BMP4002 Business Law: Analyzing Legal Sources & Business Context in UK

This report provides an overview of the key sources of law and the legal context for business organizations in the UK, with a focus on IOM Solutions, a company selling electrical parts. It discusses various types of laws including contract law, company law, and employment law, along with busines...Read More

BSc (Hons) Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of laws
as the legal context for business
organizations in the UK
Submitted by:
Name:
ID:
0

Contents
Introduction..............................................................................................................................2
Businesses & Organizations in the UK...............................................................................2
The legal business structure of UK companies..................................................................4
Recommendations for IOM Solutions................................................................................6
Conclusion.................................................................................................................................6
1

Introduction
The laws are extremely important for society since they provide specific rules and
regulations that regulate both corporations and people in terms of the interplay of certain
responsibilities. Laws are the only criterion that governs every aspect of our existence, from
conception to death. Business must follow the required business regulations in order to
function properly and transparently, as they touch every aspect and workings of the company.
Furthermore, business laws include all legislation and standards that govern and guide any
firm, regardless of its form, on how to incorporate, run, dissolve, or sell it. The law that
governs business and commerce is known as business law (Huang, L., 2018). Because it deals
with both private and public legal issues, it is commonly considered a branch of civil law.
Commercial law governs everything from corporate contracts to employment procedures to
the manufacture and selling of consumer goods. Many countries have developed civil codes
that outline their commercial rules in detail. IOM Solutions, which sells electrical parts to
local garages, is the subject of this investigation. This will discuss business & orgnaisation in
UK along with legal business structure of UK companies. Further recommendation is
provided to IOM solutions for best legal business structure.
Businesses & Organizations in the UK
All of the aforementioned laws are distinct from one another, but they are intertwined
in terms of how they operate. Every law, with its own significance and nature, necessitates
compliance by those who are subject to it. Each has its own set of favorable and negative
consequences. Furthermore, business organizations are governed by number of legislations,
each of which is outlined below: -
Different Types of law-
 Contract law- A written or verbal agreement between two parties that defines and
governs their respective responsibilities and rights is referred to as contract law. It's a
legally binding agreement in which the parties trade goods and services, as well as
money and property. It is formed through a verbal agreement with the commitment to
follow through on the terms (Merryman and et. al., 2020).
 Company law- It is also known as corporate law, and it governs people's, firms', and
businesses' rights, relationships, and behavior. It is a business-related legal profession.
It entails the development, funding, governance, and eventual demise of a business. It
is a separate legal body with limited liabilities and shares that can be transferred.
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 Employment law- It is a labor legislation that establishes the working relationship
between employees, labor unions, employee entities, and the government.
Government authorities are in charge of enforcing it. It involves employment
standards, which are social norms that employees and contractors must accept in order
to be permitted to work. Health and safety, minimum salaries, working conditions,
hours, and discrimination are all covered under employment legislation.
Business transactions management of company- The business transaction is also
defined as business transaction monitoring as it is practice of managing information
technology from company perspective. This offers tools in respect to tracking the move of
transactions.
Vicarious liability - Vicarious liability refers to a circumstance in which one party is held
partially responsible for the illegal conduct of a third party. A portion of the liability is also
borne by the third party. When one party is supposed to be responsible for (and have control
over) a third party but fails to do so, vicarious responsibility might arise. The corporation
may be held accountable if an employee causes an injury to another person while on the job.
This simply means that the wounded person, rather than the employee, may be able to seek
compensation from the corporation (Mohammed and et. al., 2017).
Business liability in Negligence- Negligence occurs when a professional fails to perform
their duties to the required standard or breaches a duty of care. They suffer a financial loss as
well as bodily harm or injury to their customer or consumer as a result of their improper
behavior. In common law jurisdictions, a tort is a civil wrong that unfairly causes someone
else to suffer loss or harm, resulting in legal accountability for the one who does the wrong.
Although torts can be crimes, the cause of legal action does not always have to be a crime, as
the injury could be caused by non-criminal negligence. The victim of the harm can recover
their losses as damages in a lawsuit (Moroni and et. al., 2020). To win a case, the plaintiff
must establish that the defendant's actions or lack of conduct were the legally identifiable
cause of the harm.
Termination of partnership- In the creation of general partnership it does not require
any kind of formalities. The partnership is terminated on the completion of windup which
ensures that no partners will be held responsible for other partners debts. The termination of
partnership involves sale of partnership assets, paying debts and distribution of money or
property. If a partnership was formed without formalities or a written partnership agreement,
the law of the state in which the partnership operates will regulate the partnership's
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termination by default. The termination of partnership causes because of if one partner dies,
or resigns, or retires or partnership business is bankruptcy.
Memorandum of association (MOA)- The Memorandum of Association (MOA of Private
Limited Corporation) is a legal document that lays forth the foundations of a company. It is a
necessary document for the company's continued existence. The MOA is the company's
charter, which defines and regulates the company's rights for the benefit of the general public.
The objective of the Memorandum of Association is to show the scope of a company's
permitted activities for the benefit of shareholders, creditors, and others (Parker Jr, L.V.,
2019).
Articles of Association (AOA)- The articles of association are a legal document that defines
a company's objective and lays out the guidelines for its activity. The paper lays out how
internal business activities will be carried out, including how directors will be recruited and
how financial records will be kept. It's a certificate of incorporation that outlines the
company's goals and operations regulations. It also establishes rules and regulations for the
internal management of the organization.
The legal business structure of UK companies
Sole Trader
