Why the Limited Liability Company Is Better than the General Partnership in the UK - Essay Example

Business Law Name Date Course Table of Contents Table of Contents 2 Executive Summary 2 Part 1 3 Introduction 3 Discussion 4 Part 2 7 Introduction 7 Discussion 8 Conclusion 11 Bibliography 12 Executive Summary In the United Kingdom, there are different types of partnership. The general partnership is a business with two or more owners. The limited liability company does not have the maximum number of partners and it may have as many as possible. The Partnership Act 1890 in UK plays an important role in governing the partnership businesses. Limited Liability partnership Act 2000 also governs that Limited Liability Companies. In the United Kingdom, the Limited Liability Company is more beneficial than the general partnership. The main benefit is that the partners cannot be held liable for the debt of the company. Equality Act 2010 is a legislation that all the employers have to observe. It mainly deals with equality and fairness at the work place. Its main goal is to protect the employees from any form of discrimination, exploitation and harassment by the employer. It has prohibited several conducts in order to protect the employees. Legal action can be taken against the employer for failing to observe the provisions of the act. Part 1 Introduction According section 1 of the Partnership Act 1890, partnership is defined as the relation which subsists between persons carrying on a business in common with a view of profit. Partnership arises when two or more people co-own a business. Sharing of profit and losses is one of the main characteristics of a partnership business. The partners are also jointly liable for the business. There are different types of partnership which includes general partnership, limited partnership and limited liability partnership. The report discusses why running a business through a limited liability company is better than general partnership. Discussion General partnership is a business with two or more owners. A limited liability company in the United Kingdom is not a corporation but a legal form of company that provides limited liabilities to its owners. According to section 1(3) of the Limited Liability partnership Act 2000, A limited liability partnership or company has unlimited capacity. In a general partnership, each partner assumes equal responsibility for all the debts and obligations of the business. According to section 2, a limited liability company is a corporate entity with legal personality separate from that of its members. This is one of the major advantages of Limited Liability Company over the general partnership. The individual partners are not personally responsible for the wrongful acts of the company or for the debts. This means that an individual will not be held liable in case the company accumulates debts that it may be unable to pay. However, in the general partnership business, the individual partners are personally liable for any debt incurred by the company. The partners are also liable for any wrongful act by one of the partners in a general partnership business. Individuals in the limited liability company are protected from any form any wrongful act that is carried out by any of the partners. It is the company that will be held liable since it is a corporate body. A limited partnership company is thus advantageous as the partners are fully protected from any wrongful activity of other partners or debt incurred by the company. In terms of taxation, the taxation for the limited liability companies is similar to the general partnership. The taxation is mainly at the individual level at the company. The principle of pass through taxation is also applied which plays an essential role in eliminating any possibility of double taxation. It is only the profits that are taxed personally at the member level. The ownership of property at the limited liability company also ensures that the individual members are shielded from cross liability. The company can only be taxed if the profits belong to the company and not the individuals (Miller, 2015). This is considering that the limited liability company is a body corporate. During the process of carrying out business, a company may face lawsuit for claims of negligence. In general partnership, the members are not protected from incidences and will be held personally responsible. This is even when the negligent act has been committed by another business partner. The partners who have not committed the negligent act will be required to pay incase the court orders payments to be made for the negligent activity. This has a negative impact on the partners as they will end up paying for acts of negligence that they are not responsible for. In a limited liability company, the individuals are protected from any lawsuit against the business. It is the company that will be responsible for the payment of such claims since it is a body corporate. The protection from personal liability for negligent acts is therefore guaranteed in the limited liability company. A limited liability company is flexible as compared to the general partnership company. This makes it easy for the managerial and administrative activities to be carried out. The partners in a limited liability company have the authority to decide how each of the individuals will contribute to the business operations (Haldane, 2015). In general agreement, the duties of the members is mainly