disadvantages
 Sole trader is the simplest type of
business structure.
 Full control of the business is
retained by the sole trader.
 This type of business is easiest to
set- up.
 All the profits are kept by such
owner.
 The level of privacy is highest,
hence, there is least potentiality
that the competitors will know the
next move of such business.
 There is no separate legal entity
of the business.
 All the liability lies with the sole
trader.
 In case of firm goes into debt the
personal assets of the owner will
be used for meeting the
obligations.
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