Types of Business Organizations and Their Legal Consequences in UK

This report discusses different types of business organizations in UK, including partnership, limited liability partnership, limited company, and sole trader. It analyzes the legal consequences of each type of business organization and provides recommendations for reorganizing a sole trader business into a limited liability company. The report also includes references for further reading.

Law

TABLE OF CONTENT
INTRODUCTION...............................................................................................................................3
MAIN BODY.......................................................................................................................................3
Kinds of business organisation.........................................................................................................3
Partnership.......................................................................................................................................3
Limited Liability Partners.................................................................................................................4
Limited company...............................................................................................................................5
Recommendation..............................................................................................................................6
CONCLUSION....................................................................................................................................7
REFERENCES....................................................................................................................................7

INTRODUCTION
Business is an important enterprise which helps out to manage and undertakes all the
activities in a commercial manner through which profit can be generated in revenue can be
created in the company. In order to manage the activities in business there are certain laws
relates to the working nature of the enterprise with their liabilities, rights and duties which
can be managed. Business used to ambit an expanded legislation which considers data
protection, company law, employment law, contract law and many more. There is being seen
two important types of laws in UK they are statutory which includes all the law-making
power and the supreme law authorities named as Parliament and the other one is common law
where the laws are being made by the judges. It includes judicial precedents (Frecka, Griffin,
and Stevens, 2018). In this report there will be analyzation of IOM solutions which used to
deal with electrical parts in the local garages. The business structure followed by them is of
sole trader and they are implicating to see organise it. This report will provide types of
business organisations with their general legal consequences.
MAIN BODY
Kinds of business organisation
For starting up a business and also for reorganising and restructuring any company or
organisation there is being involved scrutinization of different legal solutions and
consequences through which organisation can manage their business practises. For reorganise
IOM solution it can be seen that different variable options are available which will help in
further expansion. The major sources and the areas that are being considered in the
implicating factors of business are degree of personal liability, tax amount, administrative
work, finance, accountability and many more. Other than sole traders some of the options
which IOM solutions can take for reorganisation of business practice are mentioned there
under:
Partnership
All those business organisations which involves two or more individuals to agree on
mutually sharing profit and loss of firm. The partners considered a greater involvement in
benefits, sharing risk, cost sharing and all the important responsibilities and liabilities lie in
the business. This can be treated as an unincorporated entity where partners mutually engaged
and are self-employed (Knight, Holder, and Knight, 2017). They are being liable for all the
laws and the debts for the business activities, any kind of misconduct or negligence in the

firm will be amounted to both the partners and they will be equally liable for it. The
registration of partnership firm is important and can be made through HMRC where
partnership agreement is being made through the legal formation in the company. In various
causes and consequences where written partnership agreements are not being made it
considers non-clarity in the responsibilities and the sharing of loss and profit. The agreement
considers expectations and the confidence and trust for the future business as it is conferred
the safeguarding tool in order to protect the investment between the partners of the business.
Legal consequences:
 In case of partnership there is being seen that for the consequences of one of the
partners the other partners are being liable for all the negligence, actions and the
misconduct taken by the other. And it also promotes the unlimited within the personal
liabilities of partners for the conduction of others person.
 Another legal consequence is it can be seen that many partnership firms involve
sleeping partners and also the part-time partners or members which used to contribute
in their working capital and also expects to gain more share and profit earning
although there have no responsibilities in the functioning of the firm. This generally
creates a confusion and also conflicts in the partners and can also end with the
dissolution of firm (Michaud, 2020).
 Other legal consequence is according to section 26 in the partnership act where in
case where partners dissolve the partnership by giving notice to all the other this will
create an immediate effect at any time in the working procedure. Which means a
single notice from any of the partner can even dissolve whole firm even in this
scenario where others were willing to work in the firm. It reflects the dependency of
all the partners on one another in spite of having options for continuing their work and
also to buy certain shares for the investment and partners interest there is being
required the partnership agreements which certain particular clauses.
 Another consequence is when partner dies it used to dissolve whole firm and it also
affects the realisations of general asset through which liabilities are being paid. Whole
partnership I reluctantly dependent on each other and in case where one partner died,
they have to give notice in order to dissolve the firm and the dissolution will be
irrespective to the partners even having the ability to continue working in the firm
(Meunier, Krylova, and Ramalho, 2017).

Limited Liability Partners
This is a general partnership which have slight difference between the liabilities lies
in the two partners. In all the limited liability partners used to invest money on a particular
extent in the business. In order to open LLP it is important to manage registration through
companies house and HMRC. All such partnerships can be established with two or more
members, The agreements framed in LLP is through sharing of profit and all the further
responsibilities of the partners that are being managed in order to submit the tax return on
personal self-assessment on variable yearly basis this also requires to pay the income tax for
all the profit that is being shared. LLP also have to pay national insurance to all the HMRC.
Legal consequence:
 This requires to manage public disclosure of all the financial accounts and all the
documents are to be submitted to public companies house for the public record. This
generates all the transparency in the public regarding the income which is being
earned by the partners.
 Another consequence in LLP is that all the profit which is being earned under it is to
be retained in the same context as that of company which covers limited shares which
means that all the earning of profit is managed really distributed without any
flexibility so as to hold the profit for all the future year taxation (Fackler, 2021).
 LLP is being dissolved if any of the partner wish to leave the firm or the partnership
enterprise the remaining partners will have to dissolve it despite of willingness to
continue the business practice.
 All the partners and general members in the LLP considers to be an agent which will
be appointed by the contract that is being signed by the members on behalf of LLP so
the members which are being managed in LLP are being associated with the general
duty and compliances.
Limited company
These are all the privately managed business or companies which are hold it by the
shareholders and the running of the company is managed by directors associated in it
(Morrissey and Kenny, 2021). This considers to have separate legal body which has legal
obligations and general rights. It means that the company is mainly responsible in order to
articulate all the activities which are being made within it and all the finance and the personal
affairs of the owners. The generation of profit in the company is released and retained after

