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Unit 8 Legal Aspects of Business M/508/0494 HND Business Level 4

University: University of Greenwich

  • Unit No: 16
  • Level: High school
  • Pages: 11 / Words 2789
  • Paper Type: Assignment
  • Course Code: N/A
  • Downloads: 4463

Task 1


There are different forms of business organisation that are a partnership, sole proprietorship and corporation. An unlimited partnership is an arrangement through which two or more persons agree to share in all assets, profit and financial and legal liabilities of a business. In unlimited partnership company, all partners have unlimited liability which means that all their personal assets are liable for the partnership’s obligation (Warner and Sullivan, 2017). On the other side, a private limited company is a help privately and liability of owner is limited. Along with this, their number of members should not exceed more than 50. The present task will cover the main features of an unlimited partnership and private limited companies. Apart from this, advantage and disadvantage of private limited will be explained.

Critical discuss the main feature of unlimited partnership and private limited companies

An unlimited partnership provides a relatively simple way for two or more people with respect to own and manage the firm together. General duties under companies act 2006, to accomplish success of the firm for benefits company members (Perkman and Schildt, 2015). Along with this, the director should avoid conflicts of interest within the firm Under this business each partner their skills, capital and time. There are some key features of unlimited partnership that are as follows:

The share of risk and rewards: In unlimited partnership, all the profit and risk are shared equally. As no individual is liable for particular risk when it occurs within the firm (Kitching, J., Kašperová and Collis, 2015). As all partners contribute to business so they are liable for each activity carried out by the firm.

The share of profit: Each partner is liable to share the net profits which are earned by the firm. Along with this, a contract needs to be provided for equal shares and it is also depended on the investment done by partners within the firm (Holloway and Parmigiani, 2016).

Liability, without limit: While working in partnership, all the partners are responsible for all the debts and obligation of the business without any limitation. It also includes all the damages which take place due to wrongful act and omissions of other partners.

A private company is that company which is help privately and it has a separate legal entity. Under this shareholder cannot trade publicly shares. No shares can be sold out with permission of shareholders (Gutierrez, Boukrami and Lumsden, 2015). In private limited company, there are maximum 2 directors appointed and they do not need to appoint by independent directors. Liability is held by an individual as the total amount of shares which are held by the firm (Albers, Wohlgezogen and Zajac, 2016). Contrasting partnership, there will be no risk on the assets of a shareholder and they do not need to may more amount as compared to the value of shares they hold. It is essential for the private limited company to use the world private limited after their firm name.

Advantage and disadvantage of unlimited partnership

There are many sole traders who are forming private limited firms every day in order to protect themselves against from trading in ever-changing economic climate. There are some limitation and benefit of general partnership firms that are as follows:

A general partnership has no separate legal existence which is different from its partner. Contrasting to this, a private limited company it does not need to be registered at or make regular filings to the firm house which can hold keep things simple (Alcácer, Cantwell and Piscitello, 2016). All the profit earned by the firm is shared equally between business partners. One of the main advantages is that they do not need to pay tax. Along with this, each partner registers their profit and loss of the firm on their own personal income tax return (Hardgrove, McDowell and Rootham, 2015). There are chances that assets can be raised by partners if there are more than two partners. Along with this management can be improved with there is more than 1 owner. On the other side, some of its disadvantages are that if risk or damage takes place due to one partner mistake then other partners also bear losses. A partner cannot transfer their interest in the firm without the common agreement of all the partners (Mouraviev and Kakabadse, 2016). All decisions are made by partners and all the issues are solved which are faced by company. However, disagreement is one of the common problem in partnership case it is so because one may not agree with other partner ideas for carrying out the business.

