Advantages and Disadvantages of Unincorporated Business Structure - Coursework Example

Business Law by Student’s Name Code + Course Name Professor’s Name University Name City, State Date i) Advise a couple setting up a retail business what advantages and disadvantages they may encounter with an unincorporated business structure and explain the consequences of incorporating their business. In the modern day world, majority of business people have embraced the unincorporated type of business because of its numerous advantages. Nevertheless, just like any other business enterprise, it has to be registered with relevant authorities before the owner can start operations. Unincorporated structure has been said to be the simplest and easiest form of business to carry out, as the requirements are also minimal. Since it is normally a small firm, most of them start as small entities and then grow over time. As a result, the capital required may be minimal compared to other form of business enterprises. According to Roach (2014), these kinds of businesses may be operated by one person although over time, as operations are diversified, more people can be brought in to assist as employees. In addition, he has observed that the decisions of these kinds of businesses are normally dependent on the number of people who owns it. This means that, although unincorporated business enterprise can be owned by one person, there is a possibility of others coming together and assisting in raising required capital to open up the business. Advantages of unincorporated business structure Unincorporated business structure does not require a lot of paper work to commence operations. According to Roach (2014), once the business is licensed to carry out its operations, the entrepreneur can go ahead and open its doors for clients to come in. This is unlike the corporate business structure where the owners may be required to get licenses from different departments in the government. In addition, this kind of business structure is also ideal because it has no limit on the number of people who can be shareholders. As soon as the business is registered, the shareholders can pull their resources together and the business will be up and running within a short time. This, at times, works well when the business is also not performing well. This means that if the business owned by various shareholders operated at a loss, then the burden of such a loss is shared by all the members. Thus, the performance of the business may not be affected as the loss realized is shared amongst the shareholders. As the business grows, the company may decide to bring in experienced employees to help in running it. The concept of employing other people is very critical as it leaves the owner of the business as the overall decision maker. Therefore, there is minimal interference with the operations of the business from the owner. Unincorporated business structure is also exempted from numerous taxes levied against other forms of business in the country. Since the business is registered as a private entity, the amount of personal taxes paid by the owner to the government is also viewed to have come from the business, and hence, there is no double taxation. According to Roach (2014), because the business owners declare the income of their business in their personal tax returns, they are exempted from paying other types of taxes as is the case with other forms of business enterprises. Unincorporated business structure is not viewed as a separate entity. Unlike the corporate business structure, this kind of business is viewed as a personal or private business and the owners are easily identifiable. This means that clients who come to do business with the company may decide to inform the owners of their displeasure with their business. This may happen if the client is not satisfied with the kind of service he or she is given while within the premises. Furthermore, unincorporated business structure limits the entity to the business own assets. This means that if the business want to secure a loan facility it may not use its assets as collateral. As a result, the business owners may have to work extra hard to make sure that their business has enough capital base to withstand the market dynamics. In addition, unincorporated business structure is also flexible. This means that if the existing business is not doing well, the owners can wake up one day and change the goods and services offered by the business. This is unlike other business models that are rigid and have to follow their line of operation to the end. Disadvantages of unincorporated business structure One of the main demerits of this kind of a venture is that it is not separate from the individual running it. This means that each person’s assets within the business are liable for the acts and liabilities of their business enterprise. This shows that, any individual who may be a debtor can have his or her properties auctioned to recover the amount claimed. As a result, every member of the business is required to manage his or her finances well to avoid throwing the business in turmoil. Roach (2014) points out that this kind of a business cannot contract sue or be sued and also own property. The people who conduct these acts are perceived to have conducted them in a private capacity that does not involve their business. In order to carry out such in a legal