Key Sources of Laws for Business Organisations in the UK

This report covers the legal context for business organisations in the UK, including different business structures and their legal obligations. It provides recommendations for IOM Solutions and concludes that Limited Liability Partnership is the best option for Sam's business. Course code and college/university not mentioned.

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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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........................................................................................6
Conclusion..................................................................................................................................6
References..................................................................................................................................6
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Introduction
Businesses play a major role in society by continuously creating competitive spirit
among all. They try to improve the quality of life of people by making goods and services
available. Its major goal is to earn profit for themselves by improving the economy at the
same time. A business environment creates various opportunities for the emerging
entrepreneurs. Thus businesses operate on a small level or on a large level depending on the
type of business and the investments. Higher revenue generation is essential for the growth
and development of a business. Proper plans and strategies are needed to expand a legal
business structure. Business law provides an organization with a set of rules and regulations
so that they can function effectively. The legislation clearly states how to form a business and
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how to operate it(Cappellino, 2020) . This project will cover in detail the various forms of
business structure, their legal obligations, director's role in company and will provide advice
to Sam for his business of IOM Solutions.
Businesses & Organisations in the UK
The Business environment of UK is governed by the Companies Act 2006. It lays
down provisions and standards for the functioning of different business structures so that they
can operate smoothly and effectively (Wial, 2018). The employees of the business are also
governed by the various employment legislation. The companies thus need to comply with
these laws for working in the longer run. Companies and various businesses are also referred
to as artificial persons because of their professional nature and distinct legal identity. Thus as
being a company they have various components and elements which are fulfilled they are
distinct and separate identification, perpetual existence, different properties, common seal and
the rights which any company gets of suing another company or getting sued if perform
misconduct. The companies in UK have different agreements included in their business
transactions which are included with various heads and clauses which are needed to be
followed. They also include the shares and assets with their sale and purchase and letters of
intent,etc(Davies, 2020) .
When a company operates they also give rise to certain liabilities which are called as
Vicarious liabilities which implies that if any employee commits any wrongful or incorrect
act when he is still working in an organization then the person employing them known as the
employer will be held liable for their actions and will give rise to responsibilities on which he
has to act in a certain period of time. Whenever any person operates or runs any business
there are high chances of them conducting business negligence in the way that they fail to
perform their duties or responsibilities according to the norms and procedures which are
given for them. But the main functioning of any organization or business is in the hands of
the head who is regarded as the director of the company. Being on that post the director has
various roles and responsibilities which should be performed by them with honesty and
fairness. Liabilities can arise if the legal obligations are not performed, these obligations are
acting within the authority by making proper decisions, making judgments which benefit the
company in a longer run by ensuring its success and also promoting harmony by resolving
conflicts and disputes which arise within the premises of the business. The other directors
have the power to hold any director liable if they do not perform their responsibilities and
conduct breach of duties. If the director leads a company towards loss and makes it suffer
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then they can be asked to provide compensations for the damages, their contract with the
company can also be ended by termination. They can also be disqualified from their post as a
director for breach and can be held for the offence of criminal nature if the breach is serious.
Sometimes they are also asked to return the property of the company if they are in possession
of any property, etc(Dignam, 2020).
Partnership is governed in any company by the provisions of the Partnership Act 1980
which defines partnership and states what leads to its termination. Memorandum of
Association (MOA) and Articles of Association (AOA) are necessary for the proper
management and running of a business. These govern the operations of a business where
MOA is a type of legal statement which is made when the company is formed with the
signatures of the shareholders or guarantors whereas AOA is a written statement which lays
down the convention and regulations of a company agreed by the owners, shareholders and
directors of a company for its smooth operations.
The legal business structure of UK companies
Sam operates IOM Solutions as a sole trader business where he faces all the liabilities
and debt problems due to being a sole decision maker in the operations of the business. He
also has the advantage of not having to share the profits with anyone else. Sam is looking for
business expansion options by choosing a suitable business structure for his business:
Sole Trader
It is also called as a Sole Proprietorship or a self employed business. It is the most
simple structure of business which is managed by a single person. It is easier to set up and
open compared to the other types (Sarah and Vida, 2020). All the revenues and profits
generated in the business go in the hands of a single person due to him being the sole owner.
Being the sole head he has various liabilities with respect to the performance of liabilities.
This is a very propular business structure in UK for anyone who wants independent decisions
in business with all the ownership control in one hand. Its cost effective nature makes it a
suitable type for start ups. It has advantages with respect to getting profits and maintaining
privacy of the business operations. But it also has disadvantages with respect to bearing of
establishment costs, risks, debts or losses because all this burden comes on a single person.
This type has various legal implications like business earnings of the owner are taxed from
time to time by the name of income tax and corporation tax. Maintaining data of customers is
essential with the register of them in the General Data Protection Regulations which provides
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penalties if not maintained. To avoid further legal consequences self assessment tax return is
also needed to be filed by the company on time (Hannigan, 2018) .