Advantage and disadvantage of private limited companies

In private limited companies, there is a restriction to transfer the shares to another person. further private limited company can easily establish by two members and all daily activities are carried out by the directors (Warner and Sullivan, 2017). The advantage of the private limited company is that members know the way to handle each other and the way of controlling owner’s capital. There is a number of directors in private limited firm is maximum 2 and it needs to be registered as per laws and legislation. One of the main disadvantages is that there us restriction on transfer of shares. Along with this, a number of the member should not exceed more than 50. There is so much time required to set up a new company. Along with limited liability firm also gain tax benefit. All the losses and profit are bear by the owner itself as no other person is liable for the risk (Cuervo-Cazurra, Inkpen. and Ramaswamy, 2016). Private limited company or PLC,s are very profitable but these all profits can be diluted because they are distributed among all their shareholders and there are many private limited company who have up to 50 shareholders. In order to create private limited firm owner, need to invest high amount and they also need to pay taxes, employee’s insurance, and legal. In private companies any break of duties can result in court interference. The director of the firm is answerable for the company and its profit through making asset of the position which they hold as a director of the firm. It is one of the strict rule and complete principal (Bolton and Foxon, 2015). The court have made their position clear on the issue of earning profit from position which is held by them in firm of good faith which is clear in the case of Bray v Ford Lord Herschell.


From the above task it is concluded that in unlimited company there are number of partners are more than 1. All the risk and profit are shared between them equally due to which no one partner need to bear all the losses. There are some benefits of unlimited company such as unlimited liability can be raised by partners without any restriction. On the other side in private limited company is carried out privately in which number of directors can be maximum 2. All the shares are strictly forbidden from being publicly traded. Further it is concluded that, there are some benefits of being private limited as all its shares are not available to the general public for buying and selling purpose. Private company need to pay higher taxes as compared to partnership. However, unlimited company can avoid the chances of double taxation.



In an organisation there is a great responsibility of the company director regarding the success and business activities of the organisation. The director of the organisation plays a very crucial role within an organisation who have several kinds of the roles and responsibility regarding the business activities An endless association gives a reasonably essential way to deal with no less than two people concerning case and manage the firm together. The manager has great power regarding the promotion and business operation through which he/she is liable to address the objective (Van der Puil and Weele, 2014). He/she has to follow all regulation and legislation which developed by the government regarding the business enterprise and practices. The power and ownership is also decided by the government which have to follow by the company.

General commitments under associations act 2006, to accomplish achievement of the firm for benefits association people. Close by this, the director of company should keep up a vital separation from hopeless circumstances inside the firm Under this business every accessory their capacities, capital and time unlimited association there are number of accessories are more than All the peril and advantage are shared between them comparably due to which no one associate need to hold up under each one of the incidents. (Sumner and Williams, 2010.) There are a couple of points of interest of endless association, for instance, endless hazard can be raised by accessories with no restriction.

Duty to the act within the power (section 171 Companies Act 2006)

What constitutes a honest to goodness reason must be scholarly concerning the specific condition under idea. This commitment characterizes the official's commitment to take after the association's constitution. The constitution is described with the true objective of the general commitments in territory furthermore the association's articles of alliance it consolidates:

  • decisions taken on the basis of the set regulation and norms
  • diverse decisions taken by the people if they are to be managed by judiciousness of any authorizing or represent of law as decisions of the association, for example a decision taken by easygoing steady consent of the impressive number of people.

This commitment orchestrates the present standard of law under which a director of company should rehearse his powers according to the terms on which they were indeed, and do all things considered for a true blue reason. As per this law all power of carry out the business activities and function are in the hand of the director so it is very important to understand this legsilation in order to carry out business in more effective and efficient manner. Director is agent of corporation as per this law who takes each and every decision regarding the business.

Duty to promote the success of the company (section 172 Companies Act 2006)

This commitment systematizes the present law and values in statute what is normally implied as the rule of "lit up speculator regard". The commitment requires an official to act in the way he or she considers, in consistence with normal conventionality, would be well while in transit to propel the accomplishment of the association for the upside of its people all things considered and, in doing in that capacity, have regard to the parts recorded. This once-over isn't exhaustive, yet includes zones of particular centrality which reflect more broad wants of tried and true business lead, for instance, the interests of the association's delegates and the impact of the association's exercises on the gathering and the earth (Rush and Ottley, 2010). The decision with reference to what will propel the accomplishment of the association, and what constitutes such accomplishment, is one for the official's awesome certainty judgement. This ensures business decisions on, for example, framework and procedures are for the director of company, and not subject to decision by the courts, subject to incredible certainty. As per this act it is also a great responsibility of the director in the private limited and limited company to promote the company success (Ramanathan, 2014). The director have work within the organisation with the pure soul and heart and full fill all responsibility regarding the business so as determined objective can address. In addition to this, as per this act, director have to follow the all regulated rules, regulation and norm which have developed by the government of country at the time of taking appropriate decision of the business. They have to work only for address the high level of outcome and success in the market. He/she is also liable to develop the such strategy, policies and practices through which they can compete with rival in the competitive business environment.

