BMP4002 Business Law: UK Legal Context for Business Organisations

This report provides an overview of the legal context for business organizations in the UK, focusing on key sources of law and different business structures. It discusses the legal framework governing businesses, including employment law, contract law, and negligence liability. The report examines vari...Read More

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:
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Table of Contents
Introduction ...............................................................................................................................4
Businesses & Organisations in the UK........................................................................................4
The legal business structure of UK companies..........................................................................6
Sole Trader.................................................................................................................................6
Partnership.................................................................................................................................7
General Partnership ..................................................................................................................7
Limited Liability..........................................................................................................................8
Recommendations for IOM Solutions........................................................................................8
Conclusion..................................................................................................................................8
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Introduction
Corporate law is regarded as that body of rules and regulations that
essentially govern rights, liabilities and conduct of establishment and associated
persons. Main purpose of company law which is framed by UK government is to
provide an environment where varied business firms can operate and grow in an
effective and flexible manner. These laws also provides surety to various
stakeholders related to corporation so that they can do business with company with
full confidence. In case of any discrepancies, they can sue the corporation and liable
persons by following company law. It also protects varied interests of establishment.
This law also helps companies in establishing standards in their dealings or
transactions with differential stakeholders. Company law, 2006 of UK provides a
framework that allows establishments for international competitiveness.
This project comprises of understanding of structure of varied legal business
and Organisations which operates in UK. This report also covers finer understanding
of sole trader, partnership. This project also comprises of different types of laws
which are to be followed by establishment in UK to operate effectively.
Businesses & Organisations in the UK
An establishment in UK refers to any corporation which is registered under the
stated act. A corporation refers to a separate business entity which owns a legal
status in nature (Armour and Sako, 2020). It is considered as artificial person have
separate identity other than its employees or other persons associated with it.
Business law of UK comprises of differential types of rules and regulations which
helps companies to operate effectively. Company law of UK describes employment
as a service contract. It provides a scope for both employers and employees to carry
on their mutual relationship for effective functioning of business (Clarkson and Miller,
2020). It says that employer provides required premises and tools to its employees
for performing a task and get compensation or salary in return. Employment law also
ensures to provide flexible and safe working conditions to employees and protect
their varied rights at the workplace. Equality Act of UK has a primary purpose to
provide equal rights to employees in workplace and also ensures them to keep safe
from any exploitation based on sex, age and caste. It gives employees a right to file a
legal complaint against employer in case of any discrimination they face at
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workplace. English Contract Law can be termed as a body of rules and regulations
that aids companies in regulating contractual business agreements (Cowan, 2018). A
contract is formed when one party makes an offer and other gives their accent. In
order to make contract enforceable in court of law it should fulfill all the essentials
such as certainty, involvement of two parties, consideration and many more.
Consideration refers to Latin phrase quid pro quo which means something in return.
In business parlance, for instance, company promises to give profits to their investors
in return of their investment. In companies parties are presumed to enter into the
contract with legal intention. A contract is terminated when both the parties perform
their promises or breaching any terms of the arrangement.
Vicarious liability arises where one person is considered liable for the doings
of other (DuBoff and Bryan, 2019). For instance, in business parlance, a company is
held liable for the acts of its directors done in a bona fide manner. Primary motive of
this liability is to provide a fair and justified remedy for victim so as to protect him
from any harm in future. Rogue employees takes benefit from this situation as this
law put employer liable. In this case, employer take help of indemnity clause in
employment contract.
Negligence liability in business is arises when an employees fails to perform
their specified duties or breeches any arrangement (Frankfurter, Landis and Stevens,
2017). This poor conduct results in any injury or physical damage to customer. In
order to claim successful negligence, a client should have conclusive evidence of
harm they suffer due to mediocre product or services. If any claim in this regard
made, company has to face legal complications.
Directors are those persons who are responsible of managing, controlling and
supervising the various affairs of corporation. Major duties for which a company
director is hired are they should work effectively in a bona fide manner to promote
the establishment. They must be capable of making individual judgment which is
beneficial for company. They should have the capability to to solve any conflict in
organisation. Company director have a legislated duty to disclose any sort of
information which is harmful for organisation. Directors have limited liability in
establishment to the extent of value of shares they hold. Director is liable for any
authentication made by him in regards to publicize any financial statement which has
false or misleading facts. A company director must adhere to rules and regulations
which are provided in company's memorandum and articles.
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Partnership can be terminated through numerous ways by partners such as by
expiration of terms or tenure, death, by the order of court and many more (Gaitán,
Herrera-Echeverri and Pablo, 2018). Memorandum of Association is a legal statement
which is signed by all the persons or shareholders who agree and come together to
form a company. Whereas Articles of Association is a legal document which contains
rules and regulations ought to be followed by employees who are working with
establishment. These two documents are formulated at the time of company
formation and should be submitted to Companies Houses, UK in order to register a
company. Memorandum of Association contains names of all the subscribers who
agreed to form a company. These can not be altered in the life of organisation.
Contradictory to this, Articles of Association is considered as a rule book of company
and can be altered or modified by voting process in general meeting.
