Business Law Report: Analyzing Business Structures and Recommendations

This report analyzes various business structures, focusing on the case of Sam, the sole proprietor of IOM Solutions, who seeks to expand his business selling electrical parts. The report defines business organizations, explores sole proprietorships, and delves into partnerships, including limited liability partnerships (LLPs). It then examines incorporation, covering re-registration and insolvency, followed by an overview of different company types, such as private and public limited companies, and other organizational forms. The report recommends a partnership structure for Sam, highlighting the benefits of shared capital, risk distribution, and the ability to leverage his brother's involvement as a sleeping partner while retaining decision-making control. The conclusion emphasizes the suitability of the partnership model for business expansion and increased revenue generation, while the report also offers valuable information on business law and its implications on various business structures.

Business Law
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Definition of Business organisation........................................................................................3
2. Sole Trader..............................................................................................................................3
3. Partnership...............................................................................................................................4
3.1. Limited Liability partnership (LLP).....................................................................................4
4. Incorporation forming company.............................................................................................5
4.1. Re- Registration...................................................................................................................5
4.2. Insolvency............................................................................................................................5
5. Main types of companies........................................................................................................6
5.1. Private limited company......................................................................................................6
5.2. Public limited company........................................................................................................6
5.3. Other forms of organisation.................................................................................................7
6. Recommendation.....................................................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
and names.........................................................................................................................................9
Incorporation and names................................................................................................................10
Incorporation and names................................................................................................................10
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INTRODUCTION
Business is the enterprise or a company which seeks profits through various activities
performed in the organisation and provides goods and services to the economic system. Law
refers to the policies and rules and regulations made by government of the country which are to
be applicable on people and enforced by judicial decision. Business law is the portion of legal
system in which business affairs orderly conducted (Aronoff and Ward, 2016). It is needed by
the business to establish some rule and regulations which can reduce misunderstanding and
injury in the business. In this report Sam who is the sole trader of IOM solutions selling electrical
parts to local garages. He wants to expand his business but he is not sure about the form of
business he expand. In this report different types of businesses are mentioned and
recommendation is also made for the types of business he choose.
MAIN BODY
1. Definition of Business organisation
According to Dr. A.N. Agarwala, “ Business organisation is the enterprise, company who
buys and sells its resources from one person or group of persons of production and distribution of
goods with the view to earn profits and revenue.”
Business is established in different forms. It can be classified into any form like managed by
individual, government, group etc. Many of the small business start with the sole proprietorship
then they commit on partnership or company in the many years of time. There are various types
of business are mentioned. Theses are discuss below:
2. Sole Trader
A sole proprietorship is the first form of business which is used by Sam as he operates his
small business called IOM solutions where he sell electrical parts to local garages. He is running
that business for about eight years. He runs this business because it is easy to set up this type of
business for small entrepreneur (Doppelt, 2017). In this form of business, entrepreneur and the
business is same as in this business assets and liabilities are considered as the personal assets. It
means if the business is going in loss or liabilities are increased then entrepreneur is personally
liable for the loss of business cause. Raising of money can create difficulty because in this type
of business enterpriser cannot able to sell shares and also banks are not interested to provide
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loans to these businesses. Sole proprietor is a good choice for the person who need not ton take
more risk. With this type of business person can able to get trade name, and it may be done as a
testing of business to choose for another type of structure. Person can be deemed as the sole
proprietor if he as not done registration and is using another type of structure. Sam also uses this
type of business as just to test but now he wants to explore it to another structure.
3. Partnership
Partnership is the form of business in which two or people start the business. Like sole
proprietorship, partner is also easy to start before adopting into any formal organisation (Hillary
ed., 2017). There are two kinds of partnership forms these are- limited partnership and limited
liability partnership. In limited partnership, one of the partner has unlimited liability and other
have limited liability. But in limited liability partnership, all partners have limited liability so
they all are protected from personally liable for company debts. In this form of partnership
partners have legal agreements and they share profits according to the decided shares in the
agreement. Te agreement should consist of certain things like who will bought how much funds
and how disputes can be resolved. Advantages of this is that profits are taxed only once and it is
easy to established. Disadvantages of this that profits is shared among the partners, partners are
jointly liable for the actions made by other partners, decision making power also divided. If Sam
wants to establish this type of business with his friend or family member then he should make
sure that all the things are already cleared before the starting of the business because later on
there can be conflicts.
3.1. Limited Liability partnership (LLP)
As discussed above that limited liability partnership is a kind of partnership business. As
in this all partners have limited liability so they all are protected from being personally liable for
the company debts. Also, they are protected from the actions which are to be performed by other
partners. This can be incorporated with two or more members (Laothamatas, 2019). These
members can be an individual or a company. For professionals like lawyers and accountants,
limited liability partnership is considered as the common organisation structure. This partnership
could be registered are Companies houses and HMRC. Also, annual accounts of the business
should also be prepared and filed.
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4. Incorporation forming company
Company is a legal entity that is completed separated from its owner. As it has
shareholders who purchase and sell the shares of the company. There is the guidance of the
incorporation of the company in UK. It involves information about incorporation. Incorporation
is refers to the process in which new company can be registered under a limited company.
Limited liability company is the company with majority as in this liability of the members are
limited by shares or by guarantee (Incorporation and names, 2020). A business cannot be called
as limited company until an unless it has been incorporated at Companies House under
Companies Act 2006. while filing under Companies Act, the director of the company should
submit some documents every year. These documents includes annual reports and confirmation
statement, Memorandum of association and Articles of associations etc. If any changes is done in
the company like appointment or resignation of directors or company registered office change,
then director must inform to the Companies House. As Sam want to expand its business, for this
he needs to be consult with some professional like accountant whether an incorporated company
is the best way to run its business or not.
