Business Management BMP4002: Business Law Assessment 2 Report

This report provides a comprehensive overview of business law in the United Kingdom, focusing on the legal context for various business organizations. It begins by introducing the key legislation, including the Company Act 2006, and highlights the four main types of business structures: sole proprietorships, partnerships, limited liability partnerships, and limited companies. The report delves into the characteristics, advantages, and disadvantages of each structure, offering detailed insights into their legal and operational aspects. Furthermore, it provides a comparative analysis of these structures, with a specific recommendation for a sole proprietor to consider transitioning to a partnership to facilitate business expansion and optimize tax implications. The report emphasizes the importance of choosing the right business structure based on individual circumstances and goals. The report also covers the legal duties of company directors and the process of registering a limited company. The report concludes by summarizing the key findings and emphasizing the importance of understanding the legal framework for business success.

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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Introduction
Business law or the Corporate law is that branch of the United Kingdom which govern
all the businesses organizations. It provide a legal frame work to all the companies which
helps them to run their businesses in the real legal manner. Parliament of the United Kingdom
did a lot of efforts behind to introduced such an act which cover all the areas of businesses,
their efforts showed the result and in the history UK parliament enacted the longest act which
is known as Company Act, 2006. It has 1300 sections and 16 schedules which applied to the
whole United Kingdom, the act was taken from the European Union Law and from the
decisions taken in Common Law (Candra, 2022). There are mainly four types of business
organization's i.e. Sole Proprietorship, Partnership, Limited Liability Partnership and the
Limited Company. All these types of businesses organization's are governed and control by
the Company act only. In this report also these four types of business organization's will
discuss with the motive to give the recommendation to the Sole proprietor who has a business
of IOM solutions and advice should be given to switch different type of business organization
with the motive to expand the business.
Businesses & Organizations in the UK
In the United Kingdom their whole economy is dependent up on the businesses, they
expand their business environment in such a way that all the people around the world has a
desire to do the business in the territory of UK. There are mainly four categories of business
companies which has different structures which provides them the different features and
characteristics. Due to difference in their structure each business structure has different nature
and management of the company. Structure like sole proprietor which is very simple need not
a separate department as its a only one person company, but the Limited Company which has
a complex form of business structure hold different department for different functions like;
human resource, technical, marketing, finance etc. It is necessary to have such an act like a
Company act which work as a legal model for all the business organizations, but there is not
only business law or the company act which influences the business activities there are some
other acts also like; Employment act which provides the guidelines to all the employee's to
get aware about their given rights at workplace. There is a law of contract which enable the
company to build the trust able relation with other business companies and also with the
employer's and employee's. From this relation of contract the employer and employee's came
in the relationship which enables one more concept of law of tort which is known as
Vicarious liability. It means the wrong done by the employee at the working time for that
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employer would also get liable for that mistake or the negligence of the employee. Like in the
partnership form of business structure all the partner's are liable for the company loss and
even one partner is liable for the mistake and negligence of another partner. Partnership is the
real supporting business structure where the partners got the support of another partner and in
every areas like in finance, risk sharing, moral and much more. But some time this support
becomes the reason of terminating the partnership company (Giliker, 2021). There are some
reasons on the basis of which partnership got dissolved.
 When the partner dies or declared bankrupt.
 Court declared to dissolve the partnership
 The time period comes to an end which decided by the partner
 the purpose of the partnership got completed
 It can also be dissolved through notice also by the partners.
There is another business structure which is very complex and which require many
administration responsibilities to perform it is the Limited Company. To control the functions
of Ltd. Company some directors are appointed and those directors have some duties to
performed for the company such as;
 Their duty should be in the interest of the company
 To take care of the company's assets
 Duty of confidentiality
 They have a duty to attend meetings for company's growth planning.
It is really necessary to done the registration of the Ltd. Company which has been done in the
Companies House. At the time of registration only company have to prepared two crucial
documents i.e. Memorandum of Association and the Article of Association. These two
documents contains the internal as well as external policies of the company.
The legal business structure of UK companies
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Doing business in the UK gives next level of satisfaction because their many
opportunities were available for the people to do the business according to their choice of
business structure. In the UK there are mainly four types of businesses structure's which gives
their contribution in the UK business sector and enhance their growth. Each business
structure carries its own features, merits and demerits, it depends up on the person that which
business structure is suitable for them. The chosen of business structure is the initial function
to do business and it should be done with all care and with application of mind by thinking
the availability of resources, fund, assets etc. because all the business structure demands
different tax implications and also carries different level of liabilities. All these business
structure's will be discuss below to get more knowledge of each business organization and
also to give better recommendation.
Sole Trader
Such type of business structure is the most easiest and simplest from of business
structure as it is very east to establish and also easy to mange the business activities. It has
only single person who is the owner of the company and alone manage all the business
operations of the company. This business structure for the legal consideration has to be
registered in HMRC (Januarita, 2021). There are some benefits of this business structure as
owner alone enjoy all the profits, there is no one between them profit would be distributed.
Along with the merits there are some demerits also like; there is a direct proportion of the
income or the profit and the tax payment. It means as much the higher profit earn by the
company according to that tax has been paid.
