Key Sources of Laws for Business Organizations in the UK

This report discusses the legal framework for business organizations in the UK and the different business structures available, including their advantages and disadvantages. It provides recommendations for a sole trader looking to expand their business through switching to a suitable business structure. The recommended business structure is the Limited Liability Partnership.

BSc (Hons) Business Management
BMP4002 Business Law
Assessment 2
Report on describing the key sources
of laws as the legal context for
business organisations in the UK
Submitted by:
Name:
ID:
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Table of Contents
Introduction ...............................................................................................................................3
Businesses & Organizations in the UK........................................................................................4
The legal business structure of UK companies..........................................................................5
Sole Trader.............................................................................................................................5
General Partnership...............................................................................................................5
Partnership............................................................................................................................6
Limited Liability......................................................................................................................7
Recommendations for IOM Solutions........................................................................................8
Conclusion..................................................................................................................................8
REFERENCES...............................................................................................................................9
Introduction
Business is an activity which get affected through various internal and external
factors. Business covers the wide means, the activities of businesses are dependent
upon various other sectors and departments. Regulating the business activities is not
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an easy task it require a legal framework or a body which support the functioning of
business activities. In starting the business, owner or the members of an organization
don't feel such stress but after the business demands controlling and legal path top
run at that time manager, owner or the board of directors of the company has to run
the business organization as per the laws and rules. In the United Kingdom doing
business is an easy task as there is no such complicated rules and laws for doing
businesses (Bai and et.al 2021). The parliament of UK gave its best efforts at the
time of introducing the legal act which regulates the functioning of all the business
organizations in UK. In UK there are mainly four kind of business structures which
are running smoothly and profitability. These different business structures are; Sole
trader, Partnership, General partnership and Limited Company. To provide them a
path and make all these business structure legal, in UK parliament passes the
Company Act 2006. it becomes the main act which prescribe all the duties and right
of business organization and of their members, managers and board of directors. In
this report also, all the business structure will be discuss along with their merits and
demerits. This has to be done for fulfilling the requirement of report which is to
provide the recommendation for a sole trader who engage in selling the electrical
parts, for expanding the business through switching the different and suitable
business structure.
Businesses & Organizations in the UK
There are different types of business structure available in a business market
which carries different features and characteristics. Nature of each business
organization is different and it get decided by its structure and define by its
functioning. An organization can be corporate or incorporated and it would get decide
through its dealing and and its size(Iris and Lam, 2021). There are mainly four types of
business structure which has different nature and that nature will get decide through
its working areas, its size. There is a simplest form of business structure which
doesn't carries much obligations and administrative responsibilities which decide that
it has a simple and formal nature. If the Limited Company business structure got
discuss it can be said that it has many obligations to perform and also has to fulfill
the administrative responsibilities which are many. For such type of business
structure it can be said that it has complicated structure and also the nature as there
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are many activities which an organization members, managers and board of directors
has to perform(Jeong and Lee, 2022). As the company structure are huge which carries
different functions and responsibilities to perform for that is require to split the
functions of an organization between the departments. To make the functions of an
organization simpler and smooth it Is necessary to divide the work and
responsibilities among the different departments. The departments which carries in
an organizations are; human resources, information technology, marketing, selling,
research, accounting etc. as there are many departments and responsibilities for that
it is essential to have such authority in an organization who has full control over the
company and on its functioning. The bigger responsibilities are on Board of Directors
who are few in number but regulate all the functioning of business organization. The
board of directors has some sense of serious responsibilities like; taking decisions,
making policies, assign duties to other authorities in an organization. In a limited
company business structure where there is no liabilities of the members of a
company but in UK there is provision in Law of Tort known as Vicarious liability. It
gives more responsibilities to the manager or the employer of a company to being
responsible for the misconduct, misbehave and negligence of their
employee's(Roycroft and Brine, 2021). It is important for every type of business
organization to make itself register either in Companies House or at HMRC
according to the requirements and prescribed manner of a company act. At the time
of registration the company it is mandatory for the organization to prepare two kind of
documents i.e. Memorandum of Association and Article of Association. These are the
documents which carries the internal as well as external policies of a company.
The legal business structure of UK companies
Sole Trader
In such type of business structure there is only single person who regulates all
the functioning of a business organization. That single person is a owner of a
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company manage all the activities and took all the decisions for betterment of
business organization(Jami Pour and Hosseinzadeh, 2021). It is the most simplest form
of business structure in a manner to establishing it also in respect to the
responsibilities. All the profit kept by the owner and also liable for the liabilities like
negligence or misconduct.
Advantages
 It is the simplest form of business structure
 Owner is free to take decisions
 Owner enjoys all the profits earn in a company
 Not required such high fee for registration
Disadvantages
 Its a difficult task for a single person to control and manage the activities of
business organization
 Owner has bare losses alone of business company
 No moral and financial support can be found
 Owner has unlimited liability
General Partnership
This business structure is also not very complex. In such type of business
structure more than one person regualtes the functioning and running the business
organization. The partners came into an agreement where they decide tha sharing of
profit and loss of the company together(Kim and et. al., 2021). All the partners are
liable for tehri own misconduct and also others in general form of partnership.
