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LO3: Examine The Formation of Different Types of Business Organisations

This document discusses different types of business organizations and their formation. There are four major types of business structures in the UK: sole trader, partnership, limited liability partnership, and limited company. A business is a corporate body created for a specific purpose, and can be either unincorporated or incorporated. Unincorporated groups cannot own property or enter contracts, while incorporated groups can. The four main types of companies are public limited company, private company limited by guarantee, private company limited by shares, and private unlimited company. Formation requires registering the company and complying with various legal requirements. Businesses are managed by a management team and board of directors, and are funded through operating profits, investing, or issuing equity capital.

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3K views5 pages

LO3: Examine The Formation of Different Types of Business Organisations

This document discusses different types of business organizations and their formation. There are four major types of business structures in the UK: sole trader, partnership, limited liability partnership, and limited company. A business is a corporate body created for a specific purpose, and can be either unincorporated or incorporated. Unincorporated groups cannot own property or enter contracts, while incorporated groups can. The four main types of companies are public limited company, private company limited by guarantee, private company limited by shares, and private unlimited company. Formation requires registering the company and complying with various legal requirements. Businesses are managed by a management team and board of directors, and are funded through operating profits, investing, or issuing equity capital.

Uploaded by

Gaslu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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LO3: Examine the formation of different types of business

organisations
All organizations must follow a legal configuration that specifies the rights and responsibilities
of participants in the ownership, control, personal responsibility, lifetime and financial structure
of the organization.

Examine the formation of different types of business organisations. (P4)


Basically, a business is a company. It is an artificial individual created by statute. To better
understand this, however, we have to create the fact that a human being is a natural individual
while a legal individual is a business or organization.

The nature and formation of a company:

A business is a corporate body created for a specific purpose to carry out such activities. It is an
organisation generated by the individual who contributes money, known as shareholders.

Unincorporated V’s incorporated legal structures

Unincorporated groups cannot, in their own right, enter into contracts or own land. Incorporated
groups can own property in their own right and enter into contracts.
Different kinds of organisation:

In the UK, there are 4 major types of business structures and each has different tax and liability
effects for owners and shareholders:

 Sole trader
 Partnership
 Limited liability partnership
 Limited company

Solo trader: A sole trader is a self-employed individual who, as an individual, owns and
operates his own business.

Partnership: When more than one person wants to do execute a new idea to gain profit is called
partnership entrepreneurship.

Limited liability partnership: A limited liability partnership (LLP) is a partnership in which


there are limited liabilities for any or all partners. like Law firms, Accounting Firms.
Limited Company: A limited company (LC) is a general form of incorporation that restricts the
amount of obligation held by the owners of the company.

Types of companies:

There are four 'ordinary' business forms in the UK-

1. Public Limited Company
2. Private Company Limited by Guarantee
3. Private Company Limited by Shares
4. Private Unlimited Company
Public Limited Company: A public limited company is one that may sell shares or debentures
to the general public, sometimes shortened to 'public company' or abbreviated to PLC.

Private Company Limited by Guarantee: A private corporation limited by guarantee restricts


the liability of its guarantors to a pre-agreed sum to be paid in the event of the corporation being
wound up.

Private Company Limited by Shares: Limited by shares 'ensures that the shareholders'


responsibility to the company's creditors is restricted to the money originally invested.

Private Unlimited Company: The hybrid company (corporation) organized with or without
share capital is an unlimited company or private unlimited company.

The most significant legal requirements for beginning a company


organization-

 Registering your company


 Get insured, get insured
 Equal Opportunities
 Comply with laws on data
 Ensure the right of employees to work
 Do a Search on DBS
 Give a written Job Statement
 Safety & Health
 Minimum national wage
 HMRC research
 The Pensions
How business organisations are managed and funded. (P5)
Ultimately, there are only three key ways in which businesses can collect money: from net
operating profits, by investing, or by issuing equity capital. Debt and equity capital are usually
acquired from foreign investors, each with its own set of advantages and disadvantages for the
business.

The management of a company:

In general, the management team is also responsible for bringing the corporate plan together and
ensuring that the corporate goals are met. The management team is kept responsible by the board
of directors of the company.

Management of all corporate and organizational operations is the process of putting people
together to successfully and efficiently achieve desirable objectives and goals using available
resources.

To keep their companies on track, good managers are required to ensure that all that is being
done is ethically oriented towards delivering what consumers want.

Good leadership is necessary in order to inject inspiration, ingenuity, discipline and enthusiasm
into environments where they either do not exist or are

The application of company law:

A firm is expected to have two constitutional documents upon incorporation under the
Companies Act 2006:

 A Memorandum that documents the willingness of the original members (subscribers) to


create a business and agree to become its members. Unable to amend the memorandum
 Articles of Association, also referred to only as the Articles, which are basically a
contract between the corporation and its members, defining the company's legally
binding laws, including the judgment, ownership and control structure. The Companies
Act 2006 allows great flexibility in drawing up articles to meet the company's particular
needs, given that it acts within the law.

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