Advantages
 It has a easy process to establish the company
 It carries very less administration responsibilities
 Whole profits belong to the owner after tax deduction
 Owner has complete control on the business
 Information is confidential
Disadvantages
 Single person has to bare all the losses and debts
 There is no moral and financial support like partnership and other business structure
 Owner has unlimited liability
 High level of risk
General Partnership
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This type of business structure is also simple and easy to establish, it just an
agreement between the partners. There are more then one person who carried the business
activities. An agreement would be made to decide the share of partnership in the company, in
the starting each partner bring their share of capital which decide their ownership and also on
that basis they shared the company's profit and losses. In such type of business structure
partner's are self employed and they are liable for company's liabilities like bare all the losses
of the company from their own share and also partner's are liable for misconduct and
negligence of the another partner which shows the vicarious liability of the partners. In such
type of business structure where partners are self-employed, they have to pay the tax as per
their own share of profit. It is necessary to registered the partnership firm at HMRC which
means partners are responsible for sending the partnership tax return.
Advantages
 It has a procedure to establish the company
 An agreement between the partner can be made orally and also in written
 Agreement is flexible
Disadvantages
 partner's has unlimited liability towards the company
 partners are liable for other partner's negligence and misconduct
Partnership
This business structure also has same structure like general partnership, there is a
difference in number of partners and this partnership firm is the Ltd. Company. It is essential
to registered the company at Companies House and inform to HMRC for the legal verification
(Johnston, and Segrestin, 2021). Partners in this types of business structure are responsible to
pay the tax as per the self assessment tax return it means they have to pay the tax from their
personal share of profit and also they have to pay the National Insurance to HMRC.
Advantages
 Liability of the partners are limited
 partners are liable for their own negligence
Disadvantages
 Tax deduction would be done from the partner's personal income
 Carries high administration responsibilities
 Registration fee is high
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 At the end partners have to prepare end year account.
Limited Liability
This business structure is a privately manged business which has many shareholder's
and the few board of directors who controls all the business activities. The company has to
get registered at Companies House and after registration company builds its own separate
legal identity which means company has a right sue and also any other company or any
person can sue against the company. Partners holds no liabilities of the company, all the
losses, debts of the company would be bare by the company assets only. Company has to pay
the corporation tax earlier to distribute the profit among the members.
Advantages
 Partner's carried no liability with them towards the company
 Corporation tax would be paid In place of personal tax which is more beneficial
Disadvantages
 It has complex form of establishing the company
 Has high administration responsibilities
 Required high fee for the registration
Recommendations for IOM Solutions
Business is not an easy task to perform from the very starting in the business person
has to takes accurate decisions. As there are four main business structures in the United
Kingdom, the first decision which has to be made is the choosing the business structure which
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suits their conditions, availability of resources and fund. As after discussed all the four
business structures it got cleared that each and every business structure has its own features
and characteristics and also each structure has its own areas of merits and demerits. In context
to the given situation where Sam who is a sole proprietor and ran the business for last eight
years, and also found some growth in it. There is no doubt in this that, sole proprietorship is
the good option if person wants to do business alone but, as said above in context to sole
proprietorship there is a direct relation between the profit earning and tax paying (Jones, and
Talbott, 2021). When the ratio of profit increase its directly enhance the tax amount which
has to be paid. So, according to the given situation of the business it will be better for Sam to
switch the company's structure from sole proprietor to partnership form of business structure.
However the business would be established from last eight years it means the sole trader has
an experience. Sam just needed another partners who will help him to run the business
activities. The benefits of partnership company are many as compare to sole proprietorship
and the main difference is, in the partnership company partners can pay corporation tax which
is more beneficial then personal income tax. Along with the tax benefits the main motive will
also achieve which is to expand the business.
Conclusion
From the above report it is concluded that all the four different business structure's
carried their own features, advantages and disadvantages. All are perfect in their individual
space, it depends up on the person that what characteristics he wants in the business and
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according to availability of resources, fund and management business structure would be
chosen. In the above report all four business structure got discussed along with their merits
and demerits. In the last of the report demand would be fulfilled by giving the
recommendation to the sole trader Sam, in the recommendation Partnership company would
got suggested to expand the business of IOM solutions.
REFERENCES
oo and o rnalB ks J u s:
Candra, J.A., 2022. Empowering Micro, Small and Medium Enterprise (MSME) by
Indonesian Government by Establishing Policy of Establishment of Sole
Proprietorship. Small and Medium Enterprise (MSME) by Indonesian Government
by Establishing Policy of Establishment of Sole Proprietorship (February 5, 2022).
Giliker, P., 2021. Legislating on Contracts for the Supply of Digital Content and Services:
An EU/UK/Irish Divide?. Journal of Business Law, 2021(2), pp.143-162.
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Hansen, C.P., Rutt, R. and Acheampong, E., 2018. ‘Experimental’or business as usual?
Implementing the European Union Forest Law Enforcement, Governance and Trade
(FLEGT) voluntary partnership agreement in Ghana. Forest Policy and
Economics, 96, pp.75-82.
Januarita, R., 2021. The Newly Sole Proprietorship as Limited Liability Company in Recent
Indonesian Company Law. MIMBAR: Jurnal Sosial dan Pembangunan, 37(1),
pp.221-231.
Johnston, A. and Segrestin, B., 2021. Lost from view: the legal invisibility of managers in the
UK. In The Emergence of Corporate Governance (pp. 33-50). Routledge.
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