BSc (Hons) Business Law: UK Business Structures Report BMP4002

This report, prepared for the BSc (Hons) Business Management course, module BMP4002, delves into the key sources of law within the UK business context, focusing on various business structures. It begins with an introduction to business law, categorizing it into substantial and procedural aspects and highlighting its role in establishing legal relationships and promoting ethical business practices. The report then explores different types of business structures prevalent in the UK, including sole trader, general partnership, limited partnership, and limited liability partnerships, detailing their advantages and disadvantages. It analyzes the legal business structures, emphasizing the importance of legal entities, the roles of directors, and the regulations governing partnerships. The report concludes with a recommendation for IOM Solutions, a sole proprietorship dealing in electric parts, suggesting a partnership structure to facilitate business expansion, given its ease of formation and potential benefits in terms of investment, expertise, and reduced operational pressure. The report references books and journals to support its analysis and recommendations.

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
Submitted by:
Name:
ID:
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Contents
Table of Contents
ntroductionI .................................................................................................................................2
usinesses rganizations in theB & O UK.....................................................................................3
he legal business structure of companiesT UK ......................................................................4
Recommendations for M SolutionsIO ........................................................................................7
Conclusion..................................................................................................................................8
R R C SEFE EN E ...............................................................................................................................9
ooks and ournalsB J .....................................................................................................................9
Introduction
Business law is the collection of various legislation and Acts which together
covers the business organization in the United Kingdom. Business law can be
categorized into two forms, the first one is substantial business law which determines
the rights and liabilities of a business and its faculties, the other is procedural law,
which provides provisions relating business conduct and its outcomes and other,
miscellaneous provisions. The purpose of the business law is establish legal
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relationship between employer and employee and maintain coordination between
employer and employees (Oxford Analytica, 2019). Business law also promotes
business and it offers different types of business structure with an individual can opt
to start business. It is indeed important that law is essential for ruling the business
activities in an ethical manner. There are several Acts and legislation made in this
behalf to bring the business activities within the purview of law to bring transparency
in business organizations. This report will cover the different types of business
structure and their nature along with their advantages and disadvantages in order to
recommend the IOM solutions fro appropriate business structure which they seek to
expand their business. IOM solutions is a sole trade proprietorship, which deals in
the electric parts. The owner of the IOM solutions is looking forward to expand
business due to continue grow of business in terms of demands and employees.
Businesses & Organizations in the UK
A business is an arrangement of various activities to crate an entity which
engaged in commercial , professional or industrial activities. A business is a regular
activity which manufacture goods or services to meet the demands of a customer.
The main purpose of a business is to to create huge revenue by fulfilling the
demands and desires of customers. The nature of a business can be ascertain by
tracking its product or services along with the objectives of a company. The nature of
the company reflects its business challenges in market.
To organize a company in a well manner, an effective management is
required which is divided into different units such as, Human resource management,
marketing management, production and manufacturing department, selling and
distribution department etc. A management of a company is a collection of people
who are employed to execute company's task (Themistocleous 2019). The other
important persons in a business are its promoters, directors, stakeholders. Managers
and other bodies which take important decision for the business in order to attain the
goals of a company .
UK has made many legislation on business law which supplement to each
other to resolve any dispute in business. These laws are known as commercial laws
which are made applicable throughout the territories of the United Kingdom . Such
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legislation are, contract law, employment law, insolvency law, tax law and many
more which contains range of provisions to manage and control business activities.
A business is a giant structure which is regulated by the living persons. where
a person associated with a business in any capacity commits a misconduct or
negligence which results into loss of company's reputation and crates an obligations.
In such cases employer is made liable for such misconduct and negligence of the
third party. Such person can be an agent or a contractor or any other employee of a
company .
The other important rule of the company law is the separate legal entity,
which was propounded in a land mark judgment in the case of Solomon versus
Solomon&Co. Ltd. 1897. In this case the separate legal status of a company was
allowed . As per this rule a company is completely separated from its owners. The
rights and obligations of a company and its owners is totally separated from each
other.
Directors of a company plays important role in making company's important
decisions. Directors of a company is duty bound to execute their role in an honest
way. A director of company is expected to remain neutral and discharge their roles
fairly and without getting biased in the interest of the company.
Among other business structures there is a partnership which is recognized under
the Partnership Act 1890 in the United Kingdom. A partnership is not a separate legal
entity. Minimum two members are required to form partnership. A partnership can be
terminated at any time either at the time of partner retirement or on death.
The Memorandum of Association and Article of Association are the charter of
a company. These are essential documents of a company without which a company
cannot be formed. Memorandum of association is the legal documents of a company
which is mandatory at the time of incorporation of a company. Whereas, the Article of
Associations are the internal rules of a company to regulate internal matters of a
company (Zhongming and et.al 2019).
The legal business structure of UK companies
Sole Trader
It is a sole proprietorship, a simplest form of business which requires less
investment to start sole trade company. Normally, the butchers, electricians operates
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sole trade business sole trade business is Small in size and can be manage by
single owner. The owner has the complete authority in sole trade who keep all the
profits of a business, in the same sole trader is liable for all the liabilities which may
occur during the course of business (Miller 2021).
Advantages of Sole trader
 It offers complete ownership and control over business.
 Owner is self employed and entitles to all the profits from business.
 Easy tax formalities as there is no corporation tax.
 More flexibility
 it offers maximum privacy in financial maters.
Disadvantages of sole trader
 Unlimited liability is imposed on owner in sole trade business.
 It offers very limited tax benefits schemes.