4.1. Re- Registration
Re- registration of the company can be through public company to the private company
or private company to the public company, private company to the unlimited company or
unlimited company to the limited company. Anything can be done, they it needs Re- registration
of the company. At the time of re- registration Companies House will issue an amended
certificate of incorporation. This certificate includes some information like change in the name
and status of the company.
4.2. Insolvency
UK insolvency law regulates those companies which are unable to pay their debts
(Picciotto and Mayne eds., 2016). Insolvency laws are made to rescue companies who faces
difficulty in running and minimising their losses and distribute fairly the losses among
community, employees and other stakeholders of the company. 'Liquidity' is the method in which
assets are sold to repay the debts to the creditors according to the priority.
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5. Main types of companies
As discuss above that there are various type of businesses structure forms by anyone. But
there are certain business which are most common in the UK country. Theses are public and
private limited company. Sam is a sole proprietor so he can go to any type of business forms
which he finds most suitable. Let discuss about them in detail:
5.1. Private limited company
A private limited company is the corporation who is owned by NGO or small number of
shareholders and its shares are handled privately. These companies are limited as compared to
public limited company in UK. In this an individual is only liable for the financial liabilities that
he is invested in the company (Ramasastry, 2015). This type of company cannot sell there shares
to the general public. Advantages of this form of business is that limited liability. And they have
do protection from risk. Also, there is no obligation for the limited company to commence
trading. In UK, at the time of setting up of private limited company, no minimum capital is
required but company should issue at least one share at the time of incorporation. Sam can
expand its business into private limited company but for this he needs to be registered its
company in Companies House under Companies act 2006.
5.2. Public limited company
Public limited company is the corporations whose ownership is given to the public. As
anyone can purchases the shares of the company. In this company, public financial liability is
restricted to the fixed sum. In UK, majority of the companies are of public limited company. It is
limited by shares like private limited company. But the difference is that in this form of
company, shares can be sold to public. Also, there are other legal requirements that must be met.
It is important to note that public limited company cannot conduct a business until and unless it
has obtained a trading certificate from the Companies House. With the confirmation that
company has allotted minimum number of share capital. These company used 'plc' as the
extension after their name. These companies are to be considered as the most common type of
companies. PLC can have various types of shares these includes ordinary shares, redeemable
shares, preference shares etc. It is difficult for Sam is to create this type of business because in
this type he needs to raise financial funds from the general public. And it become difficult to
raise this much capital for setting up the business.
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5.3. Other forms of organisation
EU companies: They are also called Societas Europaea (SE). This is established in the
Europia economic area. This is the types of public limited company. These are established in
UK, they are formed as a subsidiary of another company or holding company. These company
can be created by the existing public limited company or by the mergers (Waterhouse, 2015).
They have to required registered office and head office in the UK. And also must have more
share capital of €120,000.
Right to mange company (RTM): This type of business is form when company needs to
set up to transfer powers from landlords to leaseholders. These powers includes maintenance and
repair of a certain building. These can be considered as the special type of private company by
guarantee.
6. Recommendation
From the above business forms, Sam should adopt partnership form of business because
in this he wants to create his brother as the sleeping partner and he himself as the active partner.
This will help the business in getting more share capital to expand it and also he will be the
decision maker for the company. Also, there will be distribution of risk between two persons. So
that he don't need to bear the loss alone. He will have limited liability and there should be an
agreement between him and his brother. Where his brother will share his agreed profits and Sam
will be the active partner. Sam wants to sell electrical parts to the local garages. This will help
him in expanding his business and making more connections with the local suppliers and its
customers.
CONCLUSION
From the above report it has been concluded that Sam is a sole proprietor of IOM
solutions. Now he founded that business has grown in terms of employees and demand both.
Now he wants to expand the business. Of which he has number of options to expand. For this he
choose partnership form of business. Partnership business is good for the process of expanding a
business. And by this he could earn more profits and revenue. Partnership business is easy to
adopts as it brings share capital more and there will be risk share. But Sam should considered in
this mind that in this types of business he needs to share profits and revenue with the other
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person. And also there can be conflicts. For this he needs to maintain positive attitude towards
the other person.
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REFERENCES
Aronoff, C. and Ward, J., 2016. Family business governance: Maximizing family and business
potential. Springer.
Doppelt, B., 2017. Leading change toward sustainability: A change-management guide for
business, government and civil society. Routledge.]
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Incorporation and names, 2020. [Online]. Available Through :
<https://www.gov.uk/government/publications/incorporation-and-names/incorporation-
and-names>
Laothamatas, A., 2019. Business associations and the new political economy of Thailand: From
bureaucratic polity to liberal corporatism. Routledge.
Picciotto, S. and Mayne, R. eds., 2016. Regulating international business: beyond liberalization.
Springer.
Pruzan, P and et.al., 2017. Leading with wisdom: Spiritual-based leadership in business.
Routledge.
Ramasastry, A., 2015. Corporate social responsibility versus business and human rights:
Bridging the gap between responsibility and accountability. Journal of Human Rights.
14(2). pp.237-259.
Waterhouse, B.C., 2015. Lobbying America: The politics of business from Nixon to NAFTA
(Vol. 99). Princeton University Press.
and names
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Incorporation and
names
Incorporation and
names
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