Types of Business with Legal Consequences and Recommendation

This report evaluates different types of businesses, including sole trader, general partnership, limited liability partnership, and more, based on their legal structure and nature. It also recommends a suitable business structure for IOM solutions.

Business Organisation

Table of Contents
INTRODUCTION ..........................................................................................................................2
TASKS.............................................................................................................................................2
Types of business with legal consequences and recommendation..............................................2
REFERENCES................................................................................................................................9
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INTRODUCTION
In order to start and expand any business in the economy, businesses are required to be
follows several legal legislature and structure to establish their operations. The business structure
that choose by the individual and group influences every aspect. From daily operations to taxes
slabs and the risk of personnel assets that incurred due to structural nature of business. The report
is going to highlight the sources of law, business transactions, the nature and management of a
company, the concept of business liability in negligence, the vicarious liability of an employer
and also individual employment rights. The report is further going to explain the various types of
business organisations are potentially available in terms of reorganising. It also provides the
explanation with a recommendation of the most suitable organisation type for the choose
situation.
TASKS
Types of business with legal consequences and recommendation
Sole trader
The sole trader is the person that runs the business on their own. They have the complete
rights to take the decision for the their business operations. It include as an separate entity that
performs all the business functions on their own. The mentioned business structure did not
require any legal formalities to them in the legal house. Their is no evolvement of any partners in
regard to the business functions. As only the sole trader is responsible for all business actions in
their business (Vu, Phan and Le , 2018).
Taxation
The taxation Criteria implied on the sole trader businesses in the UK are listed in the
below discussion.
 Personal allowance- First £12500 are tax free for sole traders. On the income of above
£1,00,000 these entities loose the 1 on their personnel allowance on every earning of £2
 Basic tax rate- 1-£37,500 (after taking off personal allowance) = 20% tax
 Higher rate tax: taxable income over £37,500 = 40% tax
Liability
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The mentioned business identity faces the unlimited liabilities due to the business
structure. The sole trader have the risk of their personnel assets in order to pay the debt to their
creditors. Therefore the risk of bankruptcy is way much higher in compare to other legal
structure.
Dissolvent- As there is no legal documents included in starting the business such as registration
of business. Therefore these type of business entity can be dissolved easily without any concerns
in the business operations. The sole trader need to just maintain their record for the further tax
assistance as well as they need to clear of all the debts before dissolving their business
operations.
Advantage- The above discussed business operations don't need any heavy investment in
compare to other legal business structure. The owner can take any decision regard to the business
operations as well as there is no distribution of profits without any splits.
Disadvantage - then sole trader faces the unlimited responsibility due to its solo entity as well
as all the decisions and business operations were followed by the single entity. The sole trader
works hard in order to operates its business activities more effectively (Taylor, 2020).
General partnership
The general partnership is the practices in which two or more partners agreed to split
their assets and liabilities according to their mutual concerns. it includes all the losses, profits as
well as other business functions. The discussed business entity provides the advantageous to the
indulged partners to become more flexible and functions in order to perform the functions more
effectively In the operational market. Through, the mutual concerns between the decided partners
a partnership agreement created in such business entity. This type of business structure requires
minimum two peoples in which the deed can form.
Taxation
In the above mentioned partnership the tax is not implied on the business operations. The
taxes implied on all the business partners. The share of taxes in split according to the share of
partners in the business functions. In regard to this the income of general partnership is conclude
as an self employment income.
Dissolvent- The Created partnership can be dissolve if any partners exists the business
operations of firm. Any conflicts as well as changes in the relation of the partners can also arise
the situation of dissolution in the business operations. In dissolution the business all the partners
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have to be wind up all the business functions regard to the debt repayment as well as all the legal
documentation. The entities indulged with business functions need to prior notified relation to
the dissolution as well as their concerns is required (Slijepčević, 2019).
Advantage- The mentioned partnership conclude as an less expensive in order to the formation.
It also required the minimal paperwork to create the effective partnership. This is more
compliance because there is no need to maintain or showing the annual reports of business
operations. Hence it gives the advantage in order to maintain the privacy in the business
operations. The tax segmentation is also simplified without any complexity. The dissolution is
much faster and simplified due to no paperwork requirement in the functions.
