The Structure of Business: Legal Status, Frameworks, and Sources of Finance

This document discusses the legal statuses and frameworks of businesses, strengths and weaknesses of establishing a business, and sources of finance available to business startups. It also explores the primary, secondary, and tertiary sectors in the UK and their differences.

BUS0005NFBNM THE
STRUCTURE OF BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
QUESTION 1.................................................................................................................................................3
Various frameworks and legal statuses of businesses..............................................................................3
Weaknesses and strengths need to consider while establishing the business...........................................5
Sources of finance that is available to business startup............................................................................6
QUESTION 2.................................................................................................................................................8
Three sectors within UK in which businesses operates and difference between these sectors.................8
QUESTION 3...............................................................................................................................................11
HR policies and their significance to modern workplace.......................................................................11
CONCLUSION.............................................................................................................................................14
REFERENCES..............................................................................................................................................15

INTRODUCTION
Business structure means company or organization in regards to its legal status. It trickles
many factors that are part of running a business successfully. These are corporation, partnership,
sole proprietorship and limited liability Company etc. Scenario of report is to consider myself as
a career oriented person who wants to be an entrepreneur and going to startup an online retail
business. Hence, for this these questions need to get addressed.
The study will cover legal status and framework of various types of business. It will
evaluate strengths and weaknesses while starting up a new business in UK. It will identify three
sources of finance which is available to startups. The report will identify sectors in UK in which
a business can operate and also explain the difference among them. Furthermore, study will
describe two human resource polices and will explain their importance in today's workplace.
MAIN BODY
QUESTION 1
Various frameworks and legal statuses of businesses
Business structure is the system which outlines certain activities that step direction for
achieving the objectives of an organization. It is essential to choose most appropriate structure
that helps to create legal recognition for the trade. Various types of businesses are described in
this table as follows -
Basis Private
company
limited by
shares
Public
limited
company
Community
interest
company
Charitable
incorporate
d
organization
Limited
liability
partnership
Framework The
Company
must have
use limited
The name of
the company
should be
ended with
This type of
companies
is launched
newly from
This type of
company gets
registered in
England and
This is
hybrid in
nature. It is
mixture of

in the end
of its name
(Types of
registered
companies,
2020).
PLC or
public
limited
company.
the year
2005. This
is generally
established
for the
community
benefit.
Wales. It was
brought into
action by
Charities Act
2006.
plc and
partnership.
It is separate
legal entity
(Vershitsky,
Takhumova
and
Glushchenko,
2019).
Legal No fixed
capital
required is
being set
for private
limited
company.
It is
generally
notice that
it is less
than 100
pounds.
The capital
requirement
must be up
to 50000
pounds.
The profits
and assets
must be
permanently
retained in
the CIC.
The
registration is
mandatory
both as
charity and
company
limited by
guarantee.
They have to
submit
annual return
and accounts
set every
year.
There is no
such
statutory
requirement
is to do
written
agreements
of LLP or to
get registered
but should
have an
agreement
for a business
practice.
Each
Liability The
company
has limited
liability.
This type of
company has
not limited
liability.
Community
interest
company
could be
limited by
its share or
The company
is limited by
guarantee
(Ajagbe, Cho
and Peter,
There is
limited
liability on
the partners.
Each partner
is liable to

maybe
through
guarantee.
2016). pay income
tax from their
own share of
business
profits.
Allow for
issue of
share
This
company is
not
allowed to
offer
debentures
and shares
to the
public.
This is
allowed to
give shares
to the public.
The
company
must list on
stock
exchange.
This type of
company is
established
only for
community
benefits not
for own
profits.
Thus, they
do offer any
share to
public.
Not allow to
issue any
share to
public.
In this case
there are
business
partners.
Thus, there is
no need to
offer share to
public
because
partners are
the owners of
company.
Weaknesses and strengths need to consider while establishing the business
Retail industry is growing fastest in UK economy. It provides a great opportunity to
startup an online retail business (Roberts, 2018). To analysis it, strengths and weaknesses of UK
retail industry has been determined.
Strengths
 Retail market is very vast. Thus, there is unlimited opportunity for the retailers to perform
business in UK.
 There is growth opportunity present in new markets. Very large market to be captured by
start -ups.
 There is opportunity of growth both in national and international market as retail sector is
at boom.

 Retail industry has diversified market and variety of product range is available. Thus, it is
helpful in fulfilling customer’s requirements and needs.
 Effective supply chain network is available for the retail industry in UK.
 Strength is there is opportunity for doing joint venture for the startup retail business in
UK.
 Online retailers have vast demand in UK market.
Weakness
 Retail industry is facing high competition in UK market. Due to large number of sellers
and buyers it is hard for a new entrant to cut off the competition (Ramanathan,
Subramanian and Vijaygopal, 2017).
 Bad reputation in market of the brand can ruin the company. Initially it is hard to create a
good reputation among the customers. It takes time to build a good brand value as there is
high competitive brand already available in the marketplace such as Tesco, Aldi, and
Amazon etc.
 Being a startup business it is not possible to cope with the competitors and response to
the changes in price.
Sources of finance that is available to business startup
Sources of finance available to business startups are as follows -
Angel investors - These are the investors who are wealthy individuals and provide financing to
the business startups in exchange of Equity shares of the company (Mason and Botelho, 2018).
They provide financing but below the range of 1 million pound. They worked in organized
groups for investing and doing screen deals with each other. Rest of the investment angel
investors done by their own.
Strengths –
 Angels are experienced individuals and they can easily provide guidance to the startups.
 Flexible business agreements can be done with angels as they are generally less rigid in
the nature.
Weakness-

