Analysis of Business Organisations: Formation and Management in the UK

This report provides an overview of business organizations in the UK, focusing on their nature, formation, and management. It explores various legal structures, including sole proprietorships, partnerships, and limited liability companies, highlighting their respective merits and demerits. The re...Read More

Nature, formation,
and management of
Business
Organisations

Table of Contents
INTRODUCTION ..........................................................................................................................3
Business and organisation in the UK ..............................................................................................4
The legal Structure of UK companies. ...........................................................................................5
Sole Trader ......................................................................................................................................5
Recommendations for IOM Solutions.............................................................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business law is a set of command which collectively decides the rules of business. A
business law can be called as mercantile law which regulates the business conduct and
operations. All the faculties of business are covered under business law (Yovanno2022). In
respect of UK, it has a wide consolidated Acts relating to businesses established and functioning
with the United Kingdom. Business law also covers other Acts which supplement the business
law such as, company law, partnership law, property law etc. business law formalise the steps
and rules to commence a business. (Anayi and et.al 2021). The idea behind business is to
generate huge revenue which also contributes in UK economy in the form of tax, tariffs, penalty
and other miscellaneous charges. Business law also gives opportunities to existing business to
expand its business through several process. In this report discussion will be made on different
types of business organisation and provide best potential option to Sam who is a sole trader of
IOM solutions and seeks to reorganise his business.
Business and organisation in the UK
Business is a wide term because it covers various facets associated with business. There
are many businesses functioning in UK which are doing great in their segment and contributing
in the economy of the United Kingdom. A business organisation is the corporation constituted
into different units or department which have different functions. Such as, finance department,
human resource department, marketing department, production department etc. Employees of a
business organisation are essential faculties which keeps the momentum of business and they are
subject to several rights. Employees are covered under Employment law which guarantees them
right against employer. On the other hand, a business is under an obligation within a legal
framework to maintain the ethics and code of conduct of business. A business must act lawfully.
As per the company law, wherein, it is provided that a company is a separate entity which
means that a company can be sued or sue in its name and can be made liable separately from the
owners. Apart from company law, there is an Intellectual property law, which directs the
business organisation to adopt the relevant provisions of the Act which enables companies or
firms to establish market value or goodwill to stand the market competition (Georgiadis and
Manning 2020). Businesses are made for commercial practices which begins from creating a
product or service, marketing and selling and buying commodities in local or global market. A

business must comply with the business law and ensure to fulfil its legal and moral obligation
towards business, employees and nation. There is concept of vicarious liability in business law
which imposed legal penalty on the employer in case of misconduct committed by an employee.
Basically, there are more rights given to employees to protect them from arbitrariness of
employers. There are several other laws which also covers the business negligence or breach of
trust in business such as contract law and tort law (Hall and Aldous 2021). Business is an
institution which creates employment make contribution in the country's economy. The top level
management of a business is responsible and under an obligation to maintain the decorum of a
business operation and make essential decision in the interest of the business and its employees.
A business before initiating its business process requires to prepare its preamble which mentions
objectives and purpose of a business which is called as Memorandum of association and Article
of association. Memorandum of association describes the external objectives, functions and
operations of a business, whereas, in Article of association an internal process and duties of a
company is mentioned which a company needs to follow and fulfil.
The legal Structure of UK companies.
A company is a artificial person which is created by natural person to commence a
business and to generate revenue. Company is a separate legal entity which posses its own
identity and has its own rights and liabilities other than its owners. Business law provides range
of companies formation and structure which are successfully being followed by the peoples.
There are set of laws and rules which needs to be followed to structure a company in legal
format. A company to pass legal factors needs to fulfil all the essential ingredients of a
company's incorporation or registration. A company is legal entity when it had obtained the
certificate of incorporation form the authorised registrar. In a given case, a sole trader who runes
a business in the name of IOM solutions (Ivanov Zavyalova and Ryazantsev2019). IM solution is
doing good and has established its presence in market. Now, Sam who is a trader wish to expand
its business with the view to generate more profit and seeking an potential alternative business
option which could help to elevate the current business. Following are the different business
alternatives made to IOM solutions which could help them to expand their business.

Sole Trader
It pertains to sole owner who has all the control over the business. In this, owner enjoys
all the profits by himself. However, the liabilities also imposed on the owners including vicarious
liability. Its a self employed concept, wherein, a person investing small capital initiates the
operations of trading (Lennox and Wu2018). Tax liability is levied on the owner. Sole trading
has its own merits and demerits according to the situation and condition of a business status.
Following are the merits and demerits of of sole trading.
Merits: The process of commencing business as a sole trader is far easy unlike any other form of
business. In this system there is less risk and confusion because there is very limited staff and it
is fas easy to regulate the business management. As per registration norms there is no fee
required for its registration. The trader gets some tax benefits like deductions in income from
business.
Demerits: The demerits of sole trader are the opposite of its merits, as all the profit in sole trade
belongs to sole trader in the same way, all the loss in a sole trading has to bear by the sole owner
only.
Partnerships
Partnership another good option which a sole trader can opt to expand its business.
Partnership is mutual agreement execute between two or more living people with the view to
commence a business with a common objectives. In partnership all the partners contributes
capital in business and the profits distributed as per the contribution ratio. Similarly, the
liabilities in a partnership firm determined on the sharing ratio. The key benefit of partnership is
that the burden of loss is equally shared between the partners and partnership can hold the
business tight during crisis (Li and Fleury 2020).
Types of partnerships
In UK's business legal system following partnerships are recognised which are as follows:
General Partnerships: It is commonly known as traditional partnership which is covered under
Partnership Act 1890. In this, association of groups with common intent is formed to commence
business and each member of association is an individual partners in a business. General
partnership is subject to unlimited liability for the firm (Priya2019).

