Legal Analysis of UK Business Structures and Recommendations for IOM

This report provides a comprehensive overview of business law and various business structures prevalent in the UK, including sole proprietorships, general partnerships, limited partnerships, and limited liability partnerships. It examines the legal aspects of each structure, including vicarious liability, directors' duties, and the significance of the Memorandum and Articles of Association. The report includes a case study of IOM Solutions, a sole trade business seeking to expand, and recommends transitioning to a limited liability partnership (LLP) to facilitate growth and attract investors. The analysis concludes that business law is essential for regulating business activities and that the LLP structure is the most suitable option for IOM Solutions' expansion plans. Desklib provides access to this and other solved assignments for students.

Business law

Table of Contents
INTRODUCTION ..........................................................................................................................2
TASK ..............................................................................................................................................3
Business&Organisations in the UK............................................................................................3
The legal business structure of UK companies..........................................................................4
Recommendations for IOM Solutions. ......................................................................................7
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Business law is a consolidated set of legislation which together covers operations of
business organisation and its operations. Business law includes substantial and procedural law in
which rights and liabilities of parties are determined and in procedural law procedure relating to
business commencement, incorporation, winding up, resolving disputes in courts and other
miscellaneous provisions of businesses. The gist of a business law is to establish relationship
between employer and employee and to promote and regulate business in an ethical manner. In a
business organisation, an employer is the head of a business who regulates overall structure and
employees are the faculties which keeps the business operative (Collinson and et.al., 2020). All
these business operations and activities requires certain level of command to prevent misconduct
or any sort of problems at workplace (Knapp 2020.). Law is essential for ruling business
activities, because without rules and regulations no business can survive. There are various Acts,
legislation and laws made applicable on business activities and their application extend within
the territories of United kingdom. This report will cover various types of potential business
structure which are prevailing in UK along with their nature and management. Further, this
report will highlight on types of business management, vicarious liability, duties of directors,
termination of partnership, Memorandum of Association and Article of Association and the
legality of a business structure. A Sole trade company is taken to support this report which the
owner of such company is seeking potential business option in order to expand current business
structure. The report will demonstrate different business alternatives which IOM solutions can
choose to expand its sole trade business structure.
TASK
Business&Organisations in the UK
Businesses are organised to generate profits and to meet the demands of the people.
Business includes activities like purchasing of raw materials and machineries, manufacturing and
production of goods, distribution and many more. These activities of a business enables to
identify the nature of business in which they deal. Business usually deals with goods and services
and commercialize their products in market. The success of a business de[ends on many factors
like, quality of its product and services, marketing and reputation of a company.

Every company has a management which manage and controls the business activities. A
management is a collection of people employed to maintain the functionality of a business.
Management helps in establishing the relationship between employer and employee to create and
maintain coordination between business faculties. A business organisation is a set of different
departments which are given tasks accordingly. Management of a business includes, Human
resources management, marketing department, production and manufacturing department etc. a
company has a separate legal identity in the eyes of law and it is controlled and managed by its
directors, promoters, and other executives who are authorised to take decisions for a company
(Hunt Sarkar and Warhurst2022).
As per the principle of a company law which is commonly known as vicarious liability, wherein
an employer is made liable for the misconduct of a third person. Where a person who is an agent,
contractor or any other employee of a company commits any misconduct or negligence the
employer in such case is accountable for the conduct of such person.
There is a famous case in which a landmark judgement was passed and introduced the
principle of separate legal entity. The name of the case is Solomon versus Solomon&Co. Ltd.
1897, in this case the rule of separate legal identity of a company was legalised. According to
this rule, a company is completely separated from its holders. Company is a legal body, which is
created by law and given a separate status which makes a company different from its owners
(Gasparin and et.al 2021). The rights and liabilities of owners and their company is different and
separate.
Directors play important role in functioning the company and to take essential decision of
a company. Directors are the entity who are responsible for the companies status and
performance. Directors are required to make ensure that the management of company is doing
well and established coordination with the employees. A director must remain neural and act as
a prudent person while making a decisions or deciding a matter. He must remain honest and
unbiased.
Partnership is a formation of business wherein, two or more persons forms a partnership
in an agreement to carry out a business jointly and share profits and liabilities in a partnership.
Partnership is regulated by Partnership Act 1890. The application of Partnership Act 1890
extents throughout the territories of the United Kingdom. Partnership are of different types such
as, General Partnership, Limited partnership and limited liability partnership (Stauffer 2018).

