Results of Being Incapable in Partaking in Business Affairs - Case Study Example

Law Table of Contents Introduction 3 Discussion 4 (i)Formation of the Company 4 (iii) Right to be Involved in Business Management 5 (iv) Control OverBusiness Membership 6 (v) Results of Being Incapable in Partaking in Business Affairs 7 Conclusion 8 References 9 Introduction In the UK, business law is an important aspect based on which companies are needed to be registered for conducting business in an effective manner. Generally, new businesses can be formed in a transparent and business-friendly way. Set-up and development activities of businesses in the UK are administered and coordinated by Companies House. Subsequently, for registering a company in the UK in an appropriate manner, certain mandatory documents that include ‘Article of Association’ and ‘Memorandum of Association’ ought to be filed at Companies House. In this regard, registering businesses in the UK is often viewed to be quiet simple (BHCC, 2010). There lay another procedure of forming businesses in the UK, which is through conducting general partnership or incorporated association. In this context, the partnership deed is not legally recognised and the operations are conducted without profit intention (Crown, n.d.). According to the case scenario, three fiends graduated in the area of computer science from Manchester Metropolitan University planned to run a business of buying along with selling of computers, computer accessories and software. In this respect, certain people advised the friends to form a general partnership and on the other hand, others suggested them to run their business through incorporation for accomplishing profits. In this regard, the essay focussed upon providing advice to the friends regarding which of the two businesses i.e. general partnership or incorporation would be better for them with reference to certain case laws. Discussion (i) Formation of the Company As per the referred case scenario, the three friends have planned to set-up a trading business in the UK with the intention of making profits. They have been advised by certain individuals to develop the business through either general partnership or incorporation procedure. In this regard, general partnership is identified as an unincorporated association based on forming an agreement amid the partners with the intention of conducting business operations without legal recognition. Conceptually, general partnership is formed with the objective of conducting business operations without profit motive (Crown, 2013). Thus, the friends will not form a business based on general partnership as they have planned to run a business of purchasing and selling computers, computer related accessories and software with profit intention. Respectively, the friends should form their business through incorporation or registering their business as a partnership firm. Additionally, the partnership business should be developed as a limited liability partnership (LLP) firm. A LLP will be appropriate for the friends as one or additional individuals are able to perform their business as partners with limited liability opportunity in relation to debts. LLP might be incorporated amid the friends through registration in accordance with the ‘Limited Liability Partnership Act 2000’. Contextually, the partners are required to submit a completed FORM LLP 2, which includes all information details in relation to business name, commencement date, business nature and investment made. The completed Form must be submitted to Companies House along with registration fee. The registration process in relation to LLP requires at least two members as a statutory compliance. First member or solicitor must sign the compliance statement with the intention of ascertaining that the business operations will be conducted legally in the UK for profit motive (OCRA Worldwide, 2014). In this respect, the friends should form business by incorporating the company. (ii) Liable for Business Debts The friends must form a partnership business under LLP with the objective of running the business in a legal manner in order to make profits through their business operations. Additionally, the friends acting as partners would be liable in a limited manner in relation to debts that arise in the business. The partners involved in the business will not be personally liable for the debts incurred in the business. Moreover, the liability of the partners relating to debts will be limited to the amount invested by the partners as applicable in the case of [Anest v. Audino, 773 N.E.2d 202] (Fryar Law Firm, 2002). On the other hand, the partners under LLP are provided with the opportunity of participating in the management of the business (Crown, 2014). A LLP business is usually conducted as an important business form in the UK owing to the reason that it is developed with the intention of making profits from business. Under the UK law, the partners of LLP are required to pay taxes based on profits that are obtained from the business operations (OCRA Worldwide, 2014). In this regard, it can be comprehended that the friends developing LLP will have limited liability in relation to debts up to the extent of the contribution of the same in the business. (iii) Right to be Involved in Business Management In this LLP form of business, the partners generally conduct business in a legal manner in the UK. The liability of the partners is often limited to the extent of amount contributed in businesses. However, the partners have flexibility in organising the internal management structure of the partnership firm. In this respect, the partners are entitled to make management decisions in an effective manner (Business Help UK, 2014). Thus, based on the above analysis, it can be affirmed that the friends developing LLP will have full authority to participate in the