Different Types of Companies and Business Structures: A Study on Internal and External Factors Affecting Business

This report discusses the different types of companies and business structures, including sole traders, partnerships, limited liability companies, public limited liability companies, and cooperatives. It also analyzes the internal and external factors affecting businesses, such as political, economic, social, technological, legal, and environmental factors.

Business in practice

Contents
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
Section 1- Different types of companies and how they work......................................................1
Section 2- Different companies from sole traders to cooperatives and Limited Liability
Partnerships..................................................................................................................................3
Section 3- To consider different business structures and how the external factors affecting the
business........................................................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
A business refers to an organisation or an enterprise which is engaged in industrial, commercial
or professional activities. Generally, business is said to be an occupation, profession, or trade or
commercial activity which consists of producing or selling of goods and services in exchange of
profits (Wang and et.al., 2021). Through business, consumers can satisfy their requirement of
high-quality goods and services and offers employment to the people who want to generate
income and improve the quality of life. It can be for profit or non-profit motive. There are
various types of businesses in world such as sole proprietorships, partnerships, limited liability
companies, etc. The report discuss about the different types of business or companies running in
today's world as compared to Marks and Spencer and also the internal and external factors
affecting them.
MAIN BODY
Section 1- Different types of companies and how they work.
In today' s world, there are various types of business or companies running in the market which
are detailed below-
 Micro business- It is defined as a small business who employs fewer than ten people and
requires less capital investment as compared to others. This type of businesses get
difficulty in getting credit and funding for startup and expansion. Micro business has to
follow legal formalities in starting up their business as in the same way of other larger
businesses. Their operation is on the simple basis and has the ability to grow in the
market. There are various types of microbusiness such as independent contractors,
freelancers and small organisations. The benefit of starting a micro business is that they
are flexible to change as they not required to adapt to several levels of approval, decision
making and strategies (Roper, 2018). These types of businesses enjoy the freedom to
choose their career paths as they have the flexibility of independent lifestyles. But there
are some drawbacks which needs to be considered when starting a business like this as
they has the limited access to resources and are having a high-risk nature which results in
possibility of failure.
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 Small business- It is defined as a privately owned corporation, partnership or sole
proprietorship which employs fewer than 100 people and generates a less annual revenue
as compared to a corporation or a regular-sized business. The small business is important
for the entrepreneurs as they provide opportunities and create meaningful jobs with
higher job satisfaction than at the positions in the large and traditional companies. This
type of businesses requires less capital investment and fewer machines to operate as they
are producing goods and services on the small scale. These industries doesn't invest more
than one crore and a few examples of small scale businesses are candles, local chocolate,
toothpick, pen, paper, etc. They are owned by a single owner and all the management
works are controlled by the owner. They have the same flexibility to sudden changes as
of micro business. These companies utilize local and immediate available resources.
 Medium size business- It refers to that businesses which is larger than small business but
lesser than large businesses. They are defined under the Companies Act 2006 and
employs up to 500 peoples. These types of businesses may be family owned or managed
businesses as the ownership is separated from the management. These businesses doesn't
require much more capital and they can easily adjust the balance of short-term and long-
term debts. They have the flexibility as they can easily interact with their workers and
provide quickly feedbacks to them and leads to a positive environment in the workplace.
The medium size businesses deals with more than one bank and use different types of
financial institutions for their funding. They are operated and established in the mature
markets and assumes high growth (Opute, 2020). The working of these businesses is by
offering PTO days to their workers.
 Large size business- A business is said to be a large size business when their category is
above-average of business size and operates on the large scale. The large size business
has high economies of scale and hires a lot of labour. They generates lot of revenues and
the capital investment is high as compared to others. These type of businesses have a
higher competitive capacity than the small businesses. They can easily attract
professionals or specialists and target national and international markets. The large size
businesses like Marks and Spencer which is a large multinational company and offers lots
of opportunities to their workers. They can easily raise their funds from the capital
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market or financial institutions. These types of firms have to do many legal formalities to
register their business.
Section 2- Different companies from sole traders to cooperatives and Limited Liability
Partnerships.
There are various types of companies from sole trader to cooperatives and limited liability
partnerships which are listed down-
 Sole trader business- A sole trader business is a type of business which is owned and
run by single person and has no legal distinction between the owner and the business
entity. The sole trader business has to follow a process called incorporation to register
themselves and has the flexibility of less paperwork. The advantage of being a sole trader
is as they has less responsibilities, simple registration, get started immediately and many
more benefits as well (Harris, 2019). The drawback of being a sole trader is unlimited
liability and the sole trader is the only one who is accountable and responsible for
everything. The few examples of sole trader business is photographers, plumbers,
hairdressers, etc.
 Partnership- It is a type of business which has a formal agreement between two or more
than two parties. The parties who agree to form a partnership must agree to be the co-
owners, distribute responsibilities and share profits or losses on the agreed basis. It is
registered under the 'The Indian Partnership Act 1932' and it is formed with the mutual
consent of the partners. It is mandatory to have at least two parties to form a partnership
which work towards the same goal. In a partnership, every partner has unlimited liability.
Through this, the firm can access to knowledge, skills, experience and leads to a better
decision making.
 Limited liability business- It is a business structure in the US which protects their
owners from the personal responsibility for their debts or liabilities. These types of
businesses do not pay taxes on their profits directly and it is a hybrid between a
partnership and a corporation. They has separate legal existence and has limited liability.
It is a type of business entity which is owned and managed by the members and may have
one or more than one owners. There are some advantages of forming a limited liability
company as has an easy startup process, less compliance paperwork, few ownership
restrictions, charging orders.
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 Public limited liability business- It is a type of business entity which is owned by the
shareholders and managed by the directors. They can offer their shares to the public and
has limited liability. This type of companies is registered under the 'Company Act 2013'
and is a strictly regulated firm. The advantages of PLC is that it can improve the capital,
spread the risk to the public, and has growth and expansion opportunities. To register the
firm as a PLC, there are various rules and regulations that should be followed by the firm.
Marks and Spencer is a public limited company and offers shares to the general public
through the stock exchange. In 1926, the firm becomes a PLC and funding the
transformation from penny bazaars to high street superstores.
 Cooperative- It is a company or an organisation which is controlled and owned by a
group of members who work together to meet a common goal. They are the people-
centered enterprises and their main purpose is to realize the economic, cultural and social
needs of the organisation. The cooperative firm has an advantage of equal voting rights
for their members and there is no limit on the number of members (Fleacă and Jakubiak,
2018).
Section 3- To consider different business structures and how the external factors affecting the
business.
Organisational structure refers to the system which focuses on that how certain activities are
directed to achieve the organisational goals. Generally, it is a term which determines that how
information flows between the levels within the company. If there is a centralized structure in the
firm, the decisions are flow from top to bottom. While if there is a decentralized structure in the
firm, the decisions are distributