BSc Business Management: BMP4002 Business Law Assessment 2 Report

This report, submitted for a Business Law assessment, analyzes the legal context for business organizations in the UK. It begins with an introduction to business organizations, differentiating between profit and non-profit entities and outlining various legal structures like sole proprietorships, partnerships, and limited liability partnerships. The report then delves into the specifics of UK company law, including the roles and responsibilities of directors, and the essential documents for company formation, such as the Memorandum and Articles of Association. It provides a detailed examination of different business structures, including sole trader, general partnership, partnership, and limited liability partnerships, outlining their respective advantages and disadvantages. The report concludes with a recommendation for IOM Solutions, suggesting a limited liability partnership structure, and a partnership as a suitable option, considering the balance between operational flexibility, limited liability, and legal compliance. The report also offers insights into the termination of partnerships and the importance of legal compliance.

BSc (Hons) Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of
laws as the legal context for business
organisations in the UK
Contents
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Introduction
Business organization is an entity formed for the purpose of carrying an economical
and commercial activities which is governed by the law and statutory regulations
where the business is situated. There are two types of organization one is the non
profit organization where the main aim to serve the society and other one is the
profit organizations where the main aim is to satisfy its customers and earn profit.
There are different types of organization such as sole proprietorship, partnership
and limited liabilities partnership. The choice of organization depends on the
businessman and the purpose for which it is formed.(Beatty, Samuelson, and Abril,
2022). In this particular report an analysis of a UK based company is done which
includes the formation and law compliance in the UK for business and organization,
different types of organizations based on legal structures, in the last a
recommendation about the most suitable legal structure which is best for the
business.
Businesses & Organizations in the UK
A company is a separate legal entity distinct from its members who formed it, it is an
artificial legal person which is capable of undertaking or acquire any property in its
own name,it can sue and being sued, perpetual succession and limited liability of its
members towards the debt of the company. The management includes its owners
which are the shareholders and the directors who manages the company affairs.
These individual are responsible for conducting meeting to pass any decision with
the consent of all the members of the company. The directors are responsible for
managing the different transaction of the business which means dealing with
different members and their issues and various other transactions with the outsiders
as company being an artificial person cannot perform on its own so it manages the
various company affairs through directors. In case where there is any negligence
arises due to mismanagement which results into financial looses to for which the
company became liable for all the the debts and liability arises as the liability of the
company is of its own it cannot impose it on any other members.(Chaffey,
Edmundson-Bird, and Hemphill, 2019)
Directors is responsible for managing and controlling the affairs of the company they
are responsible for decisions, direct actions towards goals to achieve profitability and
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to protect interest of the shareholders they are very crucial for the success of the
organization .They act as agent, employee, officers and trustees of the company.
The rights of the directors include inspection of books of accounts, to receive notices
of board meetings, to vote and participate in board meetings, to inspect the board
meeting minute books and many other rights. The liabilities of directors comply with
SEBI guidelines,managing excess and refunds of application money, be held
accountable if the majority consent on something these are some of the liabilities of
directors.(Chinmulgund, and Tapas, 2020)
Partnership is the association of two or more person where they agreed to share the
profit of the business which is carried on by all or any of them. It is created with
mutual agreement between the partners with a particular purpose. The termination of
the partnership can happen due to many reasons as such voluntary dissolution by
the partners, completion of the purpose for which it is being formed, termination on
the order of the court, resignation by any partner by giving a written notice to all
other partners,in case of death and insolvency these are all the causes of the
termination of the partnership.
A company is a legal entity separate from its members so it have documents that
shows the scope, objectives,rules and management of the company. Memorandum
of association is an document that regulates the external functioning of the company
defining the clauses regarding name,capital,liability,object,situation of an
organisation. Article of association are the internal rules and regulations of a
company known as the constitution of company. These are the essential document
for the proper functioning of the company as they are the internal rules and
regulations which is required for internal management of company.(Hu, Cui, and
Aulakh, 2019).
The legal business structure of UK companies
Sole Trader
It is a type of business form where a single person owned and run the whole
business he solely is responsible for all the liabilities of the business entity, he is the
only owner of the business and have unlimited liability .It is one of the easy business
structure to established in terms of compliance, registration process.
ADVANTAGES
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 LESS COMPLIANCE: It is one of the business form which are easy to
established in terms of compliance as a single person is responsible to
conduct all the business affairs
 FLEXIBILITY: It is easy to operate as a single person is responsible for the
management of the business, business affairs, there is no interference of any
other person as the single person is the sole owner of the business he need
to take any advice .
 NO SHARING IN THE PROFITS: It is the single owner who is taking care of
all the debts and the liabilities hence is the only one to have all the profits
there is no sharing in that.(Lubben, S.J., 2018)
DISADVANTAGES
 UNLIMITED LIABILITY: The liability whether internal or external are on the
same person he is responsibility to pay of all the the debts of the business he
cannot put and share the burden of liabilities with any other person as he is
the owner of the whole business entity.
 DIFFICULTY IN RAISING CAPITAL : As a single person it becomes difficult
for the company to raise funding and capital for the purpose of investment in
the business for the outside sources.
 WORK PRESSURE: As there is single person who runs the whole and he is
responsible for all the compliance which ultimately imposes a lot of burden on
the owner as he had a lot of pressure of work.
General partnership
General partnership is similar to the partnership as it is also association of two or
more persons who have come together to run an organization and share profits and
looses of the business. The procedure, rules and regulations and compliance are
similar to that of partnership. It have the same advantages and disadvantages which
partnership business possess.
