Unit 49-LO1 Evaluate the nature and legal status of companies-BTEC-HND-Level 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

Since time has changed, there are many different ways companies can be held accountable. Traditionally, public law regulated a company’s activities but now that technology has advanced, business owners can reach across countries and this means that laws have changed because it is harder for local regulators to keep up with things.

Most business activity is not regulated because it doesn’t meet the criteria needed for such regulation or isn’t regulated by another means. The government looks out for this.

A company is a group of people with similar goals. They work together, share one entity, and can be held liable for what they do.

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Also Read: Assess the importance of meetings and resolutions in corporate management

Concept of corporate personality:

A company can have a name. It is like a person who can do things on their own. There are three levels of legal status for companies in each country:

1) Sole proprietorship – A corporation is the lowest level of a company. It operates through partnerships between an owner and their company. They also take on debts or obligations if the owner has stock in the company. The “corporate personality” is separate from any person or stockholder in the company’s activities nationally, but it is unclear whether individuals are protected against liabilities taking place internationally.

2) Partnership – This means that there are many owners but they still act as one company. The government will hold them all in the same way if they commit a crime. Not every business has to be registered or get a legal personality.

3) Corporation – The corporation is a separate entity. It includes all partners, stockholders, debts, and obligations into one identity. It creates one legal person, but people can act independently from the company. In partnership, everything belongs to everyone else in some way or another.

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A person who needs to be identified by law to do things is called a legal person. A criminal charge against the legal person would not hurt the employees but it could lead to problems with the company. It would make it more difficult for them to get money, or let them buy things. If their offense violates company policy, it could lead to disciplinary procedures against people who work there.

A company is an organization that represents its members and shareholders in civil, commercial, and criminal jurisdictions. A company can act as a plaintiff or defendant in different situations, including being sued for failing to meet certain standards (breach of contract) or creating a nuisance (nuisance).

Characteristics of different forms of business organizations

Different business organizations have different characteristics. They are often based on the relationship between the parties that set them up.

There are two main types of business organization: sole proprietorship and partnership.

In a sole proprietorship, there is only one person who owns the company and does all its work. I

n a partnership, some partners specialize in different areas such as accounting or technology.

These two options are both good. The first option is a C Corporation and the second one is an S Corporation. They come with their own advantages and disadvantages which should be considered before starting up your company.

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Incorporation and corporate personality, advantages and disadvantages of incorporation, promoters, pre-incorporation contracts, and commencement of trading

Incorporation and corporate personality

The key concepts of incorporation and corporate personality are very important. They can affect many parts of your company.

Incorporation is a process whereby an entity becomes a separate person or legal person.

A corporation is a business that has the ability to enter contracts and take on debts. A company is a group that can do things like sign agreements with other companies.

Advantages and disadvantages of incorporation

Advantages of Incorporation

Look at some of the advantages of merging your small business.

  • Limited Liability: A benefit of merging your business is that you will have limited liability. When you are a sole proprietor, the owner has to pay for all the debts and legal claims against the company. If you set up a company, then people owning it cannot take responsibility for any debt or litigation unless they agree to do so. This can protect owners from losing their personal money in lawsuits or debt.
  • Continue: Another advantage of consolidation is continuity. Unlike other structures, the life span of a company is unlimited. It will continue to exist even if the shareholder leaves or dies. Also, even if business ownership changes, it still exists. This makes the company more likely to flourish for many years, even if there are changes within the company.
  • Flexible income: Businesses sometimes combine so that they can make more money. When this happens, the businesses have fewer responsibilities too. They can decide when to spend their money and how much of it they want to make.

Disadvantages of incorporation

Understand the disadvantages of merging your business.

  • Expensive: One disadvantage of merging your business is the costs that come with it. Companies are more expensive to set up than other structures, and this will not go away after you do so. The company has continuous expenses that can be expensive for small businesses. The following is an overview of some of the various fees you may have to pay when setting up a company: 1. Setup cost 2. Legal fees 3. Accounting expenses 4. State fees
  • Double taxation: Another disadvantage of merging your business is double taxation. Double taxation means that you must pay income tax twice for the same income. For companies, this means that you have to pay taxes at both the personal and corporate levels.

Promoters

A promoter is a person who talks about your business. They can make a lot of noise and tell many people about it. They talk to people who are interested in what they say. A promoter’s goal is to find someone who will be interesting for the customers-someone they’re already following and listening to.

Pre-incorporation contracts

This is a legal document that can help transfer the assets or liabilities of an unincorporated company to a new one before it is incorporated. This agreement takes into account various situations that might make incorporation difficult, such as lack of investment funds, undercapitalization, and regulatory/legal restrictions on where the incorporation can happen.

Commencement of trading

The commencement of trading is the time when your security will start trading. It usually starts at 9:30 AM EST and ends at 4 PM EST. The commencement of trading usually lasts up to about 2 hours. There was a rule that said “straddles” must not happen before noon EST. This was because few people would trade them and it was hard. But now the rule has expired because there are not many people trading in straddle options, so they think this is no longer a problem.

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Formation and constitution:

Memorandum and Articles of Association, public, private, and community interest companies, purchasing ‘off the shelf’

Memorandum and Articles of Association are the two main documents for a limited liability company in the U.K. These documents tell you how to act and what to do, so they must be at hand at all times.

Companies are different types:

  • Publicly traded companies are on the stock market.
  • Private companies might be owned by people or other private corporations.
  • Nonprofit organizations might use community interest company models.

If you want to buy a company, you can buy an already made one that is ready for investment purposes and not have to take this process step by step.

Community interest companies

Community interest companies are a type of company. They are designed for social and environmental enterprises. Community interest companies do not have obligations to shareholders like other businesses and they provide a broader public benefit than most traditional for-profit entities. The structure is becoming more popular in Europe and Canada.

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The capacity and ability of a company to contract and doctrine of ultra-vires

A company can contract and doctrine of ultra-vires if it has the power to do so the source of this power is either written provisions or an agreement. An explicit grant is when the company’s statutes, articles of incorporation, or bylaws tell you about it. Implicit grants arise automatically with business operations unless they are explicitly denied in public law (statutes).

You need to know the difference between a power and a capacity. Power is something that can exist without other things. A capacity is not. You have power if you can do something on your own, even when other people are not around. You only have the capacity if other people tell you what to do or limit your choices.

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