 Angel investor might force the company to give them control.
 The risk is high and they rarely follow on investments.
Venture Capital Funding - Many of the firms have agreed that Venture Capital funding is
helpful in business success (Cherrington, Tan and Walk, 2018). These capitalist are termed as
investors which are willing to pay large amount of money in the exchange of equities. By
chance, if the money get out once than the whole business is acquired by some other firm or sale
to the public. They only invest on those companies who give them back or return on the
investment.
Strengths-
 VC has a capability to invest large amount of money at one time. They are tending to
provide assistance and expertise which is helpful for exiting and growing the business.
 This is helpful in providing instant credibility for the firm.
 This also opens up the doors for the future business partners and investors.
Weaknesses –
 Venture Capitalists might force the company to take unnecessary steps in order to see the
return on investment they have made
 Venture Capitalists are very experienced but they can steer the business direction in
which the company's owners might not get agreed.
Bank Financing - This is the most common source of financing. It can be taken from any
nearest bank or lending institution. It is trickier as there are various types of options are available
for financing. The bank provides a sum of money as a loan (Murphy, 2017). Thus, after a time
period the company has to pay total amount of money with interest. Interest rate also varies from
bank to bank.
Strengths –
 Bank give facility with payback options and funding amounts that can fits the need of
company.
 The funding is provided without any equity in the company as other routes of financing.

Weakness –
 Interest rates are sometimes generally high to be getting afforded.
 The company has to pay the borrowed money after a specific period of time whether the
company is working or not.
 The bank has right to sale the property and assets of company on lease if the firm is
unable to pay off its debts.
QUESTION 2
Three sectors within UK in which businesses operates and difference between these sectors
Sectors within UK are as follows -
 Primary sector - Primary sector is often called as the first line and base sector for other
sectors. The primary sector mainly consists of all those activities whose end result is
exploitation of natural resources. Such as forestry, fishing, deposits, mining.
 Secondary sector - Secondary sector is one of the most important sector that a economy
needs. This sector of an economy consists of industries that are engaged in production of
finished goods or are engaged in construction fields (Storey, 2016).
 Tertiary sector - Tertiary sector is the sector which works as a link between the
secondary and primary sector. Tertiary sector is mainly involved in creating a link
between primary and secondary sectors for smooth flow of goods and services. It
includes transportation, communication, banking, warehousing, etc.
Difference between primary, secondary and tertiary sector-
Basis Primary sector Secondary sector Tertiary sector
Definition This sector is also
known as first line
sector. This sector is
the base upon which
success of all other
sectors depend. It
This sector has most
important place in an
economy. This sector
involves production of
resources and
converting them into
The Tertiary sector is
the one who maintains
coordinator between
the primary and
secondary sector. The
Tertiary sector

mainly includes
agriculture, mining
and fishing.
final goods that are
extracted by primary
sector.
ensures that there is
smooth flow of goods
and services.
Constraints The agricultural sector
or primary sector is
the backbone of the
economy. It involves
extraction of natural
resources and
production of primary
raw materials.
The secondary sector
consists of use of raw
materials in further
production to produce
finished goods.
This sector mainly
maintains the
functioning of
secondary and
primary sector
smooth. It includes
transportation,
banking, hospitals, etc
(Buil, Catalán and
Martínez, 2016).
Contribution in GDP It contributes around
0.63% in GDP
(Distribution of gross
domestic product
(GDP), 2020).
It contributes a large
share around 17.51%
in GDP.
It consists 71.04% of
UK'S GDP.
Share in Employment
generation
It contributes around
1.14%.
It makes a
contribution of
17.97%.
It contributes 80.89%
share in employment
generation.
Importance Primary sector consist
the basic economic
activity in a country.
It is one of the biggest
sources of extracting
raw materials for
various industries. It
secures the food
This sector mainly
takes use of labor,
machinery, land,
capital,
Entrepreneurship and
converts raw materials
into finished goods
for making them more
Development in the
secondary and
primary sector has
also increased the
importance of tertiary
sector in UK.

