Key Sources of Laws for Business Organizations in the UK

This report covers the legal context for business organizations in the UK, including different business structures, liabilities, and key sources of laws. It also provides a recommendation for a sole trader seeking to expand their business. Course code: BMP4002, Subject: Business Law, Course Name: BSc (Hons) Business Management, College/University: Not mentioned.

BSc (Hons) Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of
laws as the legal context for business
organizations in the UK
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Contents
Table of Contents
Introduction ...............................................................................................................................3
Businesses & Organizations in the UK...................................................................................3
The legal business structure of UK companies......................................................................5
Sole Trader.............................................................................................................................5
General Partnership...............................................................................................................6
Partnership............................................................................................................................6
Limited Liability......................................................................................................................7
Recommendations for IOM Solutions...................................................................................8
Conclusion..................................................................................................................................8
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Introduction
UK business law is the collection of law and legislation which covers all the business related
aspects from commencing a business to its winding up. A business is a vital process wherein,
all the business operations being conducted. A business forms a relationship between
employer and employees,wherein an employer is a head of the business structure and
employees are the workforce which executes daily operations of a business. All these
business activities requires law, rules and regulations to regulate the relationship between
employers and employees and other business related operations (Atanassov and
Mandell2018). Business law is essential for regulating business activities because without
law no business can survive. There are several business laws and legislation which are in
operation and their application extent within the territories of United Kingdom. All the laws
relating to business are derived from English common law. In this report, several structure of
businesses will be discuss, along with nature and management of a company, types of
business management, vicarious liability, the roles opf directors their liabilities and duties,
termination of partnership , memorandum of association, article of association and the legal
business structure. To support this report a sole trade company named IOM solution is taken,
the owner of a company is a sole trader who wish to expand the business by seeking potential
alternative business plan. This report will demonstrate the availability of different alternatives
along with their advantages and disadvantages to recommend IOM solution an appropriate
potential business alternative for business expansion.
Businesses & Organizations in the UK
The nature of a business pertains to the type of business including its goals and objectives. It
also explains the legal structure of a company and their products or services and every factor
which a business organization does to attain targeted goals. The nature of a company reflects
the business challenges as well as its offerings in the market. A company is manage by its
management unit which divides into different departments such as, human resource
department, production and manufacturing department, marketing department etc. these
departments are the essential vital parts of a company which keeps the momentum of a
company going on. The management of a company includes, founders, promoters,the board
of directors, chief executing officers, shareholders, managers, workers and many more who
participate in attaining the goals of a company (Graesch Hensel-Börner and Henseler2020).
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There are various kinds of business law operating in United Kingdom, they are known as
commercial law which governs commercial bodies and transactions. There are, employment
law, tax law, anti-trust law, intellectual property law, insolvency law etc.
Business work transaction includes discovering the services and dependencies in order to
identify and gather relevant data which gives a clear picture of business environment which
enables to understand the process of work. (Scott-Patel2019).
Vicarious liability in a business is situation wherein, one party is made responsible for the
misconduct of a third party. Where a business is financially held responsible for the unlawful
actions of a third party. In most cases the employer is held liable for for the misconduct and
actions of contractors, agents or any other employees. A business is always made liable for
negligence because a business is a separate legal entity, a company is not liable for their
negligent conduct in the same way as natural person because a company is an artificial legal
person. Negligence in a company occurs due to lack of proper care which results into
harming someone (Hannigan2018).
A director of a company is duty bound to ensure that the company performs and complies
with its obligations and a director is expected to act within the powers. It is the duty of
company's director to remain independent and promote the company to attain the targeted
goals. Directors are responsible for ensuring health and safety for its employees. One of the
business structure having more than one owners is partnership. A partnership is a form of
business structure in which two or more persons are owners who mutually agreed to conduct
a business structure. Partnership can be dissolved or terminated on a retirement of a partner or
on death, it can be dissolved if a partner becomes bankrupt, dissolution by agreements and
may other reasons (Hunt Sarkar,and Warhurst2022).
Memorandum of a company also known as the charter of a company which is prepared at the
time of formation and registration process of a company. It is a legal document which creates
relationship with shareholders and it contains the key objectives of a company. Whereas,
Article of Association on the other hand, is the collection of rules and regulations of
company which regulates the conduct and manage all the internal business affairs.
(Tricker2019)
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The legal business structure of UK companies
Sole Trader
Sole trader considered to be the most easiest and and simplest business model, its registration
is far simpler than any other business structure. Sole trader is a single owned business and it
must be register with HMRC. Sole trader entitled to keep all the profits. There requires a self
Assessment tax return. A sole trader is liable for all the liabilities accrued in a business.
Liability includes personal assets of sole trader.
Advantages of sole trader
 No registration is required, easy to commenced sole trade business.
 Easy registration, it gives an opportunity to remain self employed.
 There is absolute and complete control of an owner in a sole trade business.
 Minor tax obligation as there is no rule of corporation tax to pay annual accounts in
order to submit to companies house.
 Sole trade offer More flexibility because the process is less complicated.
 It offers more privacy in financial matters.
Disadvantages of sole trader
 creates unlimited liability because an owner is wholly responsible for debts and losses
in a business.
 There is sole responsibility of a sole trader for everything in a business.
 It offers less tax planning opportunities.
 Limitation is imposed on sale in sole trade business.
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General Partnership
It is a form of business structure, wherein, two or more individuals mutually agree to
commence a business to make profits. Partnership business structure are regulated by the
Partnership Act 1890 and its application extent throughout the United Kingdom. Provided
that a partnership is not a separate legal body. To form a general partnership firm it must
satisfy certain conditions, it must have at least two members and the partners must agree to
all the liability which may incur in partnership. General partnership relating to taxation, it
dose not pay tax on income from business. The tax are levied individually on partners
according to their profit share (Yin and Burke2020).
