Key Sources of Laws for Business Organisations in the UK

This report describes the legal context for business organisations in the UK and the different types of legal structures available for managing a business. It discusses the Companies Act 2006, employment legislation, and the Partnership Act 1980. The report recommends Limited Liability Company as the best legal structure for business expansion. The report is relevant to Business Law courses such as PRO331 and BMP4002.

Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of
laws as the legal context for business
organisations in the UK
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Contents
Table of Contents
Introduction ...............................................................................................................................2
Businesses & Organisations in the UK........................................................................................2
The legal business structure of UK companies..........................................................................4
Sole Trader.............................................................................................................................4
General Partnership...............................................................................................................4
Partnership............................................................................................................................5
Limited Liability......................................................................................................................5
Recommendations for IOM Solutions........................................................................................5
Conclusion..................................................................................................................................6
Introduction
Production of goods and distribution of services with the aim of generating profits and
revenue is related to the business environment. Business creates competitions in the market
by indulging various industrial sectors. Businesses help in the improvement of economy by
facilitating exchange of trade and money. Business startups help emerging entrepreneurs to
open their own business to address the opportunities coming in their way. With business
earnings, the quality of life and standard of living also improves. Thus, businesses in the
market operate on small, medium and large scale according the investments and capital
available with them. It helps in determining the legal business structures which owners
choose in order to manage a business(Alonge and Fredrick, 2020). These also come with legal
obligations which are created by the business law which governs how it runs in the market.
Thus business law clearly states how a business is established and operated. This project will
talk about the various different types of legal structure, their merits and demerits and will give
advice recommending the best structure which Sam can choose for his business expansion of
IOM Solutions.
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Businesses & Organisations in the UK
Businesses operate and function smoothly with the guidance from the provisions of
Companies Act 2006 of UK. It states how the management of the business should work so
that it can run effectively. Employees are the main assets of a business thus their management
is also essential. Employment legislation govern how they behave and sets standards for them
which they should follow. Companies and business should work according to the companies
law to avoid legal problems. Business are identified as an artificial person due to their nature
and are given a separate legal identity (Bawah, 2019). Due to a business having distinct
identity they have to follow certain components like separate properties, perpetual existence,
a stamp which is common for their business and the rights of suing somebody and
responsibility of getting sued due to not abiding with the standards and norms. A business
also concludes various agreements while running a business which are under different heads
and have distinct clauses which help in easy management of it like the sale and purchase of
assets and shares.
Management of a company or business gives rise to various liabilities one of such is
Vicarious liabilities which arise when business is run on a large level. These liabilities arise
on the owner or employer instead of the employee. These are basically the responsibilities
and liability which arise when an employee while being in the organization commits any
wrongful act. In this scenario, the employer is held liable for the action of the employee for
which they have to act on time. Business also faces problem due to negligent behavior which
is regarded as Business negligence. It arises when according to the provisions and procedures
which are stated to carry out a business involves non compliance when the duties prescribed
are not followed. A director being the head of the organization has functions to carry out
which are in their hand. This post provides them with various roles and responsibilities which
should be carried out with honest and fair behavior. But when they do not perform these
duties, they get trapped in liabilities due to the legal obligations. They should act within the
authority by taking proper decisions and judgments on behalf of the company. They have the
duty to ensure that a company succeeds and no conflicts or disputes arise and if they do then
peacefully resolve them by promoting harmony (Cribb, Miller and Pope, 2019). When the
director is not performing his duties up to the mark and is performing unethical behavior, then
other directors of the company can hold that director responsible for breach of duties. It is
also necessary that the company is not suffering for the problems caused by the director by
negligent behaviour, if this situation arises then they can be asked for remedial measures like
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paying compensatory damages. In the circumstances of serious breach it can lead to
termination of the contractual agreement. They can also disqualify the director from the post
and can sue him for criminal offence for dishonest behavior and malpractices. The property
held by the individual on being at the post of director can also be confiscated and taken.
Provisions given in the legislation of Partnership Act 1980 govern the agreements of
Partnership stating the terms for company formation and termination. Memorandum of
Association (MOA) and Articles of Association (AOA) help in governing the operations of
the business environment. A company's formation and management is governed by the legal
statement which is MOA that is create at the time a company is incorporated. But for it to get
active it should be signed by the shareholders and guarantors whereas AOA states the rules
anmd regulations of a company by a written statement which are to be followed and should be
agreed by the directors, shareholders and owners while managing a company (Cullen, 2019) .
The legal business structure of UK companies
Sole trader is a simple type of structure which has been adopted by Sam while
managing his business of IOM Solutions. He operates it solely being a single owner of the
business(Davoudi, McKenna and Olegario, 2018). Thus he has to manage all the risk and
liabilities that occur in the business himself. He is the sole earner of the earnings but in recent
time the demand in customers has increased due to which he is looking for business
expansion by choosing a appropriate legal business structure for his business. Following are
the types which as a business structure are available to him:
Sole Trader
It is a self employment type of business structure where a business is managed by a
single person. It is generally preferred by the emerging entrepreneurs due to its simple
structure because they want to start their business on a small scale. It is easier to open,
establish and manage. Thus it is popular in small startups. The sole person is the earner of all
the profits and revenues that are generated in the business. But business also involves
financial risks, losses and liabilities which are too much for a single person to handle and thus
it becomes a burden on that person. It is cost effective and the control of ownership is in
single hand who carries out the decision making in the business without being dependent on
others. In the management of business privacy is observed. But it is difficult for the owner to
have some personal time (Lloyd and Payne, 2019). It is difficult to generate funds for the
business which sometimes leads to debts. Personal professional affairs gets mixed up in this
structure. The single owner has to pay income and corporation tax and also file self
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assessment tax returns. They have maintain data of the customers with respect to General
Data Protection Regulations and get themselves registered to avoid legal problems.