A company requires objectives for its formation which contains the goals and targets of a
company, such objective resolutions are famously known as Memorandum of Association and
Article of Association. Memorandum of association is a legal documents of a company which is
prepared at the time of incorporation of a company. It is mandatory to draft Memorandum of
association without it no company can be incorporated. There is another documents which
mention the roles and rules of internal management of a company which is called Article of
association.
The legal business structure of UK companies
Sole Trader
A sole trade company which is also known as a sole proprietorship, is a simple form of
business structure which requires less capital for its inception. Such businesses are generally
small in size , electricians, plumbers, hairdressers,butchers etc. are operate their business as sole
trader. A sole trader is a single person who owns the entire business and entitled to keep profits
all the profits arise from business after deduction like tax, insurance, loan etc. A sole trader is
also liable for the loss occurred during the course of business (Vilakazi Stainbank and
Nyide2020).
Advantages of sole trader
 Complete ownership : sole trader is a self employed person and has has absolute and
complete ownership over the business. Such traders work for their own and set their own
rules and regulations.
 Entitled for all profits: A sole trader is entitled and enjoys all the profits from business.
There is no other shareholders in a sole trade business to share profits. Sole trader mostly
works alone and they keep costs very less and maximise the profits. A sole trader can
also retain ownership of business assets.
 Less barrier to entry and costs : A sole trader does not have to pay fees to Companies
House. For its formation, no legal details, documents or registration is required.
Disadvantages of sole trader
 Unlimited Liability: A sole trade company, does not recognised as a separate legal
entity, the owner therefore is liable for all the liabilities and debts.

 Limited tax benefit schemes: A sole trader has the tax free personal income to some
extent, beyond such exemptions a sole trader has to pay income tax at the rate of 20
percent. A sole trader has less flexibility in terms of tax.
 Marketing and Credibility: There is high risk of loss in sole trade business because of
its unregistered status. Most business deals only take place between businesses who are
incorporated.
General partnership
It is a form of business which demands at least two members to create a partnership.
Partnership is legally recognised and the formation of it is made on an agreement between
partners to carry out business activities and sharing of profits and losses (Thomas Dixon and
Hullis2020).
Advantages of General Partnership
 Easy to Establish: it is relatively easy to establish partnership because of less paperwork.
 Simplified tax system: the other benefit of it is that it offers simplified tax filing.
Disadvantages of General Partnership
 No rule of separate business entity : it does not establish separate business entity
among its partners due to lack of corporate composition.
 Unprotected personal Assets : At times of loss the personal assets of partners are
unprotected, such assets can be seized to cover obligations of a firm.
Partnership
It is another from of partnership wherein, an agreement is made between two or more
persons to form a partnership with the view to start a business. In this the partners has an
unlimited liability. Partnerships are required to get register with HM revenue and customs to
obtain legal status. Partners pay tax individually on income from business (Solomon 2020).
Advantages of Partnership
 Flexibility: Minimum legal formalities and free alterations in capital or business size
makes a partnership more flexible.
 Risk Sharing: Due to lot partners, there is an agreement to share profits and losses in
partnership, in the same way risk is also shared between partners.
Disadvantages of partnership

