Types of Legal Business Structure in the UK and Recommendations for IOM Solutions

This report discusses the various types of legal business structures in the UK, including sole trader, partnership, LLP, and LLC. It also provides recommendations for IOM Solutions to expand their business by opting for LLP. The report covers the advantages and disadvantages of each business structure and highlights the importance of securing the rights of employees through employment law. It concludes by emphasizing the need to consider various factors before choosing the most suitable business structure.

bmp4002 2

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Businesses & Organizations in the UK............................................................................................3
Recommendations for IOM Solutions.............................................................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The UK legal system is complex and unique. The business law aims to provide various
rights and responsibilities to the employees in order to safeguard their legal rights. There are
several kinds of business organisation that varies according to the needs, size and type of the
business. The business owner expand their business according to the availability of resources and
opportunity to grow their business at large level. Each type of business organisation has their
own benefits and impose the liability over its members (Adamou, Kyriakidou and Connolly,
2021). Finance is another factor that helps to decide the business organisation as it helps to
operate the business activities. This report will cover the various types of legal business structure
along with its benefit and drawbacks. Further, it will provide recommendation to IOM solutions
to expand its current business into another potential business.
TASK
Businesses & Organizations in the UK
An organisation is responsible for carrying out various business activities with the aim to
achieving the goal and earn profit. It is regulated and governed by the Company Act of 2006,
which defines the procedure and formalities to incorporate an organisation. The company is a
legal entity that are formed by the statutory framework of the UK and has several essential
features which gives unique identity to a corporate body. The company is always considered as
separate and distinct from its members and have their own common seal. The Companies Act of
2006 is detailed and comprehensive document that provides wide information about the various
activities of business.
In order to run an organisation more efficiently, it is important to secure the rights of its
employees which is possible through the employment law of UK. It guarantees several rights
and bind them certain obligation to protect them from all kind of discrimination that creates
difficulties in performing their part of duties in an organisation. It safeguard them from
misconduct and ill treatment with the employees (Bowman and Wyer, 2022). It aims to create
positive environment where the employees can contribute their efforts to sustain growth. It
ensure equal protection to the employees at workplace and facilitate safe environment to avoid

conflict and dispute among the employees. However, the business law manage all the work of
the management and legislate the framework for the protection of the employee's right. Many
sources of funds are available to the businesses to manage the finance resource of the company.
It varies according to the need of the business and raise through different modes, involves
various legal formalities as some of them is easy and simple whereas few sources of funds
having complexities of formalities.
The company law is also based on certain principles in order to secure the general interest
of the employee and employers within an organisation. It also impose liability over the
wrongdoer for committing any illegal act in business (Formosa, 2018). The owner of an
organisation such as director, shareholder etc. are responsible for making effective decision for
an organisation. The legal document has been prepared with the company such as memorandum
of association and articles of association to ensure effective administration of a business. Every
business organisation is required to follow legal structure to start a new business. Depending on
defined structure , certain obligation are also associated with that , which is necessary to operate
a business. Every employees are complied with employment law of UK along with contract
which has been made between employees and employer.
Legal business structure
Sole Trader
It is a type of business form where a single person owned and run the whole business he solely is
responsible for all the liabilities of the business entity .It is one of the easy business structure to
established in terms of compliance, registration process.
Advantages of Sole Trader
 Easy to form: It is one of the business form which are easy to established in terms of
compliance as a single person is responsible to conduct all the business affairs
 Flexibility: It is easy to operate as a single person is responsible for the management of
the business, business affairs, there is no interference of any other person as the single
person is the sole owner of the business he need to take any advice
Disadvantages of Sole Trader

 Unlimited liability: The liability whether internal or external are on the same person he
is responsibility to pay of all the the debts of the business he cannot put and share the
burden of liabilities with any other person as he is the owner of the whole business entity.
 Difficulty in raising capital: As a single person it becomes difficult for the company to
raise funding and capital for the purpose of investment in the business for the outside
sources.
Partnership
Partnership is form of business entity where two or more person agreed to share the profit
of any business which is carried on by all any any of them (Henwood, 2022). It is a form of
business which may be established for a particular purpose or at will and can be dissolved at the
consent of all the partners and all the partners are responsible for the conduct of business
operation together and all of its debts in the ratio of their share of their capital contributed.
Advantages of Partnership
 Simple and easy to Form: Partnership: This kind of firm is easy and involves less legal
formalities. There is no obligation to register a partnership firm. But, advisable to be
made in writing to avoid future uncertainties and conflict among the partners.
 Effective decision making: Each partner has specialised in certain skills, knowledge and
having different capabilities that add value in the performance of the partnership firm.
 Secrecy: The secret information remain to be secretive among the partners and are not
allowed to disclose with anyone.
Disadvantage of Partnership
 Unlimited Liability: The major drawback of partnership is that the liability of the
partner is unlimited due to which they have to pay use their personal asset to repay the
creditors.
 Conflict: Due to diversification of thought, culture and competency may cause
misunderstanding and dispute among the partners.
 No Separate legal entity: A partnership firm is not considered as separate legal entity. It
comes into end just upon the death of a partners and jointly liable for losses and debts.