This type of business is modest in scale, and the proprietor is stated to be the sole
owner who conducts and manages the company's affairs. Because the business is limited to a
specific location, it requires only a minimal amount of capital to get started. There are no such
complicated legalities when it comes to the incorporation of a sole proprietorship. The only
prerequisite for starting this type of business is that it be registered with the Companies
House. Furthermore, because neither the firm nor its owner have the legal status of a separate
legal entity, the owner is considered to be exclusively liable for the business's responsibilities.
The sole proprietors have unlimited liability which means owner is personally liable for all
the business debts (Sarah, R. and Vida, A., 2020). The sole proprietorships dissolution causes
because of death, bankruptcy or the owner’s decision as owner is responsible for making
decisions regard the business. It has advantage of easy in establishing and to operate. The
disadvantage is there is unlimited liability and difficult in obtaining funds.
General Partnership
The general partnership defines to form of partnership in which partners are liable for
partnership activities. The active owners are called as general partners having unlimited
liability for all the business debts. It is an unincorporated business with two and more owners
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who share business responsibilities. All partners make contribution in day-to-day business
management. It is not necessary to file any documents, register any information, or complete
any other formalities in order to form a partnership. A partnership can be formed by two
persons just beginning a business together and sharing the earnings. The general partnerships
are pass-through companies, they do not have to pay business income taxes. This implies that
each partner reports and pays their portion of the partnership's profits and losses on their
personal tax returns (Singh, S.K., 2020). The general partners are liable for all business debt
and lawsuits. The general partnership can be dissolved by ensuring all liabilities are ended
according to partnership agreement. This has advantage of easy in formation and equal rights
are distributed. It also pass-through taxation. The disadvantage is it has easy in dissolution
when partners decide to leave. There is no transfer of interest.
Partnership
In this form, members with similar goals join together to form a partnership with the
aim of generating maximum income from the aforementioned business. This form is
considered to be one of the most common forms of business preferred by majority
entrepreneurs. The necessary steps for the establishment of a partnership are first the
establishment of the partnership deed and then the registration of the same in compliance with
the given partnership law. In addition, the aforementioned registration of the deed must be
carried out in the house of the companies. The basic idea behind partnership taxation is that
all gains and losses are passed on to the business partners, who are subsequently responsible
for them. As a result, the company entity is exempt from paying income taxes. All the
partners are jointly and severally liable for firms’ debts (Waters, B., 2018). When a
partnership is dissolved, the existing partnership is dissolved by consent or when a certain
event occurs, but the company can continue to exist if the remaining partners join into a new
partnership agreement. The key advantage of partnership is it has rich source of capital and
there is no double taxation. The disadvantage is there is unlimited personal liability for the
obligations of partnership.
Limited Liability
A person's financial liability is limited to a specified amount, usually the value of their
investment in a corporation, firm, or partnership, under this legal position. Restricted liability
refers to a situation in which the losses of a company's owners (shareholders) are limited to
the amount of capital invested in the company and do not extend to their personal assets. An
LLC is typically treated as a pass-through entity for federal income tax purposes. This means
the LLC is not required to pay taxes on its profits. All LLC members are liable for paying
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income tax and self-employment taxes on any income they get from the LLC. To dissolve a
limited liability company, it is required to file appropriate form usually articles of dissolution
with appropriate state office (Lee and et. al., 2017). The limited liability has advantage of tax
that means members can avoid double taxation on business income. It provides flexibility in
income distribution. The disadvantage is it has difficult in raising capital, and there is no
perpetual existence.
Recommendations for IOM Solutions
The most suitable organization can be partnership that are managed by all partners
since, unless there is a contract to the contrary, each partner has equal rights with regards to
the management of the business. While working in the position of co-owners, all of the
aforementioned partners share both managerial profits and responsibilities. In general, all
aspects of the firm are managed while adhering to the partnership deed's rules and
restrictions. The business can alternatively be managed by an appointed committee or
managing partner, but significant decisions must be voted on by all partners. The partners
bring funds to the firm and can take out a loan from a bank or other financial institution, or
they can bring in new partners to bring in more capital. The partnership firm is run by sharing
the same ideals, explicitly outlining each partner's job and responsibilities, having a formal
agreement, and being honest with one another (Chang, W., 2020). Share issuance, leasing,
mortgages, government subsidies, and trade credit are some of the financing options.
Conclusion
From the foregoing research, it can be inferred that business laws, in conjunction with
other required laws, are the primary source of regulation for UK enterprises. It establishes a
set of rules and regulations that regulate the day-to-day operations of the company. The
business must adhere to several rules and take into account the type of business it is forming.
The parties must reach a mutual agreement while considering each other's consent.
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References
Books and Journals
Huang, L., 2018. From benign unconstitutionality to delegated legislation: Analysis on the
ways for legal reform of china rural collective construction land circulation. Habitat
International, 74, pp.36-47.
Merryman and et. al., 2020. The civil law tradition. Stanford University Press.
Mohammed and et. al., 2017. Financial crisis, legal origin, economic status and multi-bank
performance indicators. Journal of Applied Accounting Research.
Moroni and et. al., 2020. Simple planning rules for complex urban problems: Toward legal
certainty for spatial flexibility. Journal of Planning Education and Research, 40(3),
pp.320-331.
Parker Jr, L.V., 2019. Corporate and Business Law. U. Rich. L. Rev., 54, p.73.
Sarah, R. and Vida, A., 2020. Business law. Pearson.
Singh, S.K., 2020. Alternative Dispute Resolution: Concept and Prospect. Nature. 9(2).
Waters, B., 2018. Brown & Marriott's ADR: principles & practice. Sweet & Maxwell.
Lee and et. al., 2017, August. Legal consideration on the use of artificial intelligence
technology and self-regulation in financial sector: focused on robo-advisors.
In International Workshop on Information Security Applications (pp. 323-335).
Springer, Cham.
Chang, W., 2020. 9. Legal Education in Ch'ing China. In Education and Society in Late
Imperial China, 1600–1900 (pp. 292-339). University of California Press.
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