manner, they have to be granted permission from a court of law which has to listen to both parties before a decision is given. As a result, a lot of time and resources is wasted by both parties. As earlier mentioned, the unincorporated business structures are exempted from filing annual returns forms to the government. However, when the partners are involved in a dispute, then it becomes a difficult affair to seek legal redress as there is no formal statute to address how disputes should be resolved. As a result, partners might find it hard to reconcile and this may lead to the withdrawal of other partners. This is not a right move since this affects the capital base of the company in the long term. Furthermore, if the unincorporated business is owned by more than one person, the activities within the business have to be conducted in a very careful way because a mistake from either of the partners will affect the business in a big way. The consequences of incorporating a business Whenever a business is incorporated, the business takes an identity of its own. As a result, the business can be sued for failing to meet its obligations without involving the founders in the suit. This means that the owner is protected from any financial liability that the company may incur. On the other hand, the company will be subjected to certain taxes of its earning from the government. This is perceived as a double taxation because the owner has to file personal returns with the government, as well. However, in order to avoid this kind of taxation, companies may opt to go for S-corporation status which allows them to enjoy profits without taxation. As a result, it is the owner who is required to pay taxes on profits at an individual level. References Roach, L., 2014. Company Law Concentrate: Law Revision and Study Guide. Oxford: Oxford University Press. Roach, L., 2014. Card and James' Business Law. Oxford: Oxford University Press. ii) The Equality Act 2010 (EA 2010) imposes responsibilities on employers in respect of their employees and their employment contracts. Assess the potential consequences for managers and directors where the provisions of EA 2010 are ignored. Today’s world has become a place of extraordinary population. A research, which was conducted by Equality and Human Rights Commission (n.d), suggested that the world is composed of various ethnic and racial subgroups with different cultures. According to Equality and Human Rights Commission (n. d), diversity is concerned with embracing other’s differences. The biographical characteristics have an impact on people’s behaviour and understanding in the workplace, education institutions and the society in general. Few companies, for instance, embrace the concept of diversity in their workplace. The problem of cultural diversity in the workplace, learning institutions and the society at large, has been in existence since time immemorial. Globalization has been the main factor that has enhanced this concept. There was a time when all an organization required to do was to get better i.e. during the 19th century. During the 20th century, the aspect of global competition as well as information technology radically changed the trend. In many firms, the pursuant of the status quo is so high that employees are discriminated and stereotyped and not given equal opportunities with their counterparts due to their background characteristics (British Chambers of Commerce, 2010). The EA 2010, which came into force in October 2010, combines and replaces most of the earlier inequity legislation in the Great Britain. The Equality Act 2010 makes discrimination of any kind unlawful. With this regard, it enables directors and manager to carry out their duties responsibly, and in turn, avoid workplace conflicts. Also, it enables workers to understand the law, as well as the action they can take if they feel the employers have ignored the provisions of EA 2010. Furthermore, it empowers the courts and Employment Tribunals to make the necessary recommendations on equality (British Chambers of Commerce, 2010). Under the Equality Act 2010, workplace discrimination is unlawful (Appelbe & Wingfield, 2013). Employers who ignore the provision of the 2010 Equality Act do so at their own peril. The law requires employees who think their employers ignored the provisions of EA 2010 to submit issues to the employers in order to know whether the employers have a claim. According to the provisions of EA 2010, an employer should answer the employee’s questions within a period of 8 weeks. In many instances, employers refuse to answer the questions or provide unsatisfactory answers. If the employer provides ambiguous answers or refuses to respond to discrimination claims, the Employment Tribunal may come into place to hear the cases. In the United Kingdom, discrimination questionnaires have played a critical role of ordering changes in the workplaces. For instance, they have been given powers to order the senior leadership team to undergo diversity and equality training (Equality and Human Rights Commission, n. d). According to the Equality Act 2010, employers should not ask their prospective employees questions regarding their health. In addition, the EA 2010 limits the number of questions that organizational leaders can ask their prospective employees. Under the new legislation, the burden of proof has been shifted on the companies’ owners. The EA Act, which came into force in October 2010, prohibits directors and managers from asking health questions prior to conditional job offer. According to the EA 2010, health related questions prior to a job offer amounts to discrimination. Thus, employers should refrain from asking health related questions until when a job offer is made. An employee who feels that his or her privacy was invaded during health screening can institute legal actions against the employer (Madan & Williams, 2010). The EA 2010 also covers various areas such as harassment, pay secrecies and gender pay discrepancies and protection for breastfeeding mothers (British Chambers of Commerce, 2010). With regards to pay secrecies, an employer who reveals an employee’s salary details to his or her colleagues is liable for action under the new EA 2010. The Employment Tribunal can request the employer to compensate the employee for injury to feelings (Wadham et.al, 2012). Thus, an employer must not disclose to colleagues what he pays an employee. According to the EA 2010, an employee can bring a claim of unfair treatment if he or she have been fired or punished for talking about possible inequity in their remuneration. Recent research in the UK firms indicates that most employees do not discuss their pay with their colleagues (Equality and Human Rights Commission, nd). The EA 2010 provides workers with formal avenues of knowing what their colleagues earn in order to ensure equality in the workplaces. Through the equal pay questionnaire, an employee can discuss his or her pay with his or her colleagues. According to the new law, an employer cannot prevent the workers from making ‘relevant’ salary disclosures. Thus, ‘relevant ‘disclosures play an important role of enabling an employee to know if he or she has been unlawfully paid. The EA 2010, however, does not ban confidentiality clauses, and employers can still forbid their workers from revealing their salaries, or obtaining information regarding their colleagues’ salaries, provided they do not talk about possible pay discrimination. For instance, an employer can prohibit employees from discussing about their pay if they boast about new salary increments, or complain about disappointing salary increases. According to the provisions of the EA 2010, employment tribunals can make various recommendations to directors and managers, including harmonizing the staff pay (Equality and Human Rights Commission, n.d). The EA 2010 bars organizational leaders from discriminating against breastfeeding mothers. According to the EA 2010, it is against the law for organizations to discriminate women because they are breastfeeding their children. An organization is, however, allowed to ask a woman who is breastfeeding her child to leave their premises if the reason for request is not due to her breastfeeding. Nonetheless, if the mother claims that she was discriminated due to her breastfeeding, the EA 2010 provides that the organization will have to prove that discrimination did not occur (British Chambers of Commerce, 2010). Under the new EA 2010, directors and managers are liable for the harassments of their workers by others over whom may not have direct control, including clients, suppliers, creditors and auditors. Thus, an employee who feels that his or her employer failed to take action to prevent a third party from harassing him or her can institute legal claims against the employer. Thus, the EA 2010 provisions play a critical role of protecting employees from harassment from third parties (Equality and Human Rights Commission, n. d). The EA 2010 protects those individuals who intend to change their sex from their birth one to the preferred sex. Under the new law, an employee is not required to notify his or her employer about the gender reassignment status (Equality and Human Rights Commission, n.d). However, one can discuss the gender reassignment status with the employer at his or her will, in order to gain support during the process. Additionally, an employee is not required to produce a gender identification certificate to verify his or her legal gender. Employees can, therefore, institute legal action against their employers if they are routinely requested to produce their gender identification certificates, as this compromises their right to privacy. An employer has a fiduciary duty not to treat people with disability harshly due to something related with their conditions. For instance, an employee who has been dismissed due to her disability-related sick leave may institute legal action against his or her employer as this amount to unfavourable treatment. According to the new law, such discrimination only requires an employee to show that he or she have experienced discrimination from the employer due to something related with his or her disability(Equality and Human Rights Commission, n.d). References Appelbe, G. E & Wingfield, J. 2013. Dale and Appelbe's Pharmacy and Medicines Law. London: Pharmaceutical Press. British Chambers of Commerce. 2010. Equality act 2010: What Do I Need to Know? Quick-Start Guide for Businesses Who Sell Goods and Services. London: Government Equalities office. Madan, I. & Williams, S. 2010. A review of pre-employment health screening of NHS staff. London: The Stationery Office. Wadham, J. et.al. 2012. Blackstone's Guide to the Equality Act 2010. Ed: 2. Oxford: Oxford University Press. Read More