Business Law Report: Key Sources of Law for UK Businesses

This report provides a comprehensive overview of business law within the UK, focusing on the legal context for business organizations. It delves into various business structures, including sole proprietorships, general partnerships, limited partnerships, and limited liability companies (LLCs), outlining their characteristics, advantages, and disadvantages. The report examines the legal frameworks governing these structures, such as the Companies Act of 2006 and the Partnership Act of 1890, and discusses key aspects like liability, taxation, and registration processes. The report uses the hypothetical company IOM Solutions, a sole trader selling electrical parts, as a case study. It analyzes the current business structure and provides recommendations for expansion, specifically suggesting a partnership model to facilitate growth and address workforce limitations. In conclusion, the report emphasizes the significance of understanding business law for forming, operating, and expanding businesses in the UK.

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:
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Introduction
Business law is widely spread area that defines various kinds of aspects of
doing businesses. It includes business formation, contracts, business operations,
licensing and complying with rules & regulations. It also described as commercial law
which involves trading, purchasing, merchandising and franchising of individuals or
companies (James and Thomas, 2020). In this if any individual or company wants to
start a new business and to expand the existing one, there are various options such
as sole proprietorship, partnership, corporation and limited liability company(LLC)
etc. Each business type describes the different taxation policies and rules.
Therefore, business law then helps the company to know that what type of business
structure best defines the company's requirements. This report contains the
introduction about the business law and various types of business aspects such as
types of law, business liability, roles & duties with reference to IOM solution. In this
company Sam a sole trader sells electrical parts to local garages and wants to
expand the business. Furthermore, report includes legal structure of business and
recommendation for Sam's business. Lastly, the conclusion of overall work is
defined.
Businesses & Organizations in the UK
A business organization is an organization which is involved in various types
of business and commercial activity. Each business enterprises has a separate
business unit. It also helps businesses to know how they are structured and how this
structure can help them to accomplish the defined objectives of the organization.
There are different categories of business organization such as partnership,
proprietorship, limited liability company and corporation (Anayi and et. al., 2021). To
run such businesses there are various laws and regulations set by the legislation in
United Kingdom which takes care of various aspects of the company such as
employment act, licensing and contract laws etc. In the companies Act of 2006, it is
mentioned that any business enterprises needs to incorporated under this Act in
order to define the legal existence in the country. In order to starting the new
business their respective entity involved in business can opt for limited or an
unlimited company which defines the incorporators liability to losses and debts under
the general section of law. These two section such as unlimited or limited company
have their own legal policies. In this both type of company either unlimited or limited
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needs to display the endings with 'Plc' or 'Ltd' along with company's name. In the
registration process, there is Memorandum of Association simply known as MOA in
which people who invested money in the company needs to sign this document. It
states that what shares investors will initially acquire and their latter of intent in
compliance with The Companies Act of 2006. There is also Directors must be
appointed according to type of company. In public company, it requires two directors
whereas private company requires one. In case of Article of Association(AOA), it
forms a document in which it describes that rules and regulations to operate the
company and also specifies the purpose of the company. Furthermore, The
Partnership Act 1890 defines that any partner of company can terminate the
partnership any time by giving the notice to other member of the company or partner.
In this all the assets, liabilities and shares can be disposed or settled according to
the agreement.
The legal business structure of UK companies
A business is a legal entity which is operating separately and, it specifies own
name and seal of the company. It has own property, liabilities and assets. The legal
structure of business is also referred as business ownership structure which
regulates the various aspects of the company. It helps organisation to know about
the liabilities, tax policies and legal policy management (Mili, Gharbi and Teulon,
2019). It also includes the various factors such as tax rates, paperwork requirement,
registration process, fund raising capabilities and many more. In reference to the
given company IOM solution, Sam must know about the legal structure to expand
the existing business of electrical parts. Sam also needs to explore the legal
structure that what type of business structure is useful for his company IOM Solution
such as sole proprietorship, partnership, limited liability company or corporation in
accordance with their tax policy, paperwork requirements and legal structure to
ensure the security and success of the company.
Sole Trader
Sole trader or sole proprietorship is a simple form of business structure in
which individual owns the business. In this only proprietor is responsible for all the
profits and losses incurred by the company (Formosa, 2018). In this proprietor takes
care of management and controlling of the various business requirements. It is
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majorly adopted by small business owners across the country. It offers many
advantages such as easy set up due to less requirements of paperwork. In addition
with easy6 exit, low cost and tax deduction facility. There is only licensing fees and
businesses taxes associated with the sole proprietorship. If any proprietor is facing
loss in the business, there is easy exit helps them to shut down their respective firm
with less paperwork requirements. As there is only single entity here they can opt for
tax deduction such as health insurance and expenses etc. There are many famous
company such as Walmart, JW Marriott hotels and eBay started their business as
sole trader or sole proprietorship. It also has some other advantage that name of the
company can be easily protected and personal ownership helps to take decision
quickly. There is also some disadvantage of sole proprietorship which includes
personal liability, it is one of the major disadvantage that any losses in the firm bared
by only proprietor (Kim, Lee and Sohn, 2020). It also involves a difficulty in raising
money to expand the business. It is due to that personal ownership represent the risk
involve in the firm so that banks or investors feels hesitation to invest their money in
such sole proprietorship firm or businesses. It leads complexity because it is some
time impossible to manage all the operation in the company from material
requirements to finance and management of staff as well. There is also difficulty in
exploring the business due to that taking care of all the work at the same time can
affects the entire operation of the business in which losses occurred.