Partners of a company brough their share of capital accordinh to which they share
profits and bare losseds in that share of of wihc they becom ethe partner of a
company. It is necssary for the organisation to get registered HMRC.
Advantages
 It ha sthe easy process of establishing partnership firm
 Liabilities of a company got shared among the partners
 company's risk got shared
 Raising of fund is not a difficult task
Disadvantages
 partners has the liability towarsd the company loss and debts
 partners are liable for their own negligence and also of other partners
misconduct
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 Death of partnership wind up the company
 Chances of conflict and isses are higher as there ae more than one owner
Partnership
Such type of business structure is similar in general form of partnership but
also there Is a wide difference between geneal form of partnership and the limited
liability partnership. Number of partners are more in such business structure. It
comes under the company's due to that reason partners of the company didn't
carried the liability of an organization(Weber, 2021). As per the liability partners are
liable for their part of negligence and misconduct unlike the general form of
partnership where partners are liable for other mistakes also. Like the companies
limited liability partnership haa to get registered in Companies House and about the
resgistration it is mandatory to inform to HMRC. Partners are also feel good at the
tim eof paying the tax as they paid self-assessment tax return every year it got paid
as per profit earned in the partnership firm. Partners of a company also pay the
National Insurance.
Advantages
 Liabilities of the partners are limited towards the company
 Partners are liable for their own negligence and misconduct
 partners death would not affected the partnership running
 Partners got the profir after deduction of tax
Disadvantages
 At the time of public disclosure, company have to submit financial account to
the Companies House.
 Partners got personal income and also paid wouldn't deduct from their
personal income
 profit can't be maintained like share of company
Limited Liability
It is the most complex form of business structure which Is dificult to manage
and also find difficulties at the time of establishimg the business structure. The
company area of such type of business structure is very wide for that there are many
departments situated inside the company. The departments carries and supervise
the functioning of employee's and record their performance(Sanz and Zhu, 2021).
There are departments like; human resources, accounting, marketing, selling etc all
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these departments has the function to perfrom as per their areas. The company like
busienss structure got registered in Companies House ansd send the report to
HMRC. After the registration the company build its separate legal identity which
makes the members separate from the company. It means company ha sthe right to
sue anyone or any person by the name of company, and also it would get heppened
by others where any person or an organization can sue the company.
Advanatges
 It is tax efficient
 There is no liabilities of shareholder's of a company
 shareholders share the profits after deduction of tax.
Disadvantages
 It require high amount of fee for registration
 Require high efforts for managing the company
 Raising capital is a big and risky task
 There is no perpetual existence
Recommendations for IOM Solutions
From the above discussion it got cleared that there are many types of
busienss structure which carries their independent featurtes abd characteristics.
From these business structure some have very simple form of business structure like
sole propertiership in which thee is only single person who is the owner of a
company(Chaturvedi and Chaturvedi, 2022). While the limited liability company has the
complex form of busienss structure, it is not easy to manage and controll the
activities of such kind of wide business structure. It need some board of directors
who manage the functioning of whole organization, otherwise various departments
are situated within the organization. As per the demand of report, Sam who is a sole
trader engaged himself in a business of sole trading, the busienss deals with
electrical parts with the name as IOM Solutions for last eight years. The sole tarding
business is very helpful for those who start up their business because, in the starting
it doesn't required high amount of fund and also get mange by the single person. But
as per the time spent on single trading it would become les profitable for the owner.
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Business like Sam who spent last year in sole trading, it would obvious that Sam
earned profits thats would be the reason business would goes on for eight years. But
after spending more years and in sole trading it become less profitable and also
there is no scope left for expand the busienss(Chaithanapat and Rakthin, 2021). The
same incident happened with Sam as the owner earn high amount of profit and due
to tax deduction from the personal income high amount of tax got dedcuted from the
personal income. To avoid this situation and to fulfil the dream of expanding the
business the best business structure for IOM Solutions is the Limited Liability
Partnership. In such type of business structure Sam will easily earn high profit and
even tax would not deduct from the eprsonal income.
Conclusion
From the above report it can be concluded that every types of business
structure is benefecial in their own positions. Few different types of business
structures were discussed above such as; sole trader, general partnership, limited
liability partnership and the limited liability company. These different business
structure has its own advantages and disadvantage which also describe their
features and characteristics. In the last of report, recommendation aws made for the
sole trader Sam to switch the business structure. After understanding the situation of
Sam business, limited liability partnership got recommended, as it will be beneficial in
paying the tax, reducing the liabilities and for the main aim which Is to expand the
business.
REFERENCES
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