Legal Provisions Concerned with Business Units

Legal Provisions Concerned with Business Units

Our client is in the process of forming a company.

She wishes to avoid personal liability upon any contracts she may

enter into on behalf of the proposed company.

Our job is to design a report to explain the legal provisions

concerned with the formation, management and dissolution of business

units.

The report will identify the relevant legal principles, which can

influence the choice of business unit. Explain the differences in the

regulatory approach adopted for partnerships and registered companies

and describe the procedures for the dissolution of business units.

At the end of the report we will advise our client what type of

company would be best suited to her needs. There will also be a

presentation to go with the report highlighting the main points.

2.TYPES OF COMPANY

There are many different types of business unit. Each is formed by a

group of people with a common aim. Britain has what is known as a

mixed economy where goods and services are supplied by both private

and public sector organisations, as shown in the following diagram:

Private Enterprise

Sole Trader Partnerships Limited Companies

Co-operatives

Private Public Retail Producer

Public Enterprise

Public corporations Government Departments

Local Authorities

The private sector/enterprise is the term used to describe all

businesses which are owned by individuals or groups of individuals and

run essentially for profit. About half of all trading in Britain is

controlled by private sector organisations. The other half known as

the public sector/enterprise are businesses which are owned and

controlled by the government or Local Authorities and run for the

benefit of the country. The sector this report is concerned with is

the Private Sector.

2.1 SOLE TRADER

This is the oldest, simplest and therefore most common form of

business unit. A sole trader is one who conducts their business by

themselves either using their own name or a business name. This is

somebody who is self-employed and who usually starts a business with

capital from their savings or by borrowing from friends or a bank.

Capital is the money which every business needs to enable it to set up

and operate, for example to buy premises, equipment, stock and pay

wages. The main advantage is that you can be flexible. You don’t

need to discuss with others (e.g. partners and directors) how you are

going to run the business. You also have less paperwork. A sole

trader is not necessarily a one-person business and may have many

employees or branches. However, the business is owned by one person

and it is they who receive the profits.

ADVANTAGES

DISADVANTAGES

- Business affairs can be kept private except for completing tax