LEGAL AND REGULATORY FRAMEWORK FOR UK BUSINESS

Legal and Regulatory Framework

Legal and Regulatory Framework

Question 1: Business Structures

Since the company Divine Fragrances Ltd was founded 20 years ago by Sandy Thompson, it went through several different stages of progression and business structures. It all started from Sandy's home under the name Cleopatra Scents. Sandy worked out of his garden shed with the equipment he had purchased him self with the money from his redundancy payment, this meant he had a sole proprietorship also known as a sole trader which is a for-profit business owned by one person who receives all profits and is able to hire and fire employees. They are also liable for all debts made by the business and must report any profits or losses the business makes with in their own personal income tax return (Jones & Moens 2009, p.96). This means Sandy is in full control of the company including all legal, purchasing and accounting issues that may occur.

Four year's later Cleopatra Scents had become too much for Sandy to manage on his own and so Sandy's brother Tommy was to have his offer accepted to invest money in Cleopatra Scents; Tommy then had an agreement with Sandy to 50% of all the workload and profits brought in as well as all debts and problems occurred by the company, including the small unit in the business park which would have been rented in the company's name Cleopatra Scents. This is called a general partnership which is a for-profit business under the partnership act 1890 which is a company owned by two or more people, They are known as partners and share equal responsibility as well as a liability, this type of partnership is different to a limited partnership where one person has more liability and authority then the other and is responsible for more of the company's issues, such as debt's, fines or any legitimate occurrences.

Four more years on and the company Divine Fragrances had moved to a new site purposely built to maintain their growing success, where they hired more employees and changed the company's name to Divine Fragrances Ltd. This private limited company (Ltd) is a company based on shareholders that have limited liability, leaving Sandy and Tommy only liable for the amount of money they have originally invested into Divine Fragrances Ltd but may also mean any later investments would be lost due to wages, equipment purchased and rent payments. This also means Divine Fragrances do not sell or trade their shares of the company to any of the general public. This unlisted companies stock will be exchanged outside of the stock market and more privately due to its small amount of shareholders and the lesser requirements of financial disclosure.

Question 2 Issues and Legal Principles for the Case

The following key points summarize the problem:

A mistake by a junior blender, Elvis, who, under drunkenness, mixed elements of the perfume in dangerously wrong proportions.

The ignorance of product use instructions (having a 2cm patch test) by ...