Limited Liability Partnership: it is more extensive form of general partnership as the liability
of its member is limited and they are not required to use their personal asset to pay their debts. It
also have a legal status of separate legal entity and involves less legal compliances. It is a most
popular form of business organisation among the professionals mostly used by the doctors,
lawyers, accountant etc. It has a feature of both partnership and corporation.
Advantages of LLP
 Personal liability: The partner enjoys the limited liability as they are not obliged to pay
their debts by using their personal assets (Hutton, Giles and Beautridge, 2022). It is one
of the significant feature of LLP is that the personal assets of partners are remained to be
protected.
 Flexibility: It has more flexible business structure than the other form of business
organisation. Partners are actively take part in the process of decision making and has full
control over the management of limited liability partnership.
 Separate Legal Entity: In this form of business structure, the act of one partner will not
impose the liability over the others. As it is a separate legal body having legal identity as
per the LLP Act.
Disadvantages of LLP
 Transfer of ownership: In order to transfer the ownership, consent of all the partners are
required. It is one of the major drawback of LLP as this consent is not easy to achieve
and sometimes leads to conflict among the partners.
 Penalties for non compliance: The huge penality is charged for non compliances of
legal formalities under the LLP.
 Lack of Privacy: It is important to disclose the information related to administration of
LLP in public record which may affect the privacy of the business.
Limited Liability Company

The limited Liability Company is governed by the Company Act of 2006 which gives legal
identity to a company and made them separate legal entity distinct from its owners. It involves
complex legal formalities and impose limited liability over the owner of the company. They are
acting as an agent for the company. It provides an opportunity to grow and expansion by rasing
capital and resources from the shareholders. Further, LLC is divided into two parts such as
public and private company.
Advantages of LLC
 Limited Liability: The liability of owner is limited due to which personal assets of the
shareholder remains to be protected and debts can be paid off through nominal value of
share contributed by the shareholder.
 Professional value: Limited Liability company add value through investor who attracts
investors to contribute in raising capital for an organisation (Jyothirmai, 2020). It
involves various administrative activities such as recruitment, auditing, motivating,
appraising the employees and many more.
 Expensive accounting: It is important for LLC to maintain proper record of accounting
to ascertain the financial value of an organisation. In order to conduct the accounting
practice, it requires skilled and experienced professional who charges higher fees and
expensive to appoint such personality for an organisation
Recommendations for IOM Solutions
IOM solution is a sole proprietorship business and run by the Sam. After considering
all kinds of legal business structure, it is recommended that IOM solution must go ahead with the
LLP in order to expand their business. Limited Liability partnership is less risky form of business
organisation that requires less resources and will give better outcome to the Sam. The one of the
biggest advantage of LLP is that, the liability of partners is limited and it protects from paying
any kind of debts through using their personal assets (Nso, 2020). It have similar feature of both
general partnership and LLC. The limited liability partnership is having a feature of separate
legal entity and protects the rights of their partners. By using such form of business organisation,
the IOM solution can successfully expand their business and foster their performance in the
market. It promotes the ideas and thoughts of partner, provide opportunity to grow their business.

This form of business organisation will help the IOM solution from any kind of misconduct and
conflict among the partners and secure the general interest of each partners. Therefore, it is
suggested to IOM solution to opt the LLP form of business organisation to minimise the risk and
achieve the benefit of growth in the business.
CONCLUSION
From this above report, it has been concluded that the business environment is dynamic
and complex. There are various factors that directly influence the growth and expansion of
business. The upgraded technology, innovation, human capital, sustainable resources are some of
the factor that are the key to success of an organisation . It may varies according to the need and
availability of funds in order to identify the most appropriate form of business organisation.
However, if the owner has less investment opportunity and want to exercise their full control
over their business, then the sole trader form of business is suitable for them. However, each
factor are kept to be taken into consideration to prefer the most suitable business opportunity to
identify the potential outcome from such organisation. Business organisation includes sole
trader, partnership, LLP and LLC , each of them have their own advantages and disadvantages.
Therefore, the resources available on IOM solution shows that LLP is the most suitable option
available to sustain growth and expansion of their business.

REFERENCES
Books and Journals
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.
Bowman, S. and Wyer, P., 2022. The Distinctiveness of Small Businesses. In Small Business
Management and Control of the Uncertain External Environment. Emerald Publishing
Limited.
Formosa, A.M., 2018. From a sole trader to a company: a legal and financial analysis (Master's
thesis, University of Malta).
Henwood, E., 2022. The Ongoing Challenges That Local Businesses Continue to Face as a
Result of Brexit.
Hutton, C., Giles, M. and Beautridge, J., 2022. The UK Government announces a series of
reforms for strengthening the UK Competition regime. e-Competitions Bulletin, (June
2022-II).
Jyothirmai, B., 2020. Limited Liability Partnership Suitable to Emerging Enterprises in Current
Trends. Issue 4 Int'l JL Mgmt. & Human., 3, p.432.ship as a Better Alternative to
Incorporation. Issue 5 Int'l JL Mgmt. & Human., 3, p.514.
Nso, M.A., 2020. How Small Businesses can access Finance in a Modern Financial
System?. Advances in Management, 13(1), pp.15-17.
Rajanahalli, K., 2020. Limited Liability Partner
Rosa, P.J. and Scott, M.G., 2019. Portfolio entrepreneurs: some empirical evidence on the
multiple ownership or control of SMEs, and its implication for our understanding of
start-up and growth. In Entrepreneurship and SME Research: On Its Way to the Next
Millennium (pp. 113-126). Routledge.