the management and payment by the corporation tax. All the profits which are being
distributed to the shareholders with the help of dividends. This may also limit the guarantees
that are being shared under it. The other reporting and the requirements through the
companies house and HMRC are being considered.
The two important types of limited companies involves the shares of limited within
the shareholders and all the financial liabilities which arise in the companies with the
amounts that are being raised for the paying of shares. Enter another guarantee which do not
exist as the share capital and all the entrusted areas of guarantors (Rouhani and et. al., 2018).
Legal consequences:
 The framing of limited company is an expensive and complex process as it involves
conversion of private company into a public limited and their involved so many
specialists and lawyers with the expertise knowledge about the legal formation of
business.
 Limited companies are being appealed through the liability of limited partners but in
general instances there is being seen that the directors are being left responsible for all
the repayment of companies debts.
 It used to provide major benefits and advancement for all the corporation where
shareholders will not receive any kind of relief that are being related to loss. There in
walls tax deduction and all the lower report income from which loss is being
generated in business practice (Bo, 2019).
 The memorandum of association and articles of association are needed to be form for
making the registration in the companies house and also to manage the director of the
company in a proper manner so that there will not be any hardship which is being
faced in it.
 It focus on protection of their owners and also on maximising the identities which are
not being held liable for all the responsibilities and the debts in it.
 LLC frame written agreement through which all the regulations are being imposed
under it.
 The regulations which are being imposed unit that no person will be considered as
holy liable for all the laws that are been incurred and they also provide protection with
insurance through the laws and norms with the general abidance.

 LLC provides corporate structure through which all the principals and the laws are
being considered to be the holding of shares and general maintenance with the profit
and loss being served.
Recommendation
IOM solutions as being a sole trader company where a single owner is responsible for
all the rights and responsibilities in the business is being managed by them on their own
means. They are considered to have sole responsibilities for all the affairs in the business and
the liabilities and decision-making process. Now IOM solution in order to reorganise their
business structure through converting it in a sole trader into different form of business
practice so as to expand its further operations (Biygautane, Neesham and Al-Yahya, 2019).
It can be recommended to IOM solutions that they can reorganise their sole trader business
into the limited liability company so as to manage the business effectively. As it has two
different meanings and all the limited liability owners will manage the distribution of
decision-making powers. It considerably has separate legal entity and also have no perpetual
liabilities on it. All the loss and debts are covered in it. Such business structure will help out
in managing the finance and also in the growth of the company by raising the funds as
compare to all the business related to sole traders.
CONCLUSION
From this above report it is concluded that there consist of different business practises
and organisations which are formed in UK. It involves partnership, limited company, sole
traders and Limited liability partnership. These are incorporation with different kinds of
procedures and various legal consequences and business structures. In partnership there the
major legal consequence is dissolution of firm as in case where any of the partner die it will
ultimately dissolve the company. Limited liability partnership provides that all the public
disclosure of the income, account and profit raising. Furthermore, it is also concluded that
company thereby is an expensive and complex process and considers to follow AOA and
MOA clause. From all the above instance it can be recommended to IOM solution that they
can reorganise their business into a company by raising fund and also by expanding the
business effectively.

REFERENCES
Frecka, T.J., Griffin, J.B. and Stevens, J.S., 2018. Transparency and the audit industry? Not
in the US Evidence on audit production costs, profitability and partner compensation
from the UK. Research in Accounting Regulation, 30(2), pp.73-81.
Knight, R.A., Holder, K.K. and Knight, L.G., 2017. Partnership Allocations Should Be
Respected. Taxes, 95, p.45.
Michaud, G., 2020. Perspectives on community solar policy adoption across the United
States. Renewable Energy Focus, 33, pp.1-15.
Fackler, M., 2021. Mitigation and transfer of risks: prevention, insurance, and limited
liability. Available at SSRN 3806849.
Bo, X.U.E., 2019. On the Liability of Shareholders when the Company Reduces Capital in
Violation of the Notification Obligation——Commentary on the “Delixi Case” in
the Supreme People's Court Gazette. Northern Legal Science, p.03.
Meunier, F., Krylova, Y. and Ramalho, R., 2017. Women's entrepreneurship: how to measure
the gap between new female and male entrepreneurs?. World Bank Policy Research
Working Paper, (8242).
Morrissey, D. and Kenny, A., 2021. Teacher-artist partnership as teacher professional
development. Irish Educational Studies, pp.1-19.
Rouhani, O.M., and et. al., 2018. Revenue-risk-sharing approaches for public-private
partnership provision of highway facilities. Case Studies on Transport Policy, 6(4),
pp.439-448.
Biygautane, M., Neesham, C. and Al-Yahya, K.O., 2019. Institutional entrepreneurship and
infrastructure public-private partnership (PPP): Unpacking the role of social actors
in implementing PPP projects. International Journal of Project Management, 37(1),
pp.192-219.