determined by the capital contributions that have been made by the members. This exposes the business to poor leadership and management as the person with the highest number of shares may not have good leadership and management skills. As a result of the high levels of flexibility, the managerial duties can be divided equally among the members based on their experience. This plays an important role in ensuring that the business is managed by the most qualified and experienced members. The members who have financial interest on the company are also can also elect not to have any authority over business decisions. However, they can maintain their ownership rights which is based on their percentage interest at the company. This is not possible in the general partnership as each of the partners has to be directly involved in the business operations. The decision making process in the business is also enhanced as a result of the flexibility. The decisions that are made by the partners are usually in effective as intense consultations are usually carried out among the members. Decisions can also be changed easily as a result of the flexibility in the limited liability companies. The limited liability companies do not have a limit with regards to the number of business partners. The company can therefore have as many business partners as possible. This plays an important role in terms of ensuring that the capital can be raised easily to start the business. Huge amounts can also be raised and hence ensuring that the company is able to finance its activities through the contributions of the members. As a result of the high number of members, the risks are spread among the members and hence minimizing the losses for individual members (Murray & Hwang, 2011). The limited liability partnership has a lot of benefits as compared to the general partnership. In a general partnership, any disagreement among the partners can lead to the closure of business. However due to the high number of partners in the limited liability companies, the disagreements may not easily lead to the closure of the business. In case something goes wrong, the partners may not feel greater impacts as compared to the general partnership business. This is due to the unlimited number of partners. The chances of success are high as the high number of members ensures that expertise and experience is brought on board and shared. The best option is therefore the limited liability company as compared to the general partnership. Part 2 Introduction The Equality Act 2010, in the United Kingdom is has the same goals and objectives with the European Union Equal Treatment Directives. The legislation is primarily for the purposes of ensuring employees are provided with equal opportunity. It also protects the employees from discrimination on the basis of gender, race, age, religion or sexual orientation. All the organizations have to fully comply with the legislations provided for in the Act. An employee may take legal action against an organization that does not comply with the provisions of the Act. The report thus discusses the steps that a client with 100 employees should take in order to avoid legal action from the employees. Discussion The Act has outlined the prohibited conducts which the companies should not be engaged in. Discrimination of the employees is one of the prohibited conducts that should be completely be avoided by the company. According to section 13(1), direct discrimination is prohibited and it takes place when a person treats another les favorably because of protected characteristics as they would treat others. This means that the company should ensure that people with protected characteristics such as disability are treated equally by the company. Section 15 also indicates that the people with disabilities should not be subjected to any form of discrimination. Discrimination arising from disability may lead to legal action by the affected employee. Gender equality is also one of the aspects that the company should totally observe. Gender reassignment discrimination is prohibited according to section 16. This mainly deals with the cases of absence from work. Whenever an employee is absent from work, the duties should be reassigned without any form of gender discrimination. When dealing with the gender issues within the company, discrimination in terms of promotion or any other opportunities should be completely avoided. In the past, men were usually favored as compared to women during the promotions. This was the case even when the women had the same qualifications as the men. This should be totally avoided in order to ensure that an employee does not take any legal action against the company. The legal action can be taken as highlighted in the case of R. (Brown) v Secretary of State for work and pensions. The company should also put in place measures to ensure that the employees who are pregnant are not discriminated. According to section 17(2), a person discriminates against a woman if they treat her unfavorably because of her pregnancy. This will require the company to provide some training on its staff members in order to ensure that the other employees do not discriminate against the employees. Discrimination against a woman after giving birth is also prohibited according to section 17 (3). The company should also ensure that any pregnant woman is provided with the maternity leave as required. The failure of the company to provide maternity leave to the