Business Law 3: Memorandum of Advice on Business Structure for Chris

This memorandum of advice analyzes three business structures: sole trader, partnership, and private limited company. It considers factors such as liability, legal compliance, control, ownership, and financial provisions. The analysis compares the structures, highlighting their advantages and disadvantages to determine the most efficient structure for Chris. The memorandum concludes that establishing a private limited company is the most efficient structure for Chris due to its limited liability and the ability to raise capital through shares, protecting Chris from personal liability for company debts. The memorandum references relevant legal cases and acts to support its recommendations.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Memorandum of Advice
An individual who has been willing to establish business can adopt any of the three
variations of the business structures available. Such structures may cover private limited
company, partnership or even sole trading. For the purpose of selecting any of the structures,
the individual proposing to establish the business needs to consider the same under the light
of several factors. Such factors may cover the liability connected with the structure, the legal
compliances that needs to be followed in the structure, and other requirements that needs to
be complied with for the purpose of registration. The control and ownership pertaining to the
business and the provision for finances will also be considered. All these would be discussed
for the purpose of arriving at the recommendation as to the business to be selected in the
given situation.
The business structure where the owner and the business is considered as a single entity is
termed as sole trader. In such form of business, the business and the owner are treated as the
same individual and the liability of any one of them would be rendered as the liability of the
other as well. This can be made evident with the contention that there is no separation in the
Identity of the business and the individual behind the business in this form of business
structure. The cost of establishing this form of business and other expenses relating to the
establishment of the same is comparatively less than other forms of business. The individual
resolving to establish this form of business would find it easier and pocket friendly to arrange
the finances for the same (Meager, 2015). The compliances relating to registration, licensing
as well as other requirements are simple and easy to abide by. The capital required for the
establishment of the same being affordable acts beneficial to the owner. The business
structure pertaining to an individual confers the owner with the chief control and ownership

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of the business. The trader will be authorised to make all decisions and incur all liabilities
arising from the business (Mould & Comunian, 2015).
Partnership, on the other hand, is a form of business which requires two or more persons
to carry out business in a common capacity. The relationship of partnership is regulated with
the Partnership Act 1980. This form of business structure requires the common owners to
establish the business with the chief motive of earning profit. There are no essential
compliances for the purpose of incorporating this form of business. All the resources and
finances pertaining to this form of business are to be treated as joint assets of the firm and the
whole business will be treated as a united entity. All the liabilities that the firm will incur,
will be treated as the joint liability pertaining to all the partners (Burns, 2016). This form of
business is established by agreement effected by partners and is considered to be much
pocket friendly as the cost of setting of the same is bone by all the partners. The power to
conduct the affairs of the business lies with all the partners in in coming capacity. This will
hold all the partners jointly and severally liable for the acts of any partner acting on behalf of
the firm (Gbadamosi, 2015).
The private limited company need to be treated as a distinct entity from that of the owners
and managers of the same. The company is conferred with a separate status in the eyes of law
from that of the owners and the managers. This contention can be best explained with the
case of Salomon v A Salomon & Co Ltd [1896] UKHL 1. Any person authorized to manage
the company will not be held liable personally for the liabilities incurred by the company
(Burns & Dewhurst, 2016). Again, if the person managing the company has been
intentionally involving fraudulent means while managing the company that person needs to
be regarded as personally liable for the liabilities incurred by the company in that furtherance.
The compliances of the formation of a company need to be strictly abided by. As capital can
be raised by way of shares the burden of acquiring finances will not fall on a single person so

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as to create an inconvenience for that person. Hence, the huge volume of capital required for
the formation of a company will not be treated as burdensome. All the management of the
company is conducted by the directors, will not be regarded as the owners of the company.
The ownership belongs to the shareholders. The liability of the shareholders will be limited to
the contribution they have been making towards the finances of creating the company
(Hannigan, 2018).
Therefore, it can be concluded from the above discussion that establishing a private
limited company will be more efficient for Chris. The justification for the same lies with the
limited liability that this form of business structure offers to the owner. The profits arising
from the business will be declared by way of dividend and Chris would be provided with an
immunity from being held liable personally for the liabilities of the company.

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References
Burns, P. (2016). Entrepreneurship and small business. Palgrave Macmillan Limited.
Burns, P., & Dewhurst, J. (Eds.). (2016). Small business and entrepreneurship. Macmillan
International Higher Education.
Gbadamosi, A. (2015). Exploring the growing link of ethnic entrepreneurship, markets, and
Pentecostalism in London (UK) An empirical study. Society and Business Review,
10(2), 150-169.
Hannigan, B. (2018). Company law. Oxford University Press, USA.
Meager, N. (2015). Job quality and self-employment: Is it (still) better to work for yourself.
The handbook of research on freelancing and self-employment, 35-46.
Mould, O., & Comunian, R. (2015). Hung, drawn and cultural quartered: rethinking cultural
quarter development policy in the UK. European Planning Studies, 23(12), 2356-
2369.
Salomon v A Salomon & Co Ltd [1896] UKHL 1
The Partnership Act 1980