safety in a country. useful (Hillary, 2017).
Examples Activities such as
farming, fishing, dairy
and other related
activities.
It includes industries
such as iron and steel,
cotton, textile, etc.
It involves services
like private hospitals,
shopping, food joints
and tourism, etc.
Importance of these sectors to UK economy -
 Less engagement in agriculture - The most of the people in UK are engaged in tertiary
sector which results in low level product in agricultural sector. This reduces opportunities
of growth in agriculture as agriculture sector is becoming popular day by day. In UK only
around 3% of total population is engaged in production. The overall contribution of
workforce in GDP that is engaged in agriculture is only 0.63% or 1%. Also the primary
sector of UK is most important as the issues that this sector is facing affect all other
sectors. The issue are export revenue and monopoly power of MNC's in UK.
 Secondary sector a key result area - The secondary sector is one of the vital sectors that
UK needs. As the secondary sector forces the global economy to expand and create
opportunities of growth. The country whose industrial base is weak depends upon other
countries for finished goods and these results in decrease in foreign exchange of the
country. And the decrease in foreign exchange will result in insolvency of the country in
difficult times when the country needs fund; also the financial position of UK is not well.
The secondary sector also plays a vital role in developing the poor areas of the country
and in UK there are many areas in which people live under desperate conditions and
below poverty line. Thus secondary sector needs a development in Poor and backward
areas to improve standard of living.
 Improvement in production - Improvement in production has been noticed in UK
which is a result of high participation rate in tertiary sector. The Tertiary sector of UK
concludes around 71.04% of GDP in UK (Distribution of gross domestic product (GDP),
2020). The participants in tertiary sector are growing day by day and are resulting in

increased productivity level due to highly technical machines, facilitated transportation
facilities and communication facilities.
QUESTION 3
HR policies and their significance to modern workplace
1. Recruiting and Hiring policies - These are the HR policies which help in a clear and brief
understanding of tasks that are to be completed during the process of hiring new employees.
These policies will help in saving the time, money and efforts of the organization. The HR policy
of recruiting and hiring states that how a position is being offered in public, who will be the
interviewing candidates and who are the interview takers. Also the different types of documents
that is required in the process of interview.
2. Safety policies - In general safety policies are those who ensure that employees must have a
safe work environment and culture. These HR policies may be overlapped upon the conduct
policies in some ways (Ali, 2019). The safety policies ensure how to report physical or emotional
safety of the employees in the work place. Safety policies also include how an employee can take
wise decisions that are occupational safety and health administration complaints. The company
can also take benefits of safety policies when there is any property or data loss of the company.
Door locking rules and regulations and the use of passwords and CCTV cameras are some
examples of safety policies.
3. Disciplinary and termination polices - One of the most important and major HR policy that
is to ensure the consistent and fair treatment of all employees. This policy becomes more
important when a company takes decisions regarding disciplinary actions and termination in
order to establish discipline in the organization. These policies mainly addresses whether
different policies are violated and fair and same decisions for same kind of mistake for every
employee in the organization. These policies became more important when an organization is
thinking to diversify its business across the globe which requires high level of discipline in the
organization.
4. Conduct policies - These are the policies which ensure the behavior of every employee in the
organization towards other employees in the organization. It is also known as appropriate

workplace behavior. These policies also define issues regarding dress code and sexual
harassment. And it is important to ensure proper follow of code of conduct in the organization. It
is also important that these policies must address the issues in an written format for every
incident which is not appropriate as per rules and regulations. The rules and regulations that are
being followed didn't give any right of sexual harassment to any employee and this policy
ensures these matters.
Importance of HR policies as per the Modern workplace -
 Provides frame to perform task - HR policies provides the businessman an outline
which helps the manager to perform his operations correctly and in a best way which
reduces cost and saves time of the manager. These policies also communicate values and
expectations about how the work is to be done in the organization (HR Policies, 2017).
By providing a frame and outline about how the work is to be done makes the work of
employees easier and reduces the chances of wrong interpretation and losses.
 Provides safety assurance - The HR policies also ensure economic and physical safety
by providing different measures to ensure safety in the organization. The safety in the
organization must be ensured to provide a safer work environment for the employees by
whom the employees will be happy and satisfied. The satisfaction of the employees will
result in success and growth of the organization. These HR policies also ensure physical
safety of each and every employee by providing various ways and rules which makes the
working environment safer.
 Helpful in recruiting new employees - HR policies are also useful in the recruitment
process of employees as it makes the recruitment process easier and detailed (Straub,
Vinkenburg and Hofmans, 2018). The recruitment process is too lengthy but due to HR
policies the work of every person is divided in such a manner that the recruitment process
becomes too easier and the workload of every employee is reduced which also increases
motivation level due less and systematic functioning in the workplace and in the whole
organization.
 Provides Guidance - HR policies provides a written guidance for managers and
employees about the ways and techniques to handle a number of issues related to
employees and employment. These policies play a vital role in effectively and practically

implementing the strategies of the organization. These all makes the HR policies most
important element in the growth and diversification of the business.

CONCLUSION
It has been concluded from the above study that business structure means the firm has to
done legal consideration in order to run a business. It has been determined that Angel investor is
best way for the startup as a source of funding. Primary sector is the base for all the economic
activities performed in an economy, it is also known as agriculture sector. Secondary sector
converts the raw materials extracted by primary sector into finish goods, for examples, textile
industries, cement industries and manufacturing industries etc. Tertiary sector establishes link
between primary and secondary sector. The main aim of this sector is to conduct smooth flow of
services and goods across the economy. It has been summarized that HR policies provide
transparency and consistency to the managers and employees, and helping them to groom
physiological contract and create a positive working environment.

REFERENCES
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