Disadvantage- The action of other partners can easily impact the all the partners by an
individual decisions. The individual cannot take the decision regard to the business. Hence, the
mutual concern is needed in implying any decision in the business operations. Due to such
functions the formation of implying of new activity takes time. Through, the mentioned structure
money cannot by raised from the investors for developing the business operations. Hence,
enhancing the business operations through, the funding cannot be possible in discussed
partnership.
Businesses & Organisations in the UK
A company is an formation of two or more persons that performs the operations in order
to generate the profit. A company is said to be a separate legal entity in which business has its
own identity as compared to the partners. There are different type of business entities such as
public company, private limited company, sole proprietorship, limited liability company,
partnership as well as one person company.
The vicarious liability is know for the no fault liability in which one person action or
decision liable for the result of other one. In the company functions any decision or act of single
partner reflects on all the partners as well as on the operations of the company. Vicarious liability
is the aspect in which a company fails into perform their responsibility in regard to their
operations due to this company face the financial loss and operational damage (Kohler, 2019).
The role of director in the company is to manage and evaluate the operational task of
company in an effective manner in order to gain the desired result according to the set of
company goals. Director is liable of Any losses and project failure in company operations.
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The termination of partnership is known for the dissolution of partnership and relation
between the partners. After the termination of partnership all the assets, liability of business is
disposed off.
A memorandum of assassination the legal document that created at the time of
registration of a company as well as article of association is a legal document that used by the
company in order to classify their rules and regulation.
Partnership
The partnership is the formal practice of arrangement that is performed between the two
or more individuals in order to perform the functions of business to ascertain the desired level of
goals in the market. In such partnership arrangement all the owners are responsible for each
other's operations. The decision taken in this type of partnership are performed with the help of
mutual understanding or voting rights. All the assets and liability are distributed among all the
partners according to the agreement. It requires the different taxation number as well as all the
partners get the tax benefits also. At the time of dissolution the business partners need to wind up
all their affairs and notify all the interested entities in the partnership agreement (Kay , 2021).
Taxation
The taxation slab in the partnership does not implement on the above explained business
type. In partnership, the partners are required to pay the the individuals taxes as per their share
in the business operations. According to the allocated share of profits partners pay out their
taxes.
Dissolvent
The dissolution of partnership can be perform due to several attributes which are
explained below-
 Admission of a new partner
 Retirement or death of a partner
 Due to insolvency
 Change in any profit ratio
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As per the partnership Act, 1932 the dissolution of the partnership between all the
partners of the firm is known as dissolution of the firm. If any partner disagree or exit the
partnership agreement the formed partnership dissolves. In relation to this due to bankruptcy of a
partner can also dissolves the formed partnership as well as if a business involves new partner in
the partnership then new partnership agreement is created which deployed the current formed
partnership (Harding, 2021).
Advantages
The various advantages of the partnership are explained below-
 As the partners can bring cash into the business that can help the investors to invest more
in the business that will help to grow the business (Groves and Hillson, 2019).
 The partnership process is easy to from as well as less expensive as compared to other
business forms such as company, sole proprietor or LLP. All the decisions take in the
partnership are done by mutual concerns of all the partners.
 All the profit and losses in partnership are shared according as per their share in the
partnership agreement. Unlike the companies, the partnership do not need to disclose
their annual report in the public. Hence this point plays a major role in business to create
the greater option of privacy in their operations. The legal structure also can be changed
easily according to the partnership requirement.
 Under partnership type of business, the load of work can be divided among all the
members which can also save the time and can bring the positive impact on the partner's
personal life.
Disadvantages
The various disadvantages of the partnership are explained below-
 All the partners work together and responsible for the business debt that is one of the
main drawback of partnership. Hence, if any mistake or error takes place then all the
partners will be help accountable for that in the business operations. The tax is charged
as per the on the personal tax rate. For example, if business earning will increase so on
the tax rate.
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 Another disadvantage in partnership is that partners cannot transfer their individual
ownership to someone other outside the business. It requires their consent and
consideration to transfer such ownership. Hence, any individual in partnership have no
right to take the decision without consideration of all the partners (ERWIN,
ABUBAKAR and MUDA, 2018).