 Unlimited liability: The liability in partnership is not limited, all the partners are
required to share responsibility for the losses and debts which might occur in business.
 Blocking of Capital: there is a restriction of withdrawing wealth from the firm, without
the permission of all the partners no individual partner can withdraw wealth.
Limited liability Partnership
It is an arrangement to form a corporate association of partners with the status of a
separate legal entity. Limited liability is a hybrid version of partnership. Like other partnerships,
limited liability partnership is governed by Limited Liability Partnership Regulation Act, 2001.
Advantages of Limited Liability Partnership
 Separate legal entity: limited liability partnership is legally separate from its partners in
the same like a company which is separate from its shareholders. This benefits LLP to
make connection and network with other entities. It has an perpetual existence and cannot
be wound up (Ireland 2018).
 Limited liability: The partners are for any loss in the course of business. The liability is
partners is limited to the extent of their contribution only.
Disadvantages of Limited Liability partnership
 Public disclosure: The documents, financial records are not available for public
inspection.
 Limited Funding : There are very limited options to raise funds. The funds can be raised
either by financial institutions or through loan from the partners.
Recommendations for IOM Solutions.
Considering the present status and situation of an IOM solutions, it is recommended to
IOM solutions to incorporate their company in limited liability partnership. IOM solutions is a
sole trade business and functioning for almost eight yeas successfully. The owner of IOM
solution is looking for business expansion due to market demands and business functions.
Limited liability is an appropriate business structure for IOM solutions because, it will bring
many opportunities for business growth . The advantages of limited liability partnership firm is
that it will reduce the mental and work pressure of Sam and help in bringing potential investor in
the company.

CONCLUSION
From the above report it can be concluded that, business law is very essential to regulate
and govern the structure of business organisation and their activities. Business law establish the
relationship between an employer and employee and create coordination between them for
creating healthy business environment at workplace. There are various types of business law
such as, contract law, partnership law, insolvency law, anti-trust law etc. are the part of corporate
law. Business law permits businesses to establish business as per the nature and type of a
business. There are several business structure which are recognised by business law and
prevailing in United Kingdom, such as sole trade, partnership, limited liability partnership etc.
Further, a recommendation is made to the IOM solutions who deals in the business of electric
parts and seeks to expand their business by adopting different appropriate and potential business
structure. Therefore, the recommendation made to an IOM solutions is to opt for the Limited
Liability Partnership which is best and appropriate for the IOM solutions to expand their
business.

REFERENCES
Books and Journals
Gasparin, M.,and et.al., 2021. Business as unusual: A business model for social
innovation. Journal of Business Research, 125, pp.698-709.
Hunt, W., Sarkar, S. and Warhurst, C., 2022. Measuring the impact of AI on jobs at the
organization level: Lessons from a survey of UK business leaders. Research
Policy, 51(2), p.104425.
Ireland, P., 2018. Efficiency or Power-The Riser of the Shareholder-Oriented Joint Stock
Corporation. Ind. J. Global Legal Stud., 25, p.291.
Knapp, V., 2020. UK and EU Company Law after Brexit. European Company and Financial Law
Review, 17(2), pp.184-199.
Solomon, J., 2020. Corporate governance and accountability. John Wiley & Sons.
Stauffer, H., 2018. Corporate Liability: An Alternative Path to Accountability?. In Drones and
Other Unmanned Weapons Systems under International Law (pp. 195-216). Brill
Nijhoff.
Thomas, K., Dixon, E. and Hullis, M., 2020. A case study: creating more–a partnership approach
to adapting to our changing coast. In Coastal Management 2019: Joining forces to shape
our future coasts (pp. 435-444). ICE Publishing.
Vilakazi, S.P., Stainbank, L.J. and Nyide, C.J., 2020. THE ADOPTION OF MANAGEMENT
ACCOUNTING PRACTICES BY SMALL AND MEDIUM CLOTHING AND
TEXTILE ENTITIES IN AN EMERGING MARKET. Journal of Management
Information & Decision Sciences, 23.