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Business Law and Practice 2
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In depth business law and practice 2 notes. Includes worked examples, the law and in-depth, detailed notes.
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BLP 2,Business Law and Practice 2
Introduction to Business Organisations
Characteristics of Commercial Business
Incorporated or • Can be either incorporated or unincorporated
Unincorporated
Profit • Generally, seeking to make a profit.
• However, there are not-for-profit businesses e.g.
companies limited by guarantee.
Ownership • Should be able to clearly identify who owns the business
Management and • Should be able to clearly identify who manages the
structure business and there should be a clear structure as to who
the managers are.
Choosing a Business Name
Often a business spends a lot of time/money in building the company’s name e.g. advertising.
They tend to want to protect their business name once they’ve got it. There are certain
restrictions when it comes to the choice of name e.g. shouldn’t be the same as an existing
business name to avoid a passing-off action.
Legal Choice • Company cannot choose a name that is the same as or too
similar to an already-existing name (already registered on
Companies House Register).
• Business name chosen cannot be misleading
• Offence to carry on business in UK under a name which
suggests a connection with a central/local government e.g. if
client chose a name including the word ‘council’ - The
Company, Limited Liability Partnership and Business (Names
and Trading Disclosures) Regulations 2015 (SI 2015/17).
• Cannot include sensitive words or expressions e.g. royal or
university or bank. List of sensitive words can be found in
legislation – The Company, Limited Liability Partnership and
Business Names (Sensitive Words and Expressions)
Regulations 2014 (SI 2014/3140)
• Look at Companies House website to see which names are
already registered
Other things to consider –
• How does the customer respond to seeing that name?
• Is it unique?
• Does the name fit the brand/business image?
• Avoid unfortunate acronyms
,Business Law and Practice 2
Sole Traders
Definition Somebody who is –
• Self-employed
• Operates in business alone
• Has sole responsibility for the management
of the business
• They can employ other employees
Formation and Legal Requirements • Need to inform HMRC for tax purposes
(helpful to mention this to clients)
Finance • Provided by sole trader themselves and
therefore finance might be limited to what
sole trader can afford to put in their business
• If they want to take out a loan they might
need to give a personal security e.g. their
house
• Sole trader entitled to all profits they make
Risk • Responsible for all of the liabilities of the
business – may need to use personal assets to
pay off business debts
Management and Decision Making • Has total control but can employ others if
help needed e.g. consultancy advice
Outsiders • Accountable to outsiders and it’s possible
that outsiders to the business may sue sole
trader
Dissolution • No real formality - simply ceases trading
• Need to record last day of trading to report to
HMRC for tax purposes
• Might sell the business
Insolvency • If sole trader’s business unable to pay debts,
sole trader is personally liable and so could
face potential bankruptcy
Unlimited Liability Partnerships
Definition S.1 Partnership Act 1890 – “relation which subsists
between persons carrying on business in common
with a view of profit”
• No formal legal requirements for a
partnership to come about
• Individuals might not be aware that they’ve
created a partnership, known as a
‘partnership at will’
Formation and Legal Requirements • Choice of name – usual for them to use their
names. If they choose a different name for
the partnership, they’ll need to print the
, Business Law and Practice 2
partners names on their formal business
documentation
Finance • Increased access to finance in comparison to
sole trader as there are a number of
individuals involved
• Partners can use partnership assets as
security in order to borrow money for
business (rather than using their own)
Risk • Each can bind the firm and each of the other
partners. All bound by any agreement that is
made by one of the partners. Where there is
unlimited liability, this exposes each of the
partners to personal liability
Management and Decision Making • Done by the partners
• Unlike a sole trader, there will be added skill
and expertise because there’s more than 1
individual
Outsiders • S 5 Partnership Act – each partner is the agent
of the firm and his co-partners for the
purpose of the partnership business
• Outsider dealing with partner doesn’t need to
check if partner has authority to bind the
firm. Firm will be bound by the contract if a
partner has signed it. Court will look at this
from perspective of outsider. As long as
outsider believes partner is acting within his
partnership authority, firm will be bound by
contract
• Can sue 1 or all of the partners
Dissolution • If there’s no partnership agreement
containing alternative agreements, under S
26 Partnership Act 1890, partnership could
be dissolved at any time by 1 of the partners
giving notice
• Automatic dissolution if one of the partners
dies or becomes bankrupt or retires
Insolvency • Liable for the debts and obligations of the
partnership
• Main provisions set out in Insolvency Act
1986, the Insolvency (England & Wales) Rules
2016 and the Insolvent Partnerships Order
1994
• Own personal assets may be at risk if firm
cannot pay
• If partner has insufficient personal assets,
they may become bankrupt
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