Limited Liability
The limited liability partnership is said to be a type of partnership in which business and
partners are taken up as separate entity. The liability of all the partners in this structure are
separate as well as limited. Due to this the partners are not liable to pay the debt to their creditor
on the verge of their personal assets outside the business operations. Partners under this
partnership shares the profit according to their deciding ratio. The number of partners can be
extended without any limit.
Taxation
Partners in the mentioned structure pays taxes on their profit share not on business operations.
Advantages
 No limit of owners in the business operations
 It requires low registration cost
 there is no mandatory requirement of audits
 The risk of Bankruptcy of partners is exempted in this type of structure
Disadvantages
one of the major disadvantage of LLP that analysed in the given report is higher tax rate
as well as the partners in this type of structure have to be regularly posted their financial account
in the public which shows the lack of privacy to the business operations.
Recommendation
According to the above discussion various legal structure were identified. All these
structure showed the different business nature as well as entity in the structure. To perform the
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functions more effectively and effectively in the target market every business need the perfect
legal structure for their functions. In relation to this the limited liability partnership is the most
suitable business structure for the IOM solutions. Hence through such structure the individual can
easily enhance its business operations as well as expand its business process to several new
region. Through, the involvement of number of partners in the discussed partnership the owner of
IOM can engage number of partners in its business functions in order to take the effective
decision of the business operations. Through such functions the mentioned business can also
distribute its responsibility to perform more smoothly as well as they can easily raise the fund
from the investors in order to enhance their business operations. Through, such discussed
structure the complexity in business operations can also be eliminate easily as well as the risk of
business failure will also decrease (Conant, 2018).
Conclusion
From the above report it can be concluded that there are different types of business
which have different legal structure. In the above mentioned report the various businesses are
evaluated on the basis of their different nature and entity of such structure. In order to start the
business a favourable structure is needed to be followed as per the given situation. As in the
above report various structure were evaluated that demonstrated the different natures and
practices. In this given report all the four type of legal structure were discussed to proposed the
suitable structure to IOM solution. It further explained the various recommendation that are
required to be followed.
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REFERENCES
Books and Journal
Conant, L., 2018. 6. Europeanization and the Courts: Variable Patterns of Adaptation among
National Judiciaries. In Transforming Europe (pp. 97-115). Cornell University Press.
ERWIN, K., ABUBAKAR, E. and MUDA, I., 2018. The Relationship of Lending, Funding,
Capital, Human Resource, Asset Liability Management to Non-Financial Sustainability
of Rural Banks (BPRs) in Indonesia. Journal of Applied Economic Sciences, 13(2).
Groves, P. and Hillson, E., 2019. Learning outcomes. Applied Paramedic Law, Ethics and
Professionalism, eBook: Australia and New Zealand, p.291.
Harding, T., Oetzel, J., Simpson, M. and Nock, S., 2021. Identifying the Facilitators and Barriers
in Disseminating and Adopting a Health Intervention Developed by a Community–
Academic Partnership. Health Education & Behavior, p.10901981211033228.
Kay, R., Pahnke, A. and Schlepphorst, S., 2018. Business Transferability Chances: Does the
Gender of the Owner-Manager Matter?. In Women's Entrepreneurship in Europe (pp.
39-64). Springer, Cham.
Khanchel, H. and Kahla, K.B., 2021. Partnership success factors: overcoming cultural misfit
between tunisian SMEs and their french partners. Independent Journal of Management
& Production, 12(7), pp.1808-1835.
Kohler, M.J., 2019. The Tax and Legal Playbook: Game-Changing Solutions To Your Small
Business Questions. Entrepreneur Press.
Slijepčević, S., 2019. Public-private partnership in Europe: Comparative and sectoral
perspective. Journal of Applied Economic Sciences (JAES), 14(64), pp.319-331.
Taylor, A., 2020. Transatlantic Partnership: British Army Legal Services and the US Army
Judge Advocate General's Corps. Army Law., p.2.
Vu, M.C., Phan, T.T. and Le, N.T., 2018. Relationship between board ownership structure and
firm financial performance in transitional economy: The case of Vietnam. Research in
International Business and Finance, 45, pp.512-528.
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