Advantages of General Partnership
 General partnerships are easy to form, it only requires an agreement between partners
to outlines duties and responsibilities of each partner.
 There is simple tax system with pass-over system. The partners do not have to pay the
loss jointly.
 Partnerships permits multiple individuals to start business.
 It creates an equal rights for each partner in a partnership business.
Disadvantages of General Partnership
 General partnership puts personnel assets of partners at risk at times of loss.
 There is lack of instability exist in partnership.
 Due to multiple partners it becomes difficult to obtain high profits.
 There is a risk of disagreement between partners which led to termination of
partnership.
 In partnership business disputes arise very frequently.
Partnership
A partnership is an arrangement of a business wherein, two or more individuals
mutually commence and owns a business who are entitle personally to share the profits and
losses. The Partnership Act 1890 governs the partnerships in UK. As per partnerships rules,
no partnership has a separate legal identity. The partners having unlimited liability in
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partnerships. Partnerships are formed and registers HM revenue and customs. Partnerships
are not liable for tax, rather the partners individually liable for tax as per their income sharing
ratio. On dissolve of a partnership , the individual partners does not remain partners within
the legal context. The legal status of a business is terminated after dissolution of partnership
and all the assets are ceased to distribute in order to pay the losses.
Advantages of partnerships
 partnerships provides expertise and knowledge which help to grow and elevate the
business.
 Partnerships brings more capital in business, it attracts potential investors who can
invest money in partnership to accelerate the business performance.
 Partnership reduces the burden of business expenses.
 Partnerships bring more business opportunities by having a partner which helps in
bringing productivity in a business.
 Partnerships avail tax benefits.
Disadvantages of Partnerships
 there is a responsibility on the partners to held accountable towards business liability.
 There is lack of stability in partnership because of uncertainty of the nature of
business in future prospects.
 No autonomy, which means no partner holds complete control over the partnership
business.
 Partnerships has no separate legal status.
Limited Liability
It is a Corporate body having separate legal entity which different from traditional form of
partnerships. It forms a limited company structure which are governed by several pieces of
legislation including Limited Liability Partnership Regulation Act, 2001. To formulate a
Limited liability partnership it should set the objectives of business objectives and operations
including profit sharing arrangements. It can be registered electronically. Limited liability is
not considered a separate entity for the purpose of taxation. In this each members has to pay
tax individually on the income from business. In relation to liabilities, all the debts of the
company are the liability of a company, no shareholder or the directors held directly liable for
the liabilities. Where a limited liability partnership dissolves with an outstanding debts, then
creditors or other lenders can refer to restore the legal status of a business in order to recover
the dues. (Qa’dan M.B.A. and Suwaidan2018).
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Advantages of Limited Liability
 It minimizes the personal liability of partners or directors.
 There is a higher scope for personal remuneration for partners or shareholders.
 Limited liability create separate legal identity of a business.
 It creates high credibility and trust which add value to business.
 Limited liability provides additional capital by attracting investors.
Disadvantages of a limited company
 it must be incorporated by Companies House.
 Incorporation fee is to be paid to Companies House
 Annual Tax assessment must submit to HMRC
 records and registers of company must be maintained in order to made them available
for inspection by company's registrar.
Recommendations for IOM Solutions
From the above report and relevant information. It is recommended to Sam who is a Sole
trader of an IOM Solutions to go with the option of limited liability partnership. IOM solution
has a good experience and has created a good market locally and the business is also doing
well. Business is now demanding more employees because the demands are increasing and
Sam has to increase its production therefore, Sam is seeking for a potential alternative for
business expansion. Limited liability partnership is the best alternative option for IOM
solutions as it will provide many advantages to Sam.
Conclusion
From the above report, it can be concluded that, business law is essential to regulate the
conduct of business and to establish relationship between employers and employees. Business
law open wide varieties of options for an individual who seeks to commence a business wants
to change exiting business structure. This report has covered all the relevant aspects of a
business law including different kinds of business structure within the legal framework along
with their advantages and disadvantages. At last recommendation has been made to an IOM
solution who wish to expand business by seeking appropriate alternative business structure
and the recommendation made to IOM solution to go ahead with the limited liability option.
Referencing
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Atanassov, J. and Mandell, A.J., 2018. Corporate governance and dividend policy: Evidence
of tunneling from master limited partnerships. Journal of Corporate
Finance, 53, pp.106-132.
Graesch, J.P., Hensel-Börner, S. and Henseler, J., 2020. Information technology and
marketing: an important partnership for decades. Industrial Management &
Data Systems.
Hannigan, B., 2018. Company law. Oxford University Press, USA.
Hunt, W., Sarkar, S. and Warhurst, C., 2022. Measuring the impact of AI on jobs at the
organization level: Lessons from a survey of UK business leaders. Research
Policy, 51(2), p.104425.
Qa’dan, M.B.A. and Suwaidan, M.S., 2018. Board composition, ownership structure and
corporate social responsibility disclosure: the case of Jordan. Social
Responsibility Journal.
Scott-Patel, K., 2019. UK Employment Law-A Good Plan for Workers?. Int'l. In-House
Counsel J., 12, p.1.
Tricker, R.I., 2019. The Evolution of the Company—how the idea has changed. In Corporate
Governance (pp. 1-22). Gower.
Yin, G.K. and Burke, K.C., 2020. Partnership Taxation. Aspen Publishers.
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