Business Law Cases

Questions: 1. Advise three friends what they should take into consideration when making up their minds if they should set up their business as a general partnership (unincorporated) or as a limited liability company (incorporated)? 2. A business associate, who has taken on a new role as Operations Manager of a small business, has asked you to help her to explain the difference between an employee and an independent contractor to her Managing Director? 3. Your colleague has missed classes and asks you to help him catch up on the European Union (EU) elements of the module. Write a short report for him, explaining the significance of both monist and dualist legal systems and the difference between EU Regulations and Directives? Answers: Introduction to assignment:- This assignment contains three questions regarding business law cases. First question is about unincorporated partnership and incorporated LLP. Second question is about the distinction between the contractor and an employee. Third question is about European Union elements of the module. Other part of the question asks about significance of both monist and dualist legal systems and the difference between EU regulations and Directives. 1. Three friends are making their mind to set up their business as a general partnership or as a Limited Liability Company. We are required to guide them what important points need due consideration while starting a business as general partnership or as a limited liability company. Provisions of partnership are covered by different partnership acts. General partnership is covered by partnership Act 1890. General partnership is one of the business forms. In general partnership, more than two people start up a business with the aim of earning profits. Partners in general partnership are jointly and severally liable for the liabilities of the business. The provisions of The Limited Partnership Act 1907 are applicable to the limited partnership. In limited partnership, sleeping partners may become partners but they would have limited liability compared to active partners. Limited partnership can be created by all the sleeping partners. Provisions of The Limited Liability partnership Act 2000 are applicable to Limited Liability partnership. Partners may have limited and specific liability under Limited Liability partnership and it would be considered as a separate legal person. Though, it will be considered as partnership for tax and it would not be subject to much regulations. Now, lets discuss the points to be kept in mind while setting up a business as a partnership. Below given are some common points when deciding about setting up a business as a partnership or a limited liability partnership. First of all, partners should decide what kind of partnership they want to enter into. Accordingly the partnership act will be made applicable based on the type of partnership. Name should be given to the partnership and it should be registered with the appropriate authority. 1. Before setting up a business as partnership and while drawing up a partnership agreement, share of profits and losses should be decided first. Definite percentage of profits and losses should be decided so that disputes may not arise at a later point. 2. Capital contribution of every partner should be definite. Capital contribution is an important feature of a business as without capital contribution business cannot be started. 3. Authority and responsibility of every partner should be clarified to smoothen the functioning of business. Separation of authorities and responsibilities will make the running of business proper. 4. Opening of a bank account and management of a bank account should be made properly. 5. The ownership of assets of partners should be defined. Which partner will own which asset and to what extent should be clarified. 6. Terms and conditions related to withdrawal and interest on loan as well as interest on withdrawal should be defined. The agreement should be made taking into account the provisions of partnership acts. 7. Management of accounts of the partnership should be given to the specific partner to remove the difficulties of a business. 8. Terms regarding entrance and removal o a partner should be clarified properly. 9. The circumstances when the partnership will come to an end should be included in the partnership agreement. 10. After removal or resignation of a partner the condition that would apply to him regarding competing with their rivals should be clarified. Above given are few of the common points that should be considered while drawing up a partnership agreement. Another part of question one is about Limited Liability Company. We are required to state the point to be considered while setting up a business as Limited Liability Company. first, lets understand whats Limited Liability Company. Its one of the business structures where the liabilities of the shareholders are limited. The liabilities of the companies are not directly the legal liabilities of the shareholders. To start up a business with limited liability, one should decide the company name, register it with the registrar and an official UK address which will be the registered office of your company where the documentation will be kept and all the communications will be made. All the other businesses and activities of the company will be included in the MOA. MOA of the company generally contains following points:- 1. Company name should be specified in the MOA. It should not contain any sensitive names. However, it should only contain limited word at the end. 2. Location of the registered office should be specified in the MOA. Office of registered office should be in UK. 3. Objects of the company should be defined in the MOA. What business your company would carry, main as well incidental objects should be included in MOA. 4. The liabilities of the members should be limited. This means shareholders liability would be limited up the value of the shares they hold. 5. Amount of share capital should be specified. Authorised as well as all other type of capitals like subscribed, called up, paid up should be defined. 2. A business associate has taken on a new role an operations manager of a small business. She needs to explain her managing director the distinction between a contractor and an employee. Employees are the persons working under an employer who can be part time as well as full time employees. Employees are bound by the instructions given by the employers. When people decide to hire people to work under them, there emerge two possibilities; they may hire either employees or independent contractors. Like, if want to construct a special set for an award function and you employ some carpenter to create specific type of banquet according to your specification then that carpenter be called the independent contractor. Difference between employees and independent contractors:- Employee:- Hiring an employee leads to payment of payroll taxes on that employee. Apart from payroll taxes another obligation may be to make unemployment and workers compensation to the appropriate government agency. Another important feature of employees is that you can train them the way you want and make them work for certain hours at specific place. Employees work only for the employer they are hired by. They are paid on a regular basis. Employees work for certain number of hours. Employees can be fired or can be made to quit the job. Moreover, employees receive employment benefits like health and disability insurance. Employees work under the control of the employer and according to the direction of the employer. They complete the task given in the manner decided of requested by the employer. They dont need to invest any amount in the work they do