The legal business structure of UK companies
Business structure can be defined as putting an establishment in differential
categories which is recognised as per standardised legal aspects (Giubboni, 2018)
(Miller, 2021). This aids business owners in ensuring which type of structure they
want to adopt. As there are numerous pros and cons related to different types of
structure. By choosing a flexible structure helps business houses to operate their
operations effectively. Selection of business structure determines how operations will
regulated and taxed. There are majorly two types of business structures in UK,
namely, incorporated and unincorporated. Incorporated organisations are those
which have separate legal entity other than its employees and directors, for example,
public or private company. On the contrary, unincorporated institutions are those
which are not registered under any state authorities. These organisations does not
have a separate identity distinct from its owners for example, sole proprietorship,
partnership and many more. Various business structures of companies operating in
UK are as follows:
Sole Trader
Under this type of business structure, a person is self-employed and has all
the rights to take decisions regarding its operations. Business owner is solely
responsible for profits and losses for varied operational activities. To set up a sole
trading firm, a person need to file a tax return every year with HM revenue and
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customs. Business owner should choose a specific name for its firm which can not
be offensive or same as other existing one. There is no need to involve in any
registration process for formation of sole proprietorship firm. For dissolvent of
business, owner must send final tax return to tax collection department and convey
the same to them. It is advantageous as it is easy to set up and owner can retain all
the profits by himself. It is disadvantageous as it is a difficult task to raise finance.
Owner have unlimited liability that is, in case of any mishappening if firm can not pay
its debts, it is the duty of person to pay the remaining one.
Partnership
It can be termed as formal arrangement between two or more persons where
they come together to share their mutual interest (Orts, 2017). Partners agreed to
share profits and losses in equal or decided ratio. It is based on a legal deed and is
covered under partnership act. Partnership is not a separate legal entity and partners
have unlimited liability. Tax of partnership firms is collected by HM revenue and
customs on their profits at the end of every year. Partnership can be dissolved by
several means. It can be dissolved by agreement, that is, at the time of formation of
partnership, clauses are decided in deed regarding dissolution. It can also be
dissolved by notice, or death and bankruptcy of partners. Going into partnership
business is advantageous as it aids in sharing the burden of business activities. It
also aids in better decision-making about business transactions. It can be
disadvantageous as it entails lack of mutual interest and disagreements among
partners. There are two types of partnership firms in UK, namely, limited liability and
general partnership.
General Partnership
This is an arrangement between two persons who come together and agree
to share liabilities, profits and losses in specified share. Partners have unlimited
liability under this arrangement this does not require any registration process at the
time of incorporation. It is advantageous as partners agreed to share their financial
resources in order to run business operations effectively. It is disadvantageous for
partners as every person is considered liable for other's actions.
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Limited Liability
It is a type of partnership where some or all partners have limited liability. It
combines the features of both companies and partnership firm (Schmitthoff, 2020). It
has separate legal entity other than its partners. Taxation of limited liability
partnership firm is collected by HM revenue and customs just as sole trader and
other partnerships. Its formation process is not difficult one, partners have to fill forms
and do other responsibilities at local level for registering it. This type of partnership is
advantageous as it incurs low cost of registration as compared to corporation. It can
be formed with least capital requirements. There is no requirement of compulsory
audit in this type of firms. It is disadvantageous as it have to pay higher taxes to
government. Its main disadvantage is that it have to disclose its financial statements
publicly. They have to submitted with Companies Houses, UK.
Recommendations for IOM Solutions
Sam can modify its business structure from sole proprietorship to partnership
as he have a settled firm. He needs large investment for operating his business
activities effectively. Through this decision, he can have more persons to perform
business operations and he can satisfy increasing demands of consumers. This
decision best suits his existing business structure as it does not require large
registration process. Through this, he can increase investment as he is plans to
expand his business. He can share his liability too from this decision as there comes
more people. He can also make his decision-making process effective as new
persons enter in business not only with capital but also innovative ides to expand the
business. Hence, he can choose partnership for expanding its IOM Solutions.
Conclusion
From the above report, it has been concluded that top management is
essentially works for attaining organisational goal and objectives. Business law is
considered as set of rules and regulations that essentially governs commerce and
trade. It is beneficial in regulating corporate contracts and conduct of persons
towards companies. There are various types of laws which is regulated in
corporations for protecting varied interests of employees. There are differential types
of business structure followed in UK. Among them, four major are partnership, sole
trader, limited liability companies and corporation. These have their own pros and
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cons. These should be selected with proper investigation and information.
REFRENCES
Books & Journals:
Armour, J. and Sako, M., 2020. AI-enabled business models in legal services: from
traditional law firms to next-generation law companies?. Journal of Professions and
Organization. 7(1). pp.27-46.
Clarkson, K. W. and Miller, R. L., 2020. Business law: Text and cases. Cengage Learning.
Cowan, S., 2018. All change or business as usual? Reforming the law of rape in
Scotland. Reforming the Law of Rape in Scotland (May 28, 2018). Rethinking Rape
Law: International and Comparative Perspectives Edited by Clare McGlynn and
Vanessa Munro (Routledge 2010), Edinburgh School of Law Research Paper,
(2018/21).
DuBoff, L. D. and Bryan, A., 2019. The Law (in Plain English) for Small Business. Simon
and Schuster.
Frankfurter, F., Landis, J. M. and Stevens, R.G., 2017. The business of the Supreme Court: A
study in the federal judicial system. Routledge.
Gaitán, S., Herrera-Echeverri, H. and Pablo, E., 2018. How corporate governance affects
productivity in civil-law business environments: Evidence from Latin
America. Global Finance Journal. 37 pp.173-185.
Giubboni, S., 2018. Freedom to conduct a business and EU labour law. European
Constitutional Law Review.14(1). pp.172-190.
Miller, R. L., 2021. Business Law Today, the Essentials: Text and Summarized Cases.
Cengage learning.
Orts, E. W., 2017. Corporate Law and Business Theory. Wash. & Lee L. Rev., 74, p.1089.
Schmitthoff, C. M., 2020. International business law: a new law merchant. In Current Law
and Social Problems, II (pp. 129-153). University of Toronto Press.
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