Limited Liability Partnership: It is a corporation having separate legal identity from its
owners. Limited liability partnership governed by the provisions of Companies Act 2006
together with Insolvency Act 1986. the liability imposed on partners in LLP is limited.
Merits of Partnership: In this formate partners feels secure because they have each others back
to run and support business and it is always beneficial to have more than one person to run the
business rather than having one. Because it reduces the burden relating to capital, managing
business and loss.
Demerits of a partnership: There is unlimited liability and obligation of partners towards their
creditors and debtors. Every partner in a limited liability partnership is subject to liability jointly
or separately. In LLP, there is an apprehension of disagreement among partners which could
affect the management.
Limited company Business Structure
Trading under a registered company is said to be a private limited company. The
management of a limited company is driven by directors and its share holders. The directors and
shareholders are separate entities from the business. Whereas, in sole trade owner is liable for all
the defaults in business and its faculties. There is a limited liability of shareholders in limited
liability partnership firm. A company must be registered with companies house. There is a
separate account created for a company and its shareholders (Reuvid2019).
Merits: In this, liability is divided among the shareholder, the shareholders are liable up to their
contribution in business. Registration and incorporation from the companies house gives
legitimate status to limited company. It is always advisable to pay corporate tax to exempt tax
from business income which is higher.
Demerits: Huge free is to be paid for incorporating and registering limited company. There is
more responsibilities relating to administration and lack of trust (Silaghi and Sarkar2021).
Limited Liability Partnership: LLP is akin to partnership the only difference is that, there is
limited liability on partners and in such partnership firms the word limited is added at the end of
the firm name. The trading and dealings are being done only in the registered name of the
company. The partners are made liable to the extent of their contribution in the firm. The annual
report of a firm is prepared by two members who are appointed in this behalf and transfer the
recordings to the administration. Such business firms must be registered by companies house. At

least, two members are required to form a limited liability partnership. Each partner has to make
their own tax return assessment to pay the income tax.
Merits: In this the partners are not liable for the mistakes of other partners. One of the benefits
of limited company is to pay corporation tax which is rather fair and efficient than paying
income tax.
Demerits: There is high income tax, there is strict penalty on non compliance.
Recommendations for IOM Solutions
From the above report, it is recommended to IOS solutions go ahead with the option of
Limited Liability Partnership because it gives wide advantages to expand the business. As Sam
has good experience of running business and the business is really doing well and has captured
local market. To expand business, Sam need to find a potential and trustable investor who can
invest capital in the business and become partner in business. Considering the success of IOS
solutions anyone can find interest in investing in business. In Limited liability partnership
minimum two partners are required which completely fits for IOM solutions. There is protection
of partners from negligence of other partner. Partners can also share ideas and responsibilities
which will reduce the burden of work. Therefore, for IOM solutions limited liability partnership
is the best option.
CONCLUSION
From above report, it can be concluded that a business which has the potential to grow
have many options to expand. These options are given by business law which covers all the
essentials of a business and provides a set of rules and regulations to maintain the business
world. In this report, a recommendation is made to UK based sole trader who wish to expand
business and seeks potential alternative options suitable for IOM solutions.

REFERENCES
Books and Journalss
Anayi, L, and et.al., 2021. Influences on investment by UK businesses: evidence from the
Decision Maker Panel. Bank of England Quarterly Bulletin, p.Q2.
Georgiadis, A. and Manning, A., 2020. The impact of the uk minimum wage: Evidence from
high-frequency firm-level data. Available at SSRN 3560897.
Hall, D. and Aldous, S., 2021. UK: New Borders; New Approach. Global Trade and Customs
Journal, 16(9).
Ivanov, O., Zavyalova, E. and Ryazantsev, S., 2019. PUBLIC-PRIVATE PARTNERSHIP IN
THE COUNTRIES OF THE EURASIAN ECONOMIC UNION. Central Asia & the
Caucasus (14046091), 20(2).
Lennox, C.S. and Wu, X., 2018. A review of the archival literature on audit partners. Accounting
Horizons, 32(2), pp.1-35.
Li, J. and Fleury, M.T.L., 2020. Overcoming the liability of outsidership for emerging market
MNEs: A capability-building perspective. Journal of International Business
Studies, 51(1), pp.23-37.
Priya, R.S., 2019. Enhancing UK manufacturing productivity by enabling a value chain
orientation (Doctoral dissertation, University of Warwick).
Reuvid, J., 2019. Business Innovation: How companies achieve success through extended
thinking. Legend Press Ltd.
Silaghi, F. and Sarkar, S., 2021. Agency problems in public-private partnerships investment
projects. European Journal of Operational Research, 290(3), pp.1174-1191.
Yovanno, D.A., 2022. The Partnership Economy: How Modern Businesses Find New
Customers, Grow Revenue, and Deliver Exceptional Experiences. John Wiley & Sons.