Business Law BMP4002: Report on the Legal Context for UK Organisations

This report provides an overview of the legal context for business organizations in the UK, focusing on key sources of law such as the Companies Act 2006 and the Partnership Act 1890. It elaborates on various business forms, including sole proprietorships, general partnerships, partnerships, and li...Read More

Business Management
BMP4002 Business Law
Assessment 2
Report describing the key sources of
laws as the legal context for business
organisations in the UK
1

Contents
Table of Contents
Introduction ...............................................................................................................................2
Businesses & Organizations in the UK........................................................................................3
The legal business structure of UK companies..........................................................................3
Recommendations for IOM Solutions........................................................................................6
Conclusion..................................................................................................................................6
REFERENCES...............................................................................................................................7
Introduction
Business law which is also referred as the mercantile and commercial laws is a body
which regulates and manages the affairs of the businesses which are prevailing in the country.
Both the private and public entities comes under the ambit of these laws. The said regulations
are the major source which states the rights, responsibilities and duties which an individual as
well as the companies are required to comply with. Moreover, the acts also specifies the
various provisions regarding the various forms of business which are available at the option
of the party such as partnership, limited liability, sole proprietorship, etc. Further, this report
is going to elaborate the various business forms with their different aspects such as
advantages,disadvantages and legal implications. It also states recommendation for the Sam
for his business of IOM solutions, where one wishes to explore the available options with a
view to expand his business(Birinci, Berezina and Cobanoglu, 2018).
2

Businesses & Organizations in the UK
Some of the major legislation's in the country which look after the affairs of the
business are of Companies, Employment and Contract laws. All these laws works in
coordination to each other as every business activity comprises of different elements starting
from its formation to its working which also involves the engagement of the employees to the
agreement which the company enter into. The Companies Act of 2006 of United Kingdom, is
the one which provides the ways in which the company need to registered ion order to state
its legal existence. Also the process of incorporation and on later stage its dissolution are
governed by these laws. Moreover, the companies are also entitled to have benefits of certain
status and titles depending on their types. Such as the companies of limited liability nature
enjoys the status of separate legal entity, where bot the company and its members are
considered as an single entity and are evaluated accordingly. Similarly, the other being the
perpetual succession, is the concept which prevails where the existence of any company can
be continued even after the death or ceasing of the partners. The affairs of every organization
are to carried on in accordance of the two major documents which are the memorandum of
association and article of association(Cameron and Danson, 2018). These comprises of all the
information related to business including its type, the products in which it will deal, the ratios
of distribution of the partners, its registered office, etc. other than the company itself, its
directors can also be held liable for their negligent acts. The one needs to follow the
consequences if acts are of such nature which are done while exceeding their given
authorities, which is acts done in ultrvires.
Moreover, the Partnership Act of 1890 is the legislation which is responsible for governing
the affairs of the partnership firms.
The legal business structure of UK companies
Each form of business in accordance to their types in which they are dealing, are
entitled to certain merits, demerits, duties and legal implications. So in order to decide or
choose the best form for their business one needs to have an appropriate knowledge regarding
the earlier mentioned aspects. Therefore, for the given case scenario of Sam who is looking
for an appropriate form for expanding his existing business of IOM solutions. Moreover, as
every business in order to ensure the security and success, needs to comply with the
provisions of concerned legislation's therefore, Sam must also know that which business form
can attain maximum flexibility and benefits from theses legislation's(Cribb, Miller and Pope,
2019). So based on these aspects the forms of businesses are as follows-
3

Sole Trader
The form of sole trader in many places is also addressed as the Sole proprietorship or
single ownership. In this,the proprietor is the only person who is held responsible for
carrying, managing and controlling the affairs of the business. Sole proprietorship is
considered as one of the most simplest form of business in the country and has been opted by
many of the individuals for their said arrangements. Some of the major advantages of this
form are, the owner enjoys the sole control over the business, as affairs are managed by one
single person so there stands no concern of privacy, the acquisition of required capital is an
easy task and can be managed easily. Also one of the most important benefit is of the
retainment of all the profits with the owner themselves. Moreover, in this form, there lies
minimum requirements with respect to the incorporation and dissolution of the company.
Also there stands no such requirement of mandatory registration with the house of companies
in order to mark its legal existence. The disadvantage of this form are, the very first being
the unlimited liability of the owners(Ghosh, Baig and Goyal, 2020). Also there arises a lot of
issues with respect to the effective management and control of the business as for one person
it can become a tedious and complex task to take care of everything at the same time. As the
traders of this form does not enjoy the status of separate legal entity, the proprietors at the
time of settling the debts can also be held personally liable which means that there personal
assets can also be use for settling the debts of the business. For the part of legal implication,
the traders are obliged to pay the tax assessment on a timely basis out of the total generated
earnings of the business and in case of fault for non payments are also liable to face the
consequences as per the specified regulations.
General Partnership
This form of business is similar to that of the partnership firm the only difference
which lies is that the former is of more informal nature whereas the other one comprises of a
formal agreement which is addressed as the partnership deed. It is an arrangement whi9ch
takes place between two or more people who comes together to attain certain common
objectives. Here the arrangements can also be entered with an verbal agreements between the
parties and hence there stands no such requirement of its compulsory registration with the
companies house. The concerned parties are addressed as the partners of the business and are
bound to act in the capacity of co-owners in an equal manner(Jeznach, 2021). The liabilities
of the members of this form are of unlimited nature and share both the profits and losses in
equal proportions. As similar to that of the sole proprietorship the partners are bound to settle
4

