Key Sources of Laws for Business Organisations in the UK

This report discusses the legal context for business organisations in the UK, including the Companies Act 2006 and employment legislation. It explores different business structures, such as sole trader, general partnership, and limited liability, and provides recommendations for IOM Solutions. Course code: BMP4002

BSc (Hons) Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of
laws as the legal context for business
organisations in the UK
Submitted by:
Name:
ID:
Contents
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Introduction
The business is setup by the owner in reference to earning profit with production and sale of
goods, it is in a type of company and organisation. For properly function of business and to
get known in the market among other competitors the business owner will create a
environment for this. New businesses establishes and emerges in the market every day which
leads to growth of industrial sector. The growth in industry will lead the economy to
facilitating the exchange of money and trade among the people in the market. For increase in
the standard of living and better future the new entrepreneurs consider start up business as an
opportunity for earning money(Birinci, Berezina and Cobanoglu, 2018). The investment and
capital is considered as an criteria for choosing the type and size of the business, through this
they can choose type of business in small, medium or large category. The Business law helps
in understand the legal structure of business and how many legal structure is available there
in UK. This project report will give information in regard for the business structures, merits
and demerits and the recommendation is to be given to Sam for the business expansion of
IOM Solution.
Businesses & Organisations in the UK
The activities and management of business is carried according to the Companies Act, 2006
in United Kingdom. This act provides all the provisions for better functioning of business and
also helps to run the business effectively. The employees are the main assets of a company
and a business can not run without them, they help to carry out business smoothly. The
behaviour of employees will be according to other employment legislations which clears the
standard of their actions. Non fulfilment of obligation arises legal liability and to stay out of
sight of this the companies should follow the legalities of the companies law. When a
business enters the market a professional identity will be given to them for professional entry,
this will provide distinct legal identity which have many components in it. The company have
components as separate legal entity, perpetual existence, they have common stamp and seal
in the name of business and also have the rights for suing someone and to be getting sued,
this will control the rise of professional misconduct(Cappellino, 2020). When a business is
started many agreements have to be concluded in its name so that a business can be started.
All these are under various heads and clauses which will make difference between them like
an agreement on sale and purchase of goods, etc.because of the unprofessional behaviour of
the employees this will give rise to the various liability.
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Vicarious liability is one of the liability which can arise in a business which will be
operated on large scale. When an employee behaves dishonestly and acts or commits any
wrongful act while they are the part of an organisation as its employee, the liability will arise
on the part of employer because they are responsible for the actions of their employees and
they must act within time to avoid such problems. While carrying out business they will also
suffer problems such as negligent behaviour of any member of any employee while carrying
out the roles and responsibilities. As the virtue, the directors have given the position of the
organizational head and they have many roles and duties which were to be assigned to their
posts, they have to perform all the activities with honesty and carefulness for ensuring the fair
business carried out on their part. When directors do not perform their duties in proper
manner then the legal liability will arise on them due to non fulfilment of there legal
obligations. The directors have to perform well in respect of their authority to ensure proper
decisions taken on the part of company. This is the duty of directors which ensures no
conflict between employees arises, if any one do this then the directors should resolve them
while promoting harmony (Cuervo-Cazurra and Li, 2021).
The legal business structure of UK companies
Sole trader is also known as the sole proprietor of the business. Sam is also a sole trader as he
is working alone in the company. He takes all the necessary decisions of the company, IOM
solutions Ltd. The profit which is earned by the company is only utilized by Sam as he is the
owner of the company. Sam is having all the responsibilities towards the company. He bear
all the liabilities which arise out of the business activities like repayment of loan, debt, etc.
But from past two years the company is doing very well in the market due to which the
demand of the services provided by the IOM solutions has increased. For the same, Sam
needs to expand the business in order to meet the market demand and that is why he is
looking for the various types of business composition to re organize the company. The
different business structures available to Sam are as follows-
Sole Trader
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As the name suggests itself, that the business comes under this type of structure is managed
by the single owner. The sole trader business structure is cost effective as it does not require
much capital for the formation of the business company. That is the main reason behind the
smooth functioning of this type of business. This form of business is mainly used by the
small scale entrepreneurs or the young population who wants to open their startups, as it
requires low investment of the capital and funds. It is mostly chosen by the single individuals
who prefer to become the single owner of their respective companies. The sole trader is
accountable for the fulfillment of all the responsibilities, duties and liabilities of the company.
