BMP4002 Business Law: Legal Sources & Business Organizations in UK

This report provides an overview of the legal landscape for business organizations in the UK, focusing on key sources of law and different business structures such as sole proprietorships, general partnerships, partnerships, and limited liability partnerships. It discusses the advantages and disadvantages of each structure, highlighting relevant legislation like the Companies Act 2006 and the Partnership Act 1890. The report also includes a recommendation for IOM Solutions, a sole trade business, suggesting a transition to a limited liability partnership to facilitate growth and mitigate liabilities. It concludes that understanding business law is crucial for making informed decisions about business structure and ensuring compliance with legal requirements.

Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of laws
as the legal context for business
organizations in the UK
Submitted by:
Name:
ID:
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Table of Contents
Introduction ...............................................................................................................................3
Businesses & Organizations in the UK........................................................................................3
The legal business structure of UK companies..........................................................................5
Recommendations for IOM Solutions........................................................................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9
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Introduction
The legal system of the United Kingdom is the most developed and comprehensive as
it includes many laws which governed the United states. In context of business, there are laws
and legislation which are operative to govern business affairs within the United Kingdom .
Business law includes, company law, contract law, manufacturing and sales law, insolvency
law, tax law, employment law and many more. These laws are complementary to each other
which helps in resolving the legal issues arising in business and are also known as mercantile
or commercial law. In simple words, these laws are the legal commands of business and
commerce covering both public and private sector (Mariani and Wamb 2020). In this
assignment, all the relevant source pertaining to business law and related facets of it will be
covered, the key area in this report will be the legal structure of the UK companies like, sole
trade, partnership, general partnership, limited liability along with their advantages and
disadvantages. The other part of this assignment is to recommend the IOM solutions the best
potential business type for reorganizing the IOM solutions from sole trade.
Businesses & Organizations in the UK
A company is a primary vehicle that is necessary for forming and running a business.
The laws and regulations which governs all such companies and their legal formation is
construed with the Companies Act, 2013. a company that is registered and incorporated under
the said Act, gets the legal status the eyes of law. Such companies are given separate legal
identity with certain rights and obligation and are separated from its owners. There are several
types of business organizations ranging from small scale business to large scale business, the
terms used for such entities are, Sole trade, partnership, general partnership, limited liability.
All these organizations have their own characteristics which are distinct form each other.
The management of a company is divided into several activities which includes planning ,
leading, organizing and controlling which works in coordination using company's resources
to attain the goals of the company. The main purpose of management is to establish control
upon the company's conduct and its performance. The concerned departments of a company
are HR department, finance department, marketing department, sales department etc. which
co-jointly operate for running business.
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A company duly incorporated is subject to all the business laws, such organizations
needs to comply with all the laws and procedures established by business laws. There are
business faculties who works for the companies, these faculties are human capital, workers or
employees, therefore it is essential to protect the interest of all the workers or employees
working in corporations. The Employment law. That guarantees certain rights and benefits to
employees working in business organization whether in public or private sector. This statute
imposed statutory duties and obligations on employer to ensure that all the concerned
employees are given proper safety and imposed prohibition on any form of misconduct
against employees.
The Companies Act 2006 of the United Kingdom governs the formation of all types of
business organizations. Company law provides various doctrine and principles in the form of
rights to the company incorporated. As per company law, there is a rule of separate legal
entity which says that a company is a separate legal entity which means that a company
established by the procedure of Companies Act, shall be deemed to be a separate legal entity
from its owners. Such companies can sue or be sued in their own name, purchase assets, enter
into contract and many more legal rights same as natural person are given to companies
(Sivani 2019).
The other important principle in company law is the vicarious liability, according to it in
English law it imposes strict liability on employers for the misconduct of their employees.
The doctrine of vicarious liability represents a rule of responsibility in which the defendant is
made liable for the wrong committed by another. In vicarious liability no individual is made
liable for such misconduct, instead the employer is held accountable for such wrongful
actions committed by employee. In the same way, there are other principles and doctrine
tracks misconduct in a company like tortuous liability which normally arise at company's
work environment (Mehboob2020).
The key faculties of a business corporations are the directors of a company who play
crucial role in decision making for a company. It is the duty of a director to act as a
reasonable prudent person while managing affairs of the company. The role of the director is
to perform their duty honestly and fairly without any intention of personal gain by using the
name of the company. Thus, directors are the key persons of a company and must apply their
wisdom and knowledge for elevating the status of the company.
Partnership is a unique form of business type as it allows more than two persons to
form a business by executing partnership agreement, such partnership businesses are
governed by Partnership Act 1890. A partnership can be terminated by any partner by giving
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prior notice to other partners. Merely an oral intimation is sufficient to terminate the
partnership.
The legal business structure of UK companies
Sole Trader
Sole trader also known as sole proprietorship which means a business owned by
single person, such business type does not have any separate legal identity. Sole trader
businesses are easy to establish as these businesses are relatively more famous because for its
formation very limited capital is needed and legal formalities required for getting legal status.
The owner is entitled for all the profits alone. However, there is unlimited liability on the
owner at times of losses (Jones and Talbott 2021). Tax is levied on the income form profits
after deducting all the expenses in the business.
Advantages of Sole Trader
 relatively easy to form sole trade company in comparison to others.
 Limited investment is required for its inception.
 Owner is sole head of the business as no other person has right over the business.
 Owner alone is entitled to all the profits.
Disadvantages of Sole Trader
 in this no concept of separate identity is established.
 There is high risk of unlimited liability to which owner alone is held liable.
 There are no tax benefits available to in sole trade company.