the debts of the business out of their personal belongings if there stands a case where the
creditors are not fully paid out of the business assets. Some of the advantages of this form are,
with the involvement of more number of members the operations and management of the
business can be managed easily. The occurred liabilities are share in the equal share among
the partners. The disadvantages can be of the loss of autonomy, where rather than having the
sole control of one person, it lies in the hands of all the existing partners. Moreover, the
process of formation and its registration asks minimal requisites which one needs to comply
with. Further, the tax assessments has to be paid by the partners on their share of revenues
which has been rendered out of the business.
Partnership
One of the major legislation which states provisions specifically regarding the
workings and conduct of this form is the Partnership Act of 1890. Being similar to that of the
general partnership it is an arrangement where two parties or more than that comes together
with an aim to run a business(Mancuso, 2019). The formation of a partnership deed is a
mandatory requirement, which comprises of all the minute details of the arrangement. The
affairs of the business are carried in a proportionate manner by all the concerned owners of
the business and similarly all can be held responsible on behalf of the business. Also whether
the acts needs to be carried out by any one of the partners or all of them together, the
ascertainment of this lies totally on the partners. This form has an advantage that the one need
not to bear all the liabilities as they are divided in equal ratios. Also as there lies the cluster of
different individuals each having different skills and talent the management of the business
can become an easy task. Further, the chances of conflict can be a disadvantage for this form
as the conflict can arise with respect to the choice of ideas or the process of decision making
among the partners. In partnership firm, the tax assessments are to be paid by the partners on
their part of income only as there exists no title of separate legal entity.
Limited Liability
This form of business is considered as the combination of corporate and
partnership companies. The limited liability company consists the features of both the
before mentioned types(Simkovic, 2018). The formation of company can be take
placed when two or more individuals collaborates with each other with an aim of
5

earning profits with the help of a business. Here, every person who acts in the
capacity of a partner need to invest certain amount of capital and because of this
reason their liabilities are also limited to the ratio of their share of capital. The
members of the company, if there stands a case where the assets of the company
are unable to pay the creditors, are not liable to settle the same out of their personal
assets reason being both the company and its partners enjoys the status of separate
legal entity. The perks of this type is that the members are not bound to use their
personal assets for the interest of the business. The disadvantage can be that, there
lies number of formalities which ultimately requires more expenses and time. Further,
with respect to the legal implications of company having limited liability form, both the
members and the company are required to pay the taxes in their individual capacity.
Also the form requires various formalities regarding the incorporation and dissolution
of the company.
Recommendations for IOM Solutions
Sam being the sole owner of his company named IOM solutions, which deals
particularly in the electrical parts. Sam now wishes to expand his existing business which was
earlier being operated in the capacity of sole trader and is seeking recommendation for the
same after exploring the various other forms of business. The business structure which this
report suggests to Sam is of the Partnership model. As it has been mentioned that he has been
facing issues with respect to the task of management while having more demands from the
market, so this form will help in engaging more members each possessing certain skills to
the company. Also this can help in fulfilling the demands of the customers while bifurcating
the work load and tasks among all the said partners. The said involvement will also help in
sharing the equal proportion of liabilities which in earlier case the burden was solely on th
head of one person(Tevosyan, Tevosyan and Kuzmina, 2018).
Conclusion
From the following report it can be summarized that business law is a subject which
comprises of the various provisions and regulations which are required to be abide by the
6

businesses. United Kingdom is a country which has its roots spread all over the world in
terms of trade and hence holds major stake in the global market. Further it concludes that
there lies various forms of business out of which one can opt for. After analyzing all the
forms along with their legal aspects, for the given case study of Sam the best recommended
form is of the Partnership.
REFERENCES
Birinci, H., Berezina, K. and Cobanoglu, C., 2018. Comparing customer perceptions of hotel
and peer-to-peer accommodation advantages and disadvantages. International
Journal of Contemporary Hospitality Management.
Cameron, G. and Danson, M., 2018. The European partnership model and the changing role
of regional development agencies: a regional development and organisation
perspective. In Governance, institutional change and regional development (pp. 11-
36). Routledge.
Cribb, J., Miller, H. and Pope, T., 2019. Who are business owners and what are they
doing? (No. R158). IFS Report.
Ghosh, P.K., Baig, N. and Goyal, R.N., 2020. Unit-2 Forms of Business Organisation-I.
IGNOU.
Jeznach, A., 2021. The Business Valuation based on XYZ Limited Liability
Company (Doctoral dissertation, Kolegium Nauk Ekonomicznych i Społecznych w
Płocku).
Mancuso, A., 2019. Your limited liability company: an operating manual. Nolo.
Simkovic, M., 2018. Limited Liability and the Known Unknown. Duke LJ. 68. p.275.
Tevosyan, A.T., Tevosyan, M.T. and Kuzmina, V.V., 2018. SMALL BUSINESS
NOWADAYS. In Современный взгляд на будущее управленческой науки (pp.
126-128).
7