On the other hand, he is not required to share the profits earned through the business
operations as he is the sole owner. The owner can take its own decisions without any kind of
interference in the process of decision making(Gitman,et.al.,2018). This type of business also
holds some negative aspects in terms of the liabilities, debts, repayment of loan and bearing
all losses. The sole trader needs to maintain a balance between the responsibilities and the
management of the businesses. There is a strong element of confidentiality and secrecy as it
is maintained by a single person. The concept of double taxation policy is applied on such
type of business structure in which the owner has to pay the tax in the name if the corporation
as well as on its personal income. It is mandatory to maintain proper details of the clients
under General Data Protection Regulations.
General Partnership
According to partnership act for a valid partnership there should be minimum two or more
than two members required who called general partners and sign the agreement. After signing
the agreement, these partners become jointly liable to carry all roles and liability which
involves in business. They also eligible for equal share of profit and losses. So its their
responsibility to share profit and losses on time for run the business smoothly. As they are
partners of profits so they have to take all risk like financial, any debt or other benefit which
is necessary for business defined under partnership law. They are collectively responsible for
complete every task which occurs during the business. As they sign the agreement the joint
liability automatically involves so for run the business perfectly they have to maintain off
accounts and other tasks or risks clear and they should be more accountable and transparency
toward there duties(Lemasse, 2020). The easy investments in business makes partnership
contract more reliable. The main benefit or reason for making this more attractive ,because
they are share their different skills and experiences in business and their creative ideas.
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Which helps to improve productivity of business. But their minus point of joint liability of
partnership is a wrongful act of one partner make suffers other as they are jointly liable. In
case of any death or bankruptcy of any partner the dissolution or formation of partnership
regulates according to the define law of partnership act.
Partnership
A partnership is a type of business which involves two or more persons who mutually agreed
to the terms and conditions of the partnership deed. They have equal share in the profits and
losses of the company. It is also known as unincorporated business entities in which the
partners are self employed. They holds personal responsibilities to fulfill the requirements of
the partnership firm, for example- repayment of any debt or bearing the losses. Each
individual is held liable for the conduct of the other fellow partner in case of any negligence,
fraud or mistake(Mogaji, 2020) . The profit sharing ratio is decided between the partners. The
partners pay the taxes on their personal share of profits.
Limited Liability
It is also termed as private limited company working as per the provisions of Company Act
2006 having separate corporal individuality and ownership by stockholders. It is a type of
company where owners relish meagre liabilities of private nature. How a company is created,
what are its functions, what are pre-requisites for its creation and how its dissolution takes
place is also according to the provisions of Company Law 2006. The management of the
company where director is the head, also constituted and governed as to their rights and duties
here.
Recommendations for IOM Solutions
Limited Liability Company must be chosen by Sam to spread out his enterprise of IOM
Resolution. This provides borderline private liabilities which will be beneficial for Sam. In
order to retain the available possibilities from the marketplace, it is necessary that a business
is timely expanded. This also ensures growth of the same. This aids the business in
accommodating the changing circumstances. Profit generation is also expected to be higher
with it. Because of its certain nature more investors are attracted to it and thus the investment
capital also increases. The jural framework also enriches business with varied benefits
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including proficient tax designing. The burden of work or to say the responsibilities are also
shared amongst the management and the persons associated with business.
Conclusion
It can be made out from this report that appropriate administration of the enterprises is
necessary for effective working. The businesses can be of different forms in regard to the
status, nature and the man of affairs can chose which type he want to opt. The major concern
of the management or the owners of business is business gains and revenues that are generate
by it. The law of business works on dealings and conduct of business. Thus Sam should
choose Limited liability Company for expanding his business. With the production of huge
profits and investments, the limited liability company will help him balancing his private as
well as business life.
REFERENCES
Birinci, H., Berezina, K. and Cobanoglu, C., 2018. Comparing customer perceptions of hotel
and peer-to-peer accommodation advantages and disadvantages. International
Journal of Contemporary Hospitality Management.
Cappellino, A., 2020. How to Choose the Right Business Organization Form.
Cuervo-Cazurra, A. and Li, C., 2021. State ownership and internationalization: The
advantage and disadvantage of stateness. Journal of World Business, 56(1),
p.101112.
Gitman, L.J.,et.al., 2018. Corporations: Limiting Your Liability. Introduction to Business.
Lemassel, M.M., 2020. Regulations of financial institutions in the US/UK.
Mogaji, E., 2020. Brand name nomenclature of UK law firms. Available at SSRN 3644042.
Ostrow, L., Nemec, P.B. and Smith, C., 2019. Self-employment for people with psychiatric
disabilities: Advantages and strategies. The journal of behavioral health services &
research, 46(4), pp.686-696.
Robison, L., 2021. Alternative Forms of Business Organizations. Financial Management for
Small Businesses, 2nd OER Edition.
Sharma, J.K., 2020. Limited Liability Partnership as a Better Alternative to Incorporation. Jus
Corpus LJ, 1, p.440.
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