management functions. In this regard, the friends will be liable for managing as well as coordinating the business operations in accordance with the fulfilment of the predetermined business objectives. (iv) Control Over Business Membership In accordance with the ‘Limited Liability Partnerships Act 2000’, partners forming LLP business are required to follow different legal provisions in relation to membership factor. In this regard, the members subscribing their names in the incorporation document are recognised as legal partners. Additionally, the other individuals might be identified as members of LLP through the confirmation of existing partners. The members of LLP are not identified to be employed under LLP but they are recognised as self-employed as identified in the case of [Cooper v. Creative Homes of Distinction, L.L.C., No. COA01-1138, 2002 WL 2004298] (Bamberger, 2004). In this regard, under the Act, the members are offered with certain mutual rights along with duties based on agreement amid the members or between the members and LLP. The LLP agreement developed will provide adequate information based on which the members must act in order to ensure that conflict situations are resolved appropriately. In this respect, the members or partners are provided with the rights of appointing new partners (Willans LLP, 2010). Respectively, it can be stated that the friends on developing LLP will be provided with the rights along with the duties of appointing new members as partners in the LLP. Consequently, the friends will be facilitated with the opportunity of exercising their powers in controlling membership. (v) Results of Being Incapable in Partaking in Business Affairs According to the ‘Limited Liability Partnerships Act 2000’, the partners are offered with various provisions in relation to duties along with responsibilities that include management decisions and membership among others. In this respect, the Act signifies that in case of death or incapability of members in participating in the management affairs, their membership might be ceased, so that the business operations are conducted in an efficient manner. In this context, the partners are entrusted with the responsibility of ceasing members due to death or dissolution through mutual agreement with all the members associated with the LLP business. Moreover, in case of lack of agreement amid the members, membership can be ceased by providing notice to other members in a reasonable along with justifiable manner (Crown, 2002). Subsequently, it can be comprehended that in case of death or lack of competency in managing business of any of the friends, membership will be ceased in accordance with the aforementioned law. Conclusion As per the above analysis and discussion, it can be advised that the friends might decide to form a company though general partnership or incorporation in order to attain substantial profits. Theoretically, general partnership is a way of conducting operations without legal recognition or profit intention. In this respect, the friends should develop LLP through incorporation by submitting mandatory statutory documents with the Companies House. The friends developing LLP will be able to conduct their operations legally and with profit motive. LLP will be appropriate business form for the friends, as minimum two members are required for it, which fulfils the minimum requirement as observed in the referred case scenario. Specially mentioning, the liability of the friends will be limited to the amount that they will invest in the business. The friends will also be provided with the opportunity of participating in management affairs with better flexibility. Additionally, the friends are also offered with different rights as well as duties based on which they should conduct their business. Respectively, the friends will have the rights in exercising control over membership. Thus, it can be concluded that the friends developing their new business in the form of LLP will be the best option for conducting business operations with legal recognition and profit motive in the UK. References Bamberger, M. A. (2004) Liability of Partners and Members of Entities Improperly Formed. News Letter. [Online] [Accessed on 16th February 2014] http://apps.americanbar.org/buslaw/newsletter/0029/materials/pub/63.pdf BHCC. (2010) Forming a Company in UK. [Online] [Accessed on 16th February 2014]. http://www.bhcc.gr/en/useful-info/compuk Business Help UK. (2014) Partnerships. [Online] [Accessed on 16th February 2014]http://www.businesshelpuk.ltd.uk/?itemId=239 Crown. (n.d.) CTM41305 - Particular Bodies: Unincorporated Associations: Definition. [Online] [Accessed on 16th February 2014]. http://www.hmrc.gov.uk/manuals/ctmanual/ctm41305.htm Crown. (2002) Limited Liability Partnerships Act 2000. [Online] [Accessed on 16th February 2014] http://www.legislation.gov.uk/ukpga/2000/12/crossheading/membership Crown. (2013) Choose A Legal Structure For A New Business. [Online] [Accessed on 16th February 2014] https://www.gov.uk/business-legal-structures/unincorporated-association Crown. (2014) Limited Liability Partnership Incorporation and Names - GPLLP1. [Online] [Accessed on 16th February 2014] http://www.companieshouse.gov.uk/about/gbhtml/gpllp1.shtml#ch1 Fryar Law Firm. (2002) Anest v. Audino, 773 NE 2d 202 - Ill: Appellate Court, 2nd Dist. 2002. [Online] [Accessed on 16th February 2014] https://busites_www.s3.amazonaws.com/fryarlawfirmcom/content/pdfs/Anest_v._Audino_773_NE_2d_202_-_Ill__Appellate_Court_2nd_Dist._2002_-_Goog.pdf OCRA Worldwide. (2014) UK Limited Liability Partnerships (LLP). [Online] [Accessed on 16th February 2014] http://www.ocra.com/jurisdictions/ukllp.asp Willans LLP. (2010) Limited Liability Partnerships - Overview of Legal Issues. [Online] [Accessed on 16th February 2014] http://www.willans.co.uk/files/uploads/download/Willans%20LLP.pdf Read More