General Partnership
General partnership refers to a business is owned by the two or more person.
It is further divided into two types as general partnership and limited partnerships. In
general partnership all the member in the company shares equally either it loss or
profits of the company. In this all the individuals of the company have ownership of
the company (Szalados, 2021). On the other hand, limited partnership is a
partnership in which only single entity or one partner has control over the operations
of the company and the other person in the company contributes and shares the
profits of the company. In this partnership, there is verbal agreement among all the
parties that defines their shares and ownership of the company. It is similar to sole
proprietorship in which if there is any loss or any incident occurred in the business
the partners of the company are bound to pay the debts of business from their
personal assets. There are various advantages of the general partnership which
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includes easier access of information, risk divided, flexibility, scope of expansion of
existing business and responsibilities divided among the partners etc. In this type of
company, it requires less legal formalities in which only partners have agreements.
Due to less legal formalities which makes it to free from government control. In this
partner can make change in the company as per their requirement. They can make
changes in the size of company, structure of the company and investment decision
etc. that provides flexibility to the firm. Since the partnerships firms has many
members and they are agreed to share profits and losses of the company equally.
Therefore, there is less burden of risk in this type of firm as compared to sole
proprietorship. And there is also advantage in operations of firm due to that there is
different role and responsibilities divided between different partner of the firm that
reduces the overall burden on single person. In addition, there are some
disadvantages as well such as poor decision making process, mutual differences
and liabilities.
Partnership
This form of legal business structure is quite similar to the general partnership
the only major thing that differentiate it from general partnership is nature.
Partnership has more formal nature as compare with general partnership (Syrbu and
Kvintyuk, 2019). The Partnership of 1890 specifies the working of such type of
partnership firms. Similar as general partnership, where two or more two parties
come together with the objectives to start a business. It comprises all the required
documents in accordance to define the ownership between the various member of
the company. The management and controlling operations of the business are
carried out in appropriate manner with the intent of all the concerned owners of the
firm. There are also some advantages as like the other firm of the business in which
single person is not liable for all the losses occurred by the firm. With the help of all
the partners company can raise more funds to expand the business and there are
also limited external regulation due to less legal formalities. There is also risk of
indifference among the partners that can negatively affect working of the firm.
Limited Liability
The limited liability company is hybrid in nature. It combines the advantages of
both partnership and corporation. The main advantage of this legal business
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structure is that the owners of the company or firm are protected from having
personal liability (Mancuso, 2019). It includes the features of the both types. In this
formation of the company is similar with partnership in which individual collaborates
to form a business. There is every partner in the company needs to invest some
amount of capital in the business and according to investment capital some shares
of the company is allotted to them. Here their liabilities is limited to their ratio of
investment done or according to their share in the company or firm. If company faces
losses the partners of the company are not liable to pay the debts of creditors from
their personal belongings. There are many benefits of limited liability company as
that owners are not personally responsible for the debts and, there is no restrictions
on the number of partnership. It includes some disadvantage as that it is more
expensive as compared to sole proprietorship and partnerships. It also requires more
paperwork and typically harder to transfer the ownership.
Recommendations for IOM Solutions
As it is mentioned that Sam is sole owner of the company named as IOM
Solutions. His company deals in selling electrical parts to the local garages. Sam
wants to expand his existing business as being the sole trader. There are various
things that needs to be explored by Sam. The legal structure of business which this
above mentioned report suggest that Sam should adopt the partnership structure.
This will help the Sam to raise the fund from various partners by diluting the equity
among them. It is also mentioned that Sam is unable to fulfill the demand of
customers due to less workforce and department. Hence, with the partnership model
there will be various partners where Sam can divide the work and responsibilities
among them and can fulfill the customer demand.
Conclusion
From the above report it can summarized that how business law is significant
to start new business or firm which includes business formation, contracts, business
operations, licensing and complying with rules & regulations in reference with given
company as IOM Solutions. It explains the various legal business structure that are
being used in United Kingdom for new businesses. At the end, it defines that which
legal structure is beneficial for Sam to expand his business in recommendation.
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References
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.
Formosa, A.M., 2018. From a sole trader to a company: a legal and financial
analysis (Master's thesis, University of Malta).
James, N. and Thomas, T., 2020. Business law. John Wiley & Sons.
Kim, H.J., Lee, B.K. and Sohn, S.Y., 2020. Comparing spatial patterns of sole
proprietorship and corporate payday lenders in Seoul, Korea. The Annals of
Regional Science, 64(1), pp.215-236.
Mancuso, A., 2019. Your Limited Liability Company. Nolo.
Mili, M., Gharbi, S. and Teulon, F., 2019. Business ethics, company value and
ownership structure. Journal of Management and Governance, 23(4),
pp.973-987.
Syrbu, A.N. and Kvintyuk, Y.M., 2019. Cognitive Modeling of the Mechanism of
Partnership of Business Entities with Public Authorities. The 21st Century
from the Positions of Modern Science: Intellectual, Digital and Innovative
Aspects, 91, p.104.
Szalados, J.E., 2021. Corporate and Partnership Structures Used in Healthcare
Entity Formation. In The Medical-Legal Aspects of Acute Care Medicine (pp.
535-546). Springer, Cham.
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