General Partnership
It generally refers to the type of business where two or more individuals are involved
and are called as owners. They are referred to as General Partners who share the profits and
losses which occur in the business. An agreement is created between the partners according to
which they share the costs of establishment, financial risks and debts, benefits of the business,
etc among them. They collectively manage and operate the business which creates joint
responsibility between them so that they manage the risks and remain transparent and
accountable to each other. There is personal unlimited liability of the partners for the
business actions. But this business structure is more reliable than sole trader due to easy
creation of capital. The decision making is powerful due to involvement of different minds
and their knowledge, skills. It helps in improving the productivity of the business. But there is
also problem in joint liability in respect of wrongful actions. This is governed by Partnership
Act. It governs its operation and provisions for dissolution in case of illegality, death or
bankruptcy of a partner (Lord, Wingerde and Campbell, 2018).
Partnership
It is also referred by the name of Limited Liability Partnership. It is different from
General Partnership with respect to obligations which puts limit on the amount of money that
is spent on the business by the partners. Its incorporation includes two or more partners who
are personally responsible for negligent activities or wrongful conduct in the business place
due to their limited liabilities. It is not similar to the general partnership in respect of
collective responsibility because there is no such thing in this. One thing that is essential in
this partnership is having a registered office which abides by government regulations.
Protection is given to partners according to Limited Partnership Act of 1907 for effective
functioning which states that partnership be constituted by written agreement. The partners
are responsible for the financial risks and obligations of business(OGUNSAKIN, 2021).
Limited Liability
It is a type of company which has private management of its affairs and limited
liabilities. The company is run by the director who is the head which runs it and its
shareholders are called as real owners of the company. It has a separate legal identity as a
professional entity. It has its own legal rights and obligations which govern its functioning.
The nature of limited liabilities makes the company retain all its profits. But this business
structure proves to be meritorious in the nature of providing separation in the personal and
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professional affairs in relation of finances(Roberts, 2018). Limited Liability companies are
registered under the companies Act 2006 which provides them with the image of corporate
personality where dividends pay shareholders profits. Directors duties are mentioned in detail
in this Company legislation.
Recommendations for IOM Solutions
When a business is growing it moves towards expansion which makes it essential to
change the structure of the business to adapt with the market conditions. The best option for
Sam to choose for his business of IOM Solutions is Limited Liability Company which has a
lot of advantages. It helps in managing responsibilities by hiring more employees and training
them about the rules of the company so that they can carry out the functions of the business.
It is easier and efficient to work in tax planning. The owner of the business enjoys limited
liabilities. Company gets the identity of a legal entity which makes it easier for it to acquire
loans and investments which helps in creation of capital. It helps in the professional
development of the company. It also protects the interests of the owner which is not the case
in a sole proprietorship (Travis, 2019). Thus, Sam is recommended to opt for this type to
enjoy separation of personal and business affairs even in the department of finance. It will
make him financially safe and secure due to investors showing interest in the company. It has
flexible structure of management of company. So it will prove to be the best legal business
structure for the expansion of his business.
Conclusion
From this project, it can be concluded that a business can function efficiently and
effectively with business law. It helps in clear understanding of business formation and its
management due to the provisions which are laid down in it. Most businesses operate with the
aim of generating profits in the longer run by following the legal rights which are provisioned
in the laws. Businesses can range from a sole trader to a Corporation varying in their sizes.
Sam is recommended to opt for Limited Liability Company as the best solution for the
business expansion which will help him generate high profits.
References
Alonge, F. and Fredrick, K., 2020. The Influence of Gender on Business Development: A
study of Micro and Small Enterprises in the UK.
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Bawah, A.S., 2019. A Comparison of the Statutory Provisions of the United Kingdom (UK)
Companies Act 2006 and Ghana's Companies Act 1963 (Act 179), to the Rule in
Foss v Harbottle. Beijing L. Rev., 10, p.153.
Cribb, J., Miller, H. and Pope, T., 2019. Who are business owners and what are they
doing? (No. R158). IFS Report.
Cullen, U., 2019. Sociocultural factors as determinants of female entrepreneurs’ business
strategies. Journal of Entrepreneurship in Emerging Economies.
Davoudi, L., McKenna, C. and Olegario, R., 2018. The historical role of the corporation in
society. Journal of the British Academy, 6(s1).
Lloyd, C. and Payne, J., 2019. Rethinking country effects: Robotics, AI and work futures in
Norway and the UK. New Technology, Work and Employment, 34(3), pp.208-225.
Lord, N., Wingerde, K.V. and Campbell, L., 2018. Organising the monies of corporate
financial crimes via organisational structures: Ostensible legitimacy, effective
anonymity, and third-party facilitation. Administrative Sciences, 8(2), p.17.
OGUNSAKIN, O.O., 2021. A COMPARATIVE ANALYSIS OF THE LEGAL REGIME FOR
THE PROTECTION OF THE RIGHTS OF DISABLED PERSONS IN THE UK AND
NIGERIA (Doctoral dissertation, FACULTY OF LAW, UNIVERSITY OF ILORIN,
ILORIN).
Roberts, J., 2018. Multinational business service firms: development of multinational
organization structures in the UK business service sector. Routledge.
Travis, A., 2019. The organization of neglect: Limited liability companies and housing
disinvestment. American Sociological Review, 84(1), pp.142-170.
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