 There is high risk in loosing the credibility of a business due its unregistered
status.
 There are many limitations on sale.
 The owner is alone responsible and accountable for all the liabilities.
General Partnership
It is a type of business arrangement which consist of two or more members
mutually agrees on of an agreement to carry out a business and equally share all the
profits and losses. Minimum two members are required to form a partnership, the
Partnership Act of 1890 governs all types of partnership which exists with the
territories of the United Kingdom (Wu and Ruang 2021). A partnership business does
not fall under the category of Separate legal entity. Partners are individually liable for
tax obligations on the income form business. It is not considered as a separate legal
entity. Each member is obliged to pay tax as per
Advantages of General Partnership
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 Easy inception of a partnership firm, it requires less formalities and
paperwork.
 It offers simple process for tax filing.
 Partnership offers more than one owner which benefits the business.
 It is formed on an agreement which creates equal rights and obligations of
each partner.
Disadvantages of General Partnership
 There is a high probability in loosing partners personal assets.
 There is a limit on sharing profit in partnership among the partners.
 Partnership does not follow the rule of separate business entity.
 There are frequent disputes which takes place in partnership.
Partnership
It is also a type of partnership which consist of two or more members joins to
form a partnership on order to run a business by having equal distribution of profits
and loss, which means partners have unlimited personal liability towards the
business. Owners by way of partnership proportionally share profits earned from
business. Partners I a partnership can be of two types, permanent or limited partners
who contributes in business but do not take part in the operation of business
(Rosamond 2019). They individually have the same liability as the sole proprietors
have in business.
Advantages of Partnership
 Partnership bring potential source of capital for business expansion.
 It brings specialization by bringing people having diverse skills which enhance
the overall performance of a business.
 There is minimal tax filing criteria.
 It does not follow double taxation.
Disadvantages of Partnership
 Partnership comes with a unlimited personal liability.
 Partnership disagreement
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 there is abrupt dissolution of a partnership firm on the death or insolvency of
partner, which directly hampers the business.
 The rule of separate legal entity does not applicable in partnership.
Limited Liability
It is a most famous from of business organization which has become very
famous among the entrepreneurs, it is a hybrid form of business structure which
gives benefits of a private limited company. To form a limited liability partnership at
least two partners are required for its incorporation. There is an limited liability
Agreement which specifies rights and duties of partners and objectives of the
Limited Liability Partnership Agreement. Each partners are required to pay tax
individually on the income from business (Bennett,and et.al 2019). The directors or
stakeholders of a company are not directly made liable for the company's liabilities,
the partners are responsible to the extent of their contribution in the company. In a
case when a limited liability is dissolving, the debtors or lenders may take needful
action for restoring the legal status of a company for the outstanding dues.
Advantages of limited liability
 the foremost advantage is the partners have limited liability, which reduced
the apprehension of loosing personal wealth from the claims of lenders.
 There is more internal flexibility, it facilitates participation in the management
of the company.
 There is an option for extra remuneration for partners.
 It brings investors to invest in the firm for business enlargement.
 Separate legal identity which makes partnership distant from its partners.
Disadvantages of Limited liability
 Limited liability partnership agreement is must to avoid default provisions.
 There is lack of privacy issues, the information relating to financial must be
disclosed normally.
 It requires high fees for its incorporation with Companies house.
 Compulsory tax assessment which needs to submit to HMC.
 It is compulsory to maintain all the records and registers of the company for
inspection.
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Recommendations for IOM Solutions
From the report and considering the status and requirements of IOM
solutions, it is recommended them to opt for the partnership which is easy to form
with less complexities. Going ahead with partnership will bring lot of potential
changes in the business including investment and expertise and skilled people.
Partnership will further, reduced the pressure of running business alone, Sam is a
sole trader and has successfully run business for eight years. For business
expansion it is necessary to change the structure of present business and
incorporate an appropriate and suitable business structure. Therefore, it is
recommended to IOM solutions to go with the partnership.
Conclusion
From the above report, it is evident to conclude that, a business law is most
essential to formalize the business organizations and their activities. Business law
set standards for doing business by offering different types of business structure. The
intention of business law is to promote and regulate business in a more professional
way. In this report various types of potential business structure prevailing in United
Kingdom, along with their advantages and disadvantages are explained in order to
provide relevant and appropriate recommendation to IOM solutions, which is a Sole
trade company and wants to expand their business in terms of demands and
employees. Therefore, an option of partnership is recommended to IOM solutions
which fits best to their business profile considering the present status and
requirement .
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REFERENCES
Books and Journals
Bennett, R.J.,and et.al.,2019. The age of entrepreneurship: Business proprietors, self-
employment and corporations since 1851. Routledge.
Miller, P.B., 2021. Corporate personality, purpose, and liability. In Research Handbook on
Corporate Purpose and Personhood (pp. 222-239). Edward Elgar Publishing.
Oxford Analytica, 2019. Future of business in UK territories is uncertain. Emerald Expert
Briefings, (oxan-db).
Rosamond, B., 2019. Brexit and the politics of UK growth models. New political
economy, 24(3), pp.408-421.
Themistocleous, C., 2019. Employment status in the UK: implications for business
owners. Journal of Aesthetic Nursing, 8(2), pp.92-94.
Wu, C. and Ruang, H., 2021, July. A Research on the Influence of Directors' Turnover on the
Financial Performance of Listed Companies. In 2021 8th International Conference
on Management of e-Commerce and e-Government (pp. 82-86).
Zhongming, Z and et.al., 2019. International partnership opportunities for UK research and
innovation.
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