General Partnership
It is a form where two or more than two number of person joins hands in order to
work together as in the capacity of business partners with an aim of earning revenues. This is
considered as one of the most prevalent forms of business in the country. The members which
are involved in the affairs of the business and important decision making tasks are defined as
the partners who also works as a co-owners of the company. Moreover, the functioning and
working of general partnership is very much similar to that of the partnership form. Also the
process of its formation is one of the easiest and incurs minimum expenses. The
responsibilities and duties of company are entertained by all the partners co-jointly. Also the
share of revenues and losses are distributed in the same proportion. The said members also
enjoys the equal benefit of importing labour, assets and capital to the business. The advantage
of general partnership model is that the liabilities are shared in equivalent proportion while
also having the same profits. Moreover, other than the benefits and rights there also exists
certain legal implication for each forms. As in general partnership model there exists no
concept of separate legal entity, therefore pits members are bound to pay the taxes on their
part of acquired profits whereas the taxes on the whole income of the company are to be
settled by the account of company itself(Ilcheva, 2020) .
Partnership
As similar to that of the earlier one,, in partnership form two or more individual
comes together having common objectives in order to share the profits and losses out of the
said arrangement. There lies some essential elements which are necessary for the
incorporation of partnership model. First being the constitution of partnership deed, stating
the ratio of shares in which each individual is entitled to get benefit and losses. Also in this
form the partners are free to engage in to the activities of company either on their on or on
behalf of all. Moreover, the existence of big cluster of members on its place plays both
negative and positive effects to the business as it add on various skills and on the other hand
the fact that there exists the tendency to loose the direct control in the management. The legal
implication are, same as that of the general partnership, where each individual is required to
settle the taxes of their part of earnings(Knapp, 2020).
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Limited Liability
In this form of business, the liability of its members are confined to the limit of
amount which is invested by each individual as a share of capital in the business. Also both
company and its members acts in the capacity of separate legal entity and hence cannot be
made accountable for the dues each other. The way in which the capital is acquired is through
the issuance of shares. Also there lies no minimum criteria of capital with respect to the
incorporation of the company and the decision of the required capital lies totally upon its
members as per there discretion. The status of separate legal entity, similar to that of earlier
forms also prevails in this type where the liability of an individual is limited to certain extent.
Also for the losses and frauds of any one member are not to be entailed by the other members
of the company. Also, similarly for the acts occurred due to negligence and criminal nature
cannot be made co-jointly obligated same as that of the other members (Myers, 2020) .
Recommendations for IOM Solutions
The limited liability partnership business from is the one which seems most suitable
after ascertaining the given facts of the case study of Sam for his business venture of IOM
solutions. Also, it can be very well analysed that the various attributes and requirements
which Sam is looking for are best available in this form only. As one is looking for the
measures to expand his existing running business while asking for maximum protection in
terms of business security. The other issue which is faced by one is of the lack and improper
management reason being the inadequate and less number of staff in comparison to the
existing works related to business(Robison, 2021). Therefore because of this reason also one
can move forward with the option of limited liability partnership as with this measure more
people each having some different skills, experience, and qualities will be engaged while also
paying the equal contribution to the share of liabilities.
Conclusion
It can be summarized from the project that for a business organisation to function in a
proper manner it should be governed by the business law because it leads to its effective
management. Business is done with the aim of generating profits and these laws ensure that
the interests of the business owners and the consumers are protected. After studying the pros
and cons of each business type the best option for Sam is Limited Liability Partnership
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because of the various benefits attached to it. It can help Sam maximize his profits by
providing a separate identity to his business and ensuring he is free from personal risks.
References
Cappellino, A., 2020. How to Choose the Right Business Organization Form.
Davies, P., 2020. Introduction to company law. Oxford University Press.
Dignam, A., 2020. Company law. Core Texts Series.
Hannigan, B., 2018. Company law. Oxford University Press, USA.
Ilcheva, M., 2020. PARTNERSHIP MODELS AND SOCIAL FRANCHISE IN SOCIAL
ENTERPRISE SECTOR. SCIENTIFIC PAPERS VOL. 43.1. p.185.
Knapp, V., 2020. UK and EU Company Law after Brexit. European Company and Financial
Law Review. 17(2). pp.184-199.
Myers, D.H., 2020. Corporate Implementation and Business Forms. In Sustainability in
Business (pp. 61-83). Palgrave Macmillan, Cham.
Robison, L., 2021. Alternative Forms of Business Organizations. Financial Management for
Small Businesses, 2nd OER Edition.
Sarah, R. and Vida, A., 2020. Business law. Pearson.
Wial, H., 2018. 21. New Bargaining Structures for New Forms of Business Organization.
In Restoring the promise of American labor law (pp. 303-313). Cornell University
Press.
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