Duty to the exercise independent judgement (section 173 Companies Act 2006)

This commitment systematizes the present control of law under which director of company must exercise their powers self-rulingly, without subordinating their powers to the will of others, paying little heed to whether by assignment or something different (Malhotra and Lumineau, 2011). The territory gives that director of company must not chain the future exercise of their attentiveness unless they are acting:

According to an assention which has been legitimately gone into by the association; or In a way endorsed by the association's constitution.

According to Section 173 of Companies Act 2006, Directors of company posses independent powers to formulate and implement effective strategies or make decisions in good faith of the company without subordinating their powers to the will of others (McKendrick, 2014). As per this act, the entire power of the taking decision are in the hand of the director of the company through which he/she can survive the entire business activities and function. In the absence of the manager and leader within the company organisation c an not able to full fill the objective. He/she have all authority to taking the decision regarding the making policies, practices and strategy regarding the business activities and function. The section gives that directors must not fetter the future exercise of their discretion unless they are acting in accordance with an agreement which has been duly entered into the company(Oya, 2012). As per this section, the directors of the organisations possess powers and authorisation where they independently make any decisions for the betterment of the organisations as well as its shareholders and stakeholders. A director have to work and delegate his or her power as per the constitution of the company. For private limited companies, the director can delegate their powers in accordance with the articles. The act mandates that directors must exercise their powers in accordance with the constitution of the company (Murfin, 2012). They can formulate and implement the decisions in order to enhance the productivity and profitability of the organisation. The act helps the director to formulate policies and regulations without considering others in order to improve the company's performance. Thus, the section helps in providing powers to the director where they can independently make decisions and forms policies.

The commitment does not give a power on the administrators to assign, nor does it shield a director of company from rehearsing a vitality to dole out exhibited by the association's constitution given that its action is according to the association's constitution. Under the draft show articles of relationship for exclusive organizations confined by shares, the officials may delegate their abilities according to the articles.


From the entire discussion it has been concluded that there are several kinds of power and responsibility to the director of private limited and partnership organisation. Directors of company posses independent powers to formulate and implement effective strategies or make decisions in good faith of the company. They have power top take the all decision regarding the policies, strategy and practices and also they have responsibility to promote the success of the company.


  • Albers, S., Wohlgezogen, F. and Zajac, E.J., 2016. Strategic alliance structures: An organization design perspective.Journal of Management,42(3), pp.582-614.
  • Alcácer, J., Cantwell, J. and Piscitello, L., 2016. Internationalization in the information age: A new era for places, firms, and international business networks?.
  • Bolton, R. and Foxon, T.J., 2015. A socio-technical perspective on low carbon investment challenges–insights for UK energy policy.Environmental Innovation and Societal Transitions,14, pp.165-181.
  • Cuervo-Cazurra, A., Inkpen, A., Musacchio, A. and Ramaswamy, K., 2014. Governments as owners: State-owned multinational companies.
  • Gutierrez, A., Boukrami, E. and Lumsden, R., 2015. Technological, organisational and environmental factors influencing managers’ decision to adopt cloud computing in the UK.Journal of Enterprise Information Management,28(6), pp.788-807.
  • Hardgrove, A., McDowell, L. and Rootham, E., 2015. Precarious lives, precarious labour: family support and young men's transitions to work in the UK.Journal of Youth Studies,18(8), pp.1057-1076.
  • Holloway, S.S. and Parmigiani, A., 2016. Friends and profits don’t mix: The performance implications of repeated partnerships.Academy of Management Journal,59(2), pp.460-478.
  • Kitching, J., Kašperová, E. and Collis, J., 2015. The contradictory consequences of regulation: The influence of filing abbreviated accounts on UK small company performance.International Small Business Journal,33(7), pp.671-688.
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