Partnership
Partnership is form of business entity where two or more person agreed to share the
profit of any business which is carried on by all any any of them. It is a form of
business which may be established for a particular purpose or at will and can be
dissolved at the consent of all the partners and all the partners are responsible for
the conduct of business operation together and share all of its debts or losses in the
ratio of their share of their capital contributed. They are being governed by
partnership deed and in absence of it the
partnership act rules and regulations.
ADVANTAGES
 EASE TO RAISE CAPITAL: It is association of two or more persons which
enables the firm to raise capital easily as all of them contributes capital in the
business and for raising capital we can admit a new partner.
 SHARING OF RISK: The risk and losses of the firm are distributed between
all the partners so the liability of the individual are in accordance with the
capital contributed.
 QUICK DECISION MAKING: It is easy to take any decisions on any particular
issue due to less strict policies and procedures.
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DISADVANTAGES
 RESTRICTION ON TRANSFERABILITY OF SHARES:A partner cannot
transfer its share to any other partner without the consent of all the other
partners which restricts an individual right.
 PERPECTUAL SUCCESSION: A partner is being dissolved on the death,
resignation and insanity of any partner hence it lack the feature of perceptual
succession it cannot go on if any of the partners goes and comes in the
organization it needs to dissolve itself in that case.
 UNLIMITED LIABILITY: The liability of the partners are unlimited in
partnership which implies that they are responsible for all the debts of the
company even from their personal property.(Venturelli, and et.al., 2018)
Limited Liability
It is a separate legal entity having limited liability of its members that means partners
are liable up to the amount of capital contributed by its members and flexibility in its
operation as like partnership it have benefits of both partnership and company.
There is no liability on the minimum contribution by the partners. It has a moderate
amount of compliance required for the registration of LLP and low registration cost
for its formation.
ADVANTAGES
 NON REQUIREMENTS OF AUDIT: It is not compulsory for limited liability
partnership to conduct audit up to a certain limit ,hence it is the will of the
partners whether they want to conduct audit or not.
 TAX COMPLIANCE: LLP is not liable to pay tax on the income, profits and
share of its partners. Hence there is no compliance of LLP for filling income
tax return.
 NO LIMITS FOR OWNERS: The LLP can have any amount of owners in their
business there is no maximum limits in the business like partnership have a
limit of 200 members.(Wilson, S., 2018)
DISADVANTAGES
 FINANCIAL DISCLOSURE TO PUBLIC: It is mandatory for the LLP to
disclose all of its financial regarding its partners and related matters to the
public at large which includes the stakeholders and the persons holding
interest in our company but sometimes it is not preferable and by some of the
other partners.
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 REQUIRE MINIMUM TWO PARTNERS: It is compulsory for every LLP to
have at least two partners for the commencement of the business it cannot be
less than that hence it will be difficult for the person to commence the
operation without addition of any other partner.
 LIABLE FOR PENALTY FOR NON COMPLIANCE : Even if there is no such
transaction in a year the LLP is required to file its income tax return to the
income tax authority every year.
Recommendations for IOM Solutions
After looking at all the types of business organizations and their process and legal
compliance required for every type of organization it is advisable for the IOM to
expand its business in the form of limited liability partnership as contain benefits of
both partnership which allows flexibility in its operation and less stringent terms and
policies which will help the owner to make any changes that are required without any
hassle and limited liability of its partners as of corporate entity which reduces the
burden of paying debts more than their share in the capital contributed. It is also
recommended to that company to expand its business operations in the form of
partnership as there are very less legal compliance's which is an advantage for a
new company to start with and also the low cost of registration which is good to save
rather than the long and costly procedure of registration. The partnership are
governed by the rules and regulations which are being discussed with the consent of
all the other partners which is beneficial to implement them in the company. Hence it
is the choice to choose one from both of them which ever they feel suitable.
(Zouridakis, 2019)
Conclusion
From the above report it is concluded that business organization differ from its
nature and management which depends on the type of organization it is as different
organization have differences in its operations and compliance. This report provides
the various business transactions and business liability which arises on the
negligence by the management, about the role, duty and liability of directors and
reasons for the termination of partnerships and the essential document of every
company that is AOA and MOA. Also discussed about the different types of business
organization and their advantages and disadvantages which includes sole trader,
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partnership and limited liability partnership and in the end a recommendation for the
type of business organization suitable for IOM to expand its business operation.
References
Beatty, J.F., Samuelson, S.S. and Abril, P., 2022.Introduction to Business Law. Cengage
Learning.
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Chaffey, D., Edmundson-Bird, D. and Hemphill, T., 2019.Digital business and e-commerce
management. Pearson UK.
Chinmulgund, A. and Tapas, P., 2020. Business sustainability and the role of hr in an
organisation. Indian Journal of Ecology, 47(spl), pp.31-41.
Hu, H.W., Cui, L. and Aulakh, P.S., 2019. State capitalism and performance persistence of
business group-affiliated firms: A comparative study of China and India. Journal of
International Business Studies, 50(2), pp.193-222.
Lubben, S.J., 2018. The Law of Failure: A Tour Through the Wilds of American Business
Insolvency Law. Cambridge University Press.
Venturelli, and et.al., 2018. The state of art of corporate social disclosure before the
introduction of non-financial reporting directive: A cross country analysis. Social
responsibility journal.
Wilson, S., 2018. A framework for security technology cohesion in the era of the
GDPR. Computer Fraud & Security,2018(12), pp.8-11.
Zouridakis, G., 2019. Shareholder Protection Reconsidered: Derivative Action in the UK,
Germany and Greece. Routledge.
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