employee who is pregnant and had notified the company may attract legal action (Bryson, 2014). The company should not sack an employee on the basis of pregnancy as it amounts to discrimination which attracts legal action. Section 18 also prohibits any form of discrimination against an employee who is pregnant in terms of the work related issues. It is the duty of the company to ensure that the work offered to the pregnant employee will not endanger the pregnancy as it will also face legal action. It is therefore important for the company to ensure that the supervisors are aware of the provisions of the Act. The company should also put in place measures to ensure that all the staff members are not involved in indirect discrimination. Indirect discrimination is prohibited according to section 19. This means that the company should ensure that none of the employees is discriminated in terms of their age, race, religion, sexual orientation or gender (Bryson, 2014). Any comments that are discriminatory towards people of a certain religion, age, gender or race should be avoided at the organization. During the recruitment of the employees any form of discrimination should be avoided by the company. Equality should prevail and only the required qualification should be considered by the company during the process. The company has a duty to make adjustments for the disabled persons in accordance with section 20. This includes modifying the physical features in order to ensure that the disabled person can move freely within the organization. This may include the provision of auxiliary aids to the people with disability. According to section 20 failure to make adjustments for the disabled persons amounts discrimination. The failure of a company to offer qualified candidates employment opportunities due to their disabilities may also lead to legal action. An employee who ends up with disability while working for the company should not be sacked if they are still able to perform their duties. The company also has the responsibility of ensuring that the welfare of the employees is taken care of in an equal and non-discriminatory manner (Bryson, 2014). It is also important to note that the organization should ensure it considers the needs of all the employees on matters related to works issues. According to section 26, the harassment of employees is a prohibited conducts and it should be avoided. Harassment mainly involves engaging in unwanted conduct as well as violating the dignity of the other individuals. Harassment can take place in many forms including sexual harassment. The company should put strict measures to avoid any form of harassment of the employees as it attracts legal action against the company. It is the duty of the company to develop policies that creates an environment free of harassment. This is also applicable for the purposes of ensuring that the company observes the provisions of the Act. Victimization is also a prohibited conduct in accordance with section 27. A person victimizes another person if they subject that person to detriment because they believe that they have done or may do a protected act. Victimization has the potential of leading to the sacking of an employee. The sacking of an employee based on the ground s of victimization is considered as unlawful dismissal and it also attracts legal action against the company. It is also important for the company to ensure that the employees are protected from false evidence by any other person as it may result to victimization. It is therefore important for the company to ensure that any evidence brought against the employees is well scrutinized. Conclusion In conclusion, the limited liability company is better than the general partnership. Limited Liability Company is beneficial as it is considered a corporate person. The owner or owners of the company cannot be held liable for the debt incurred by the company. It is evident that the limited liability company is flexible which ensures that the decision making process is effective. The limited liability company is likely to offer more benefits and the risks to the individuals are much lower as compared to general partnership. It is evident that the Equality Act 2010 plays an essential role in ensuring that equal opportunity is provided to the employees. The employees have to be fully complying with all the provisions of the Act to avoid any legal problems. It is evident that the harassment and discrimination of the employees is prohibited by the Act. Legal action may be taken against the employers for engaging in prohibited conduct. The Act is important in protecting the rights of the employees. It also ensures that the employers are not engaged in acts that are unfair to the employees. Bibliography Bryson, N., 2014. Pay Equity after the Equity Act 2010: Does Sexual Orientation Still Matter.. National Institute of Economic and Social Research.. Coompany Law at Twenty, n.d. Pat Preent and Future. Touro L Rev, Volume 31, pp. 403-615. Haldane, G. A., 2015. Who Owns a Company?. Bank of England. Miller, R. M., 2015. The New York LLC ACt at Twenty.. New York: The New York Limited Liability. Moisan, M. J., 2014. Look at the Publication Requirement in New York Limited Liaility.. New York: New York Limited Liaility. Murray, H. J. & Hwang, I. E., 2011. Purpose with Profit: Governance, Enorcement, Capital-Raising and Capital-Locking in Low-Profit Limited Liability Companie,. Universityof Miami Law Review, 66(No.1). Read More