Types of Companies and Their Impact on Business Performance

This document discusses the different types of companies, including micro businesses, small businesses, medium size businesses, and large size businesses. It explores how organizational structure, such as divisional and functional structures, affects business productivity. Additionally, it examines the impact of external factors on business performance through a PESTLE analysis. The document provides valuable insights for individuals looking to select the best form of business organization and understand the factors influencing business success.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
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Contents
Introduction...............................................................................................................................2
Section 1: Different types of companies and how they work 500 words...............................2
Section 2: Different companies from sole traders to cooperatives and Limited Liability
Partnerships............................................................................................................................3
Section 3: Different business structures and external factors affecting business...................4
3.1 Identification of different organizational structures and explaining how does
organizational structure affect business productivity...........................................................4
3.2 How different external factors affect the performance of a business – PESTLE Analysis
................................................................................................................................................6
Conclusion..................................................................................................................................6
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Introduction
The world is dynamic and it is important for an individual to select best option to
conduct their business. As there are types of companies that have exist in the market. As the
selection of the business is based on the size and scope of the business. There are different
organizational structures such as individual and functional and the success of business and its
productivity is based on the performance of the business. Also there is discussion related to
various forms of internal and external factors and their impact on the business. To support the
same PESTLE Analysis is done at the end of the report.
Section 1: Different types of companies and how they work 500 words
Micro business:
A micro business is the one in which the number of employees are 10 or less than 10
and the annual turnover of the business is under £2 million. It is encouraged because it
provides opportunity for employment and it contributes to the GDP of the nation.
Small business:
A business employing employees between 10-50 and having a turnover of above £2
million but less than £10 million is termed as a small business. These business forms are
larger than micro business and also provide employment to around 50 employees. It helps to
start a business and use money effectively. It is contributing to around 47% to the economy
as per that data of 2016.
Medium size business:
A business having employees between 50-250 and an annual turnover of above £10
million but less than £50 million is a medium size business. It is one of the famous and
widely used businesses in United Kingdoms. The importance of medium business is
enhancing day by day. As they contribute a large part to the growth of nation.
Large size business:
It is a business organization that has more than 250 employees. Various organizations
in UK are large scale and they provide employment to various individuals. It plays a
significant role in growth of business sector in United Kingdom.
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As business plays an important role in a nation. It is vital to select the size of business
as per the scope.
Section 2: Different companies from sole traders to cooperatives and Limited
Liability Partnerships
Sole trader business:
A sole trader is a form of business organization where a person is solely responsible for all
the activities performed in the business from providing the capital to bearing all the risks and
from managing the business to enjoying all the profits received by the entity. In case of a sole
proprietor the owner and the entity are considered to be the one and the same unit. That
means in case the business fails to meet its third party liabilities, the creditors can recover
their amount from the personal assets of the owner. This is considered to be one of the
biggest disadvantages of a sole proprietorship. But at the same time the owner enjoys the
benefits of easy formation, confidentiality and quick decision making.
Partnership:
Partnership is the relation between individuals who have agreed to carry on a lawful business
and share the profits of the business which is either carried on by all or any one of them. In
case of a partnership business also, the liability of all the partners is unlimited that is their
personal assets can be used to pay off the debts of the firm. The partnership is a voluntary
association of people. The profit and loss is shared in proportion that is determined at the
time of agreement.
Limited liability business:
In UK a private company can be directly set up by registering it with the Companies house. A
private company is a separate legal entity from its shareholders and directors and it is
considered to be an artificial person. The company’s day-to-day functions are being handled
by its directors but the directors are not considered as the owners of the company, they are
considered to be the employees of the company. A private company cannot issue shares
publicly. Whenever a private company goes into liquidation the owners are not bound to pay
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the debts of the company beyond their value of shares in the company. It is one of the most
common form of business in UK.
Public limited liability business:
A public company is the one which is not owned by private individuals and has the privilege
to list its shares on a recognized stock exchange unlike a private company which means that
the shares of a public company can be traded freely on a stock exchange. In UK it is
compulsory for a public company to use PLC after its name and the minimum allocated share
capital should be of the value £50000. Since its shares are listed on the stock exchange it can
raise large sum of money as compared to a private company.
Cooperative:
A cooperative society is a voluntary association of people who come together with the motive
of welfare of its members. The main aim of a cooperative is to protect the interests of its
members and they are controlled by its members only. A cooperative can be set up by
consumers, producers, employees or workers. They are not meant for earning profits. The
focus is to serve all the members that are part of cooperative.
Section 3: Different business structures and external factors affecting business
3.1 Identification of different organizational structures and
explaining how does organizational structure affect business
productivity
All the organisation operate in the same environment of the nation. The size and
structure of the organization vary. The difference is according to the product service they are
offering or the decision of management. The success of business depends on the category of
structure used by the company. The two most important structures that are widely used by
various business entities are discussed below:
Divisional Organizational Structure: It is a type of structure where the organization is
divided into groups or divisions. These divisions are done on the basis of the products in
which the organization is dealing. Every division contains all the functions and resources.
The division has their own goals and objectives and the employees work to accomplish them.
The work is divided among the division and they have their own target of sales that they
achieve. This has direct impact on the productivity of the business. All the divisions are part
of business and their success makes the business successful. It plays an important role in
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enhancing the productivity. As if one division is not earning profit the other one will cover
the same.
Functional Organizational Structure: It is most common organizational structure that is
followed by various businesses. In this the organizations divide the department as functions
of the business. All the businesses have their own functions. To complete all the work
successfully it is important to have coordination among all the functions. All the company
has their own department for finance, marketing, human resource, research and development,
information technology. All these departments play an important role in success of
organization. There should be proper coordination among all of them. This helps to reduce
duplication of work and manage all functions. If there is problem is coordination or
communication is not proper among these functions then it is difficult for business to operate.
The proper coordination among these functions has direct impact on the productivity of the
business. As all the workers are working towards achieving the goals and objectives of the
company the productivity of the company enhances. It is seen that if the employees are
motivated and work effectively then it helps to enhance the productivity of the business.
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3.2 How different external factors affect the performance of
a business – PESTLE Analysis
Conclusion
From the above discussion based on types of companies it can be summarized that there are
various kind of business organization. It is vital for a business to identify the available
options. As the world is dynamic it is important for an individual to identify the best form of
business organization. This helps to operate the business successfully. There is discussion
related to internal and external factors and their impact on the performance of business entity.
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