for their employer or make any specific expenditure to finish up the task. Employees have general education and a specific background to work fo r specific position and they get proper training from the employer to work in a specific manner and to complete the job in a better way. They get salary from the employer at regular interval of time after deduction of their taxes and security taxes and medical taxes under federal Insurance Contributions Act. Employees get unemployment compensation from the employer after termination or lay off. They also receive workers compensation benefits for any workplace injury. Employment of an employee can be fired for specific reason and with serving of a specific notice. There are specific rules and regulations for minimum wages and overtime hours under which the employees are governed. Employees are even covered under laws related to safety at workplace and anti-discrimination. They can even create or join a union. Independent contractors:- Contractors are already trained persons who work for themselves and not for anyone else which means they work on independent basis and not under the employment of any person. They already have learned their job skills anywhere else. They are free to do their work according to the mutual consent of both the parties. The product will be delivered according to the specifications of the person hiring the contractor but the way of performing and completing the task will be decided by the contractor himself. They cant be forced to work in a certain way or for certain specific hour or at a specific location. Unlike employees, contractors may have other clients. Contractors are not paid on regular basis like employees but they are paid on project basis. Working hours can be decided by the contractors. They may work according to their convenience. Contractors cant be fired usually like employees. Both the parties are bound by the contract made. Employer or contractor may have to pay certain c ompensation if any of them breaches the contract terms or cancel the contract. Contractors provide services to more than one company. They dont receive employment benefits like employees receive. They work independently according to their own wish. They accomplish their work according to their choice and they can do so without the input of employer. They have to incur the costs as well as investments to accomplish the task given. They come with specific job skills of their own. They dont need to be trained by the employer for completing the task. They pay their tax dues on their own. Employers are not obliged to pay the taxes on behalf of them like employees. They are not even subject to FICA taxes. Contractors are not even given the benefits of unemployment compensation. Employers can fire contractors anywhere at any time unless the contract specifies the terms related to the same. Contractors are paid according to the terms and conditions of the contract and they are not eligible to specific other compensations like employee receive. Contractors are not even covered under the laws of safety at workplace or anti-discrimination. Contractors are not entitled to form or join a union. This way employee and contractors differ from each other. 3. European Union:- European Union is an association of 28 states which are its members and which are specifically situated in Europe. The European Union works with the help of certain institutions and intergovernmental decisions by the member states. Its partnership between 28 members states that together cover most of the European continent. EU was created after Second World War. The first motive of the EU was to expand economic co-operation between the countries who trade with one another and is become economically interdependent. This was decided to remove the conflicts. European Economic Community was resulted from this in the year 1958. Initially, it was the union of 6 countries. After that, a wide market has been created and its continuing to develop to its potential. In the year 1993, the name changed to EU from EEC. EU works on a rule of law. Whatever EU does is based on treaties, voluntarily and independently agreed by all the countries. EUs goals are decided by the binding agreements set out. Mobility, stability, growth and single currency are the goals of EU. EU has till date help people raising their standard of living, delivered peace among countries, gave prosperity and launched a single currency named EURO. EU countries boarder control abolition has played major role in success of EU. People now-a-days can travel freely across all the continents of EU. The single market has enabled the different things like currency, people, services and goods to move freely across the nation. Another main goal of EU is to create huge resources si that people can get maximum benefit from it. European parliament is the main runner of EU. Wide powers are given European parliament. European parliament, national parliaments and European institutions play grea ter role in proper running of the EU. European citizens are also taking part in political success of Europe. Significance of Monist and Dualist legal systems:- Monist and Dualist are the international laws. Question here is how the international laws can be applied to domestic legal systems. Monist legal system says that, both the national laws and international laws form a unity. Therefore, in Monist concept international laws need not to be converted into laws of national countries. The international treaties ratification instantly converts international laws into national one. Therefore, the judicial decisions of ICC can be applied to national court cases. However, Monist system has different approaches in itself. Some of constitutions permit immediate application of international laws while in other constitutions direct application takes place only for self executing treaties. In Dualist system, international law cant be directly applied to the national law. It should first be translated into national law and then application of the same to domestic law is possible. Therefore, in Dualist system only ratification of international law is not enough and implementation of national legislation is necessary. Difference between EU regulation and directives:- EU regulations are binding on all over the EU continents. Like, when EU decided to save the names of agricultural products from specific areas then the council did the needful and adopted a regulation. It is addressed to all the members of state and they were fully applied. They can be applied without the need of national legislation. Directives mean goals decided by the EU which are required to be achieved by the member countries must achieve. However, the process of achieving that goal can be decided by the countries on their own. This happened with the working time directives, according to which overtime work was illegal. It was given that minimum rest period and maximum working hours were decided which all the countries were required to follow. However, how to implement that was every countrys own matter of thinking. References:- ANON, N.D., Unincorporated Association, Accessed on 7th August 2015, ANON, N.D., Partnerships, Accessed on 7th August 2015, ANON, N.D., Partnerships, Accessed on 7th August 2015, ANON, N.D., The Partnership Act 1890, Accessed on 7th August 2015, ANON, N.D., Limited Liability, Accessed on 7th August 2015, ANON, N.D., Limited Liability Companies, Accessed on 7th August 2015, ANON, N.D., Difference Between Employees and Contractors, Accessed on 7th August 2015, ANON, N.D., Difference Between Employees and Contractors, Accessed on 7th August 2015, ANON, N.D., Significance of Dualist and Monist, Accessed on 7th August 2015, ANON, N.D., European Union, Accessed on 7th August 2015,