General Partnership
The Partnership Act 1890 defines the general partnership, wherein two or more
people are comes together with the purpose to carry out business in order to make profit. It is
relatively a simple process for two or more persons to own and manage a business jointly by
contributing their share of capital, resources, skills and experience. Partners in partnership are
required to execute a partnership agreement mutually in order to carry out the business.
Advantages of General Partnership
 General partnership need not required to be registered with Companies house.
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 Partners shared their profits individually and tax is levied as per their income from
profits.
 There is no rule of filing separate tax liability in partnership.
Disadvantage of General Partnership
 Partners in general partnership are personally liable for all business debts and
liabilities.
 Less protection to partners in case where business fails.
 General partnership has no legal personality, as it cannot own property or assets in
company name.
Partnership
Partnership is governed by the same Partnership Act 1890, partnership is relatively
similar to general partnership which is formed to carry out the business with common intent
to generate profits. It is a relationship created between two persons on contract or agreement.
The enforcement of contract creates the legal relationship between partners (Rwehumbiza and
Sakijege 2021). There is no limit prescribed for the number of partners to form partnership.
Partnership is nor regarded as a ;legal person in England, Wales or Northern Ireland.
Advantages of Partnership
 Easy to fund capital, as the partners are required to fund business with start up capital.
 A partnership is relatively easy to establish, operate and manage because there are
limited regulation.
 Easy to make decision for the best interest of the company as there are more partners
the more solutions and ideas are shared between partners.
 There is more flexibility in terms of its management and running of business.
Disadvantages of Partnership
 disagreement between partners is obvious and this can affect the partnership.
 Partnership is strictly subjected to unlimited liability.
 The partners in partnership are required to pay tax by submitting a self assessment
return every year.
Limited Liability
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It is a legal arrangement for a corporation having separate legal identity which keeps
its owners separate from it. It is a hybrid form of business arrangement which is defined in
Limited Liability Partnership Act 2000 of the United Kingdom. The liability of partners are
kept limited as per law and such partnership formed by making a private agreement between
partners (Menz 2020). The tax liability on partners is levied separately, each partners are
required to pay tax in proportion of their share in profit. No partners are personally compelled
to pay the liability of business.
Advantages of limited liability partnership
 Such partnerships are separate legal entities.
 It protects partners personnel assets from the liabilities of the companies.
 It is recognized as legal entity, can enter into contracts, own property or assets.
 The distribution of profit share between partners is determined by the agreements.
Disadvantages of Limited liability partnership
 The main disadvantages of LLP is the public disclosure.
 The income from business is deemed to be a personal income and the tax is levied
accordingly.
 LLP must have two members, where a member leave the partnership, it gets dissolved
(Rimmer 2019).
Recommendations for IOM Solutions
IOM solutions is a Sole trade company owned by Sam which deals in selling electrical
parts to the local garages. The IOM solutions successfully completed its eight years, Sam has
found that the business has grown in terms of demand and employee which led Sam to
expand the business by seeking suitable and appropriate business option. Therefor, it
recommended to Sam to choose limited liability partnership. It has many advantages as it will
provide IOM solutions more business opportunities for growth. IOM solutions has captured
local market and their customer base is good. By adopting partnership business type, IOM
solutions can attract huge funding and develop business as per desire. Limited liability
partnership offers many business benefits as it will imposed limited liability on partners and
reduce the pressure of administration and management of business. There are lots of tax
benefits schemes are available in this business format. The new partners will bring their share
of capital with new ideas which may help in building business more creative and productive.
In partnership, the negligence or any misconduct by any partner will not accountable by other
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partner. Thus , it is recommended to the IOM solutions to go ahead with the option of limited
liability partnership which has the potential to bring positive growth for the IOM solutions.
Conclusion
From the above report, it can be concluded that business law is a dynamic concept
which works in different dimensions. There are various business types which are offered by
the Companies Act 2006 of United Kingdom like, Sole proprietorship, partnership, general
partnership, limited liability partnership. All these business have their own merits and
demerits. A person who seeks to form a business can choose any business types as per their
capacity to invest. In this report all the relevant extract relating to business and its types are
covered along with their advantages and disadvantages and other miscellaneous principles
relating to business. Further, in this report recommendation is made to IOM solutions who
seeks to expand their business choosing appropriate business type for their current business.
IOM solutions is a sole trade business type which sells electrical parts to the local garage, the
owner of it is Sam who has successfully operated its business for eight years and the business
has grown in terms of demand and employees therefore, it is recommended to IOM solutions
to go for limited liability partnership which is more suitable and appropriate .
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References
Jones, S.H. and Talbott, S., 2021. Sole Traders? The Role of the Extended Family in
Eighteenth-Century Atlantic Business Networks. Enterprise & Society, pp.1-30.
Mariani, M.M. and Wamba, S.F., 2020. Exploring how consumer goods companies innovate
in the digital age: The role of big data analytics companies. Journal of Business
Research, 121, pp.338-352.
Mehboob, D., 2020. UK budget curbs short-term business uncertainty. International Tax
Review.
Menz, M., 2020. Show me the money–managing politically exposed persons (PEPs) risk in
UK financial services. Journal of Financial Crime, 28(4), pp.968-980.
Rimmer, J., 2019. FNTC (UK) Limited and BBCB Limited v Page and others. Trusts &
Trustees, 25(9), pp.939-953.
Rwehumbiza, D.A. and Sakijege, T., 2021. Economic benefits and the geographic aspect of
business behaviour. Management Decision.
Sivani, K.M.S., 2019. Critical Analysis of the Effects of Regulations under Competition Law
on Mergers and Acquisitions: A Comparison of the India, EU, US and UK
Laws. Journal of Corporate Governance and International Business Law, 2(2).
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