BMP4002 Business Law Report: Analyzing Legal Context for UK Businesses

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 begins by defining business and its governing laws, highlighting the importance of the Companies Act 2006. The report then delves into various legal business structures, including sole trader, general partnership, partnership, and limited liability companies, outlining their characteristics, advantages, and disadvantages. A recommendation is provided to Sam, the owner of IOM Solutions, regarding the most suitable business structure for expansion. The report concludes by summarizing the rules and regulations within the UK's business environment and its global market impact.

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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Table of Contents
Introduction ...............................................................................................................................4
Businesses & Organisations in the UK........................................................................................4
The legal business structure of UK companies..........................................................................5
Sole Trader.............................................................................................................................5
General Partnership...............................................................................................................6
Partnership............................................................................................................................6
Limited Liability......................................................................................................................7
Recommendations for IOM Solutions........................................................................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................8
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Introduction
Business is defined as an entity or occupation which engages itself in carrying out
certain commercial or professional activities. They generally work as enterprises aiming for
earning huge profits. Businesses operate on a small scale or on a large scale depending on the
investments, capitals and the type of structure it chooses. It is also referred to as an act of
production and sale of goods and services. These business activities are governed by the
business law which is called as commercial law. It governs the conduct of the people involved
in a business and how the business is formed, how it operates, etc. It also governs the dealings
which take place as a form of trade in the business. It is a body of rules and procedure which
must be followed and complied by the businessman. This project will cover in detail the
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different types of business structures and will provide recommendation to Sam for him to
choose the best structure for his business expansion(Alonge and Fredrick, 2020) .
Businesses & Organisations in the UK
United Kingdom's business environment is governed by the Companies Act 2006. It
helps in smooth and effective operations of a business organization. It lays down standards
for the conduct of different legal business structure. Owners of an organization manage and
operate a business by properly understanding the needs of the employees and managing them.
Employment laws govern the employees of a business by defining their behavioral conduct.
Businesses and companies should comply with Companies law. Businesses earn the identity
of a artificial person when they register their name and get separate legal identities. The
components needed by a business to maintain a distinct identity are perpetual existence,
distinct properties, Common seal and the rights of suing somebody or responsibilities of
getting sued in case of non abidance with the norms of legislation. A business is formed after
creation of concluded agreements having different heads and clauses. These agreements
include buying and selling of shares and company's assets, etc(Cribb, Miller and Pope, 2019)
.
When a business operates on a large scale there are various liabilities which arise
within the company, one of such is Vicarious liabilities. This liability arises when an
employee acts incorrectly or commits wrongful conduct while they are still a member of the
organization, then the employer or owner of the business is held liable for the actions of the
employee and they have face all the burden of responsibilities. The employer has to act
within a certain period of time to avoid legal consequences. Business negligence causes
problems for a business. This negligent behavior occurs when the responsibilities defined for
a certain role are not fulfilled which creates problems for a business. The head of a business is
responsible for the management and operations of a business, the head is generally known by
the name of Director (Troshani, 2018). The director has various duties which they should
perform with honestly and good faith. Because if these duties are not performed according to
the provisions , it gives rise to liabilities so that legal obligations are fulfilled. The legal
provisions include acting within authority, taking proper decisions on behalf of the company,
ensuring company's success and resolving conflicts that arise within the company. Other
directors can hold the director responsible for not performing duties according to the
prescribed standards, thus they can be held liable for breach of duties. The company should
not suffer at the expense of director's negligence(González, 2021). They are also asked for
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compensatory damages in certain conditions and serious breach of duties causes termination
of the contract between the director and company. Disqualification can also occur of the
director where he can be held responsible for criminal offense in case of serious unethical
behavior or conduct. A director may also be asked to return the property of the company
when the contract of the director is terminated.
Partnership Act 1980 of UK governs the partnership here company's formation and
termination is defined. A business for proper functioning includes Memorandum of
Association and Articles of Association. MOA is a legal statement created at the formation of
company and signed by the shareholders, guarantors, etc. whereas AOA is a written statement
stating the rules which should be followed while managing a company. They are agreed by
the shareholders, directors and owners (Hemingway and Gunawan, 2018) .
The legal business structure of UK companies
Sam is a sole trader in his business of IOM Solutions. Due to increase in the demand of
customers, he is looking for a suitable business structure for expanding his business. The
different legal business structures are as follows:
Sole Trader
This structure is also referred by the name of sole proprietorship. It is the most simple
structure for those who want to have a self-employment business. It is opened, managed and
operated by a single individual and thus it is easier to open and operate. Emerging
entrepreneurs prefer this business structure due to the involvement of a single person in it.
They are the sole earner of all revenues and profits made by the business. Thus this has
become very popular among people wanting to startup. They being a single are liable for all
the risks and liabilities. They get burdened with losses and responsibilities. But this structure
is cost effective because the ownership control is in one hand. They are the decision makers
who can have private management of the business. Financial risks of the owners increase due
to the involvement of single person. The business earnings are taxed with respect to the
legislation, they have to pay income tax and corporation tax. The owner has to abide by the
rules of General Data Protection Regulations, where they should maintain customer data and
must register themselves. It is also essential to file self assessment tax return in sole trader
business structure(Repiquet, 2018) .
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General Partnership
This business form is an arrangement where two or more than that individuals comes
together with an intent of earning certain revenues out of the said business. In this the partners
are entitled to get have an equal ration which means that liabilities and profits which has been
incurred from the business are shared in equal proportions by all the partners. Here the affairs
of both the company and partners are regulated in accordance with the agreed deed which
comprises of every possible details. The only point of bifurcation which lies among the
general partnership and partnership is that one which is general partnership is comprised of
more informal process. Whereas in later one there stands a mandatory requirement of
formation of deed which needs registration. Moreover, the responsibilities with respect to the
management and conduct needs to be taken care of by all its members. Moreover, the
members of the firm are held jointly responsible for all the debts which has been incurred in
the the name of the company. The process of acquiring of capital to start the form is easy task
as while having the involvement of more number of people it can be easily managed by all of
them by the means of savings, personal borrowing and short term loans. Here the partners are
entitled to have unlimited form of liability and also are subjected to the personally liable in
cases where the debts of the creditors are not fully recover from the assets of the company.
Moreover, with respect to the legal implications, the partners are subjected to pay the taxes
only for their part of income rather than the whole amount of generated revenues(Rosenstein
and Thomson, 2021) .
Partnership
The Partnership Act of 1890 is the one which has been specifically formulated with an
aim to govern the conduct of partnership firms. Partnership is an arrangement where two or
more individuals joins together bearing some common objectives with an intent to earn
profits out of the said business. Similar to that of the earlier one, the profits and losses of the
business are shred by all the partners in a equal ratio. Further, partnership deed is the
document which specifies all the terms and in which the form needs to be carried on. Also,
there lies the discretion on the part of partners whether to carry the affairs on their own or on
behalf of all. The taxes and all the other charges are need to be paid by the partners only on
their part of profits which they have incurred out of the total profits of the business. The
partnership model has certain advantages such as, the liabilities are divided in equal ratios and
also the task of controlling and managing of business becomes more simpler. Further, the
drawbacks of this form are, that there stands the high possibilities of disagreements among
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the members which can arise due to the conflicts among the ideas and experiences of the
members(Rye, 2020) .
Limited Liability
It is the business form which is the combination of partnership and corporate
organization. The limited liability company is having the characteristics of both as they are
explained before. When two or more people come together with the sole aim of generating
higher profitability with the helps of their business operations. Every person who is working
or having the capacity of partners need to invest the particular amount of their given capital
as because of this aspects, the liabilities are limited in the ratio of their shared capital. If the
member of the company stands out where the assets of an organization is unable to pay the
value of the creditors and also not able to settle the same out of their personal assets ans this
is the reason in which the both the partner can enjoy the separate legal entity. The peak of this
type is that the member are not being forced to their personal assets for their sole interest of
their business. Disadvantage can be that there are various formalities that is having ultimately
more expenses and time. Moreover, with respect to the legal implications of an organization
having limited liability form and both the member and the company is needed to pay the
taxed by their own and also the form required certain formalities related to the incorporation
and dissolution of the organization(Singh, 2021) .
Recommendations for IOM Solutions
Sam is the sole owner of his company and they name IMO solutions which is dealing
in the electrical parts. Saw now wishes to expand their existing business that is having the
earlier being operated in the capacity of sole trader and they are seeking the recommendations
for the same as they have been exploring different formats of business. As the business
structure which is being suggested to Sam is the Partnership model. By which they can
expand their business and also share their profits and looses for the same. They are having
higher consideration of making their staff skillful which contribute to the better results of the
business. This also helps in engaging more individual and also divide their task to do by
which they can rightly work in all the direction. It said involvement will also helps the
sharing of equal ratio of liabilities that is earlier the case of burden as they were operating
their business in sole trading(Stillwell, 2021).
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Conclusion
It is summarized from the above report that there are various rules and regulation
which is sustaining in the business environment of UK and its roots spread across the world
thus, it is having global market and and having god brand image. Moreover, it is concluded
that there are different types of business which can be adopt by the company in order to
operate their business in lawful manner. After analysing various legal aspects for this
respective case study Sam is recommended to use partnership business form.
References
Alonge, F. and Fredrick, K., 2020. The Influence of Gender on Business Development: A
study of Micro and Small Enterprises in the UK.
Cribb, J., Miller, H. and Pope, T., 2019. Who are business owners and what are they
doing? (No. R158). IFS Report.
González, F.F., et. al., 2021. Characterising a local energy business sector in the United
Kingdom: Participants, revenue sources, and estimates of localism and
smartness. Energy.223. p.120045.
Hemingway, R. and Gunawan, O., 2018. The Natural Hazards Partnership: A public-sector
collaboration across the UK for natural hazard disaster risk reduction. International
journal of disaster risk reduction. 27. pp.499-511.
Repiquet, M.D., 2018. Report from United Kingdom: UK Private Fund Limited Partnership
2017-Preserving UK Reputation Post-Brexit. Eur. Company L..15. p.97.
Rosenstein, M. and Thomson, W., 2021. Impact of Internal Mechanisms on Corporate
Governance: Case of Glaxosmithkline Pharmaceuticals Limited, United
Kingdom. Journal of Public Policy & Governance.5(3). pp.1-10.
Rye, J., 2020. What is the difference between a sole trader and a limited company?. In Setting
Up and Running a Therapy Business (pp. 132-134). Routledge.
Singh, V.P., 2021. Directors’ Fiduciary Duties to the Company: A Comparative Study of the
UK and Indian Companies Act. Trusts & Trustees, 27(1-2), pp.132-150.
Stillwell, J., 2021. Book Review: How Geography Changed the World and My Small Part in
it. MC Clarke. Published by Sweet Design (UK) Limited, Henleaze, Bristol, 2020.
305 pages. ISBN: 978–0–9,567,541-1-0. Applied Spatial Analysis and Policy, pp.1-
3.
Troshani, I., et. al., 2018. Digital transformation of business-to-government reporting: An
institutional work perspective. International Journal of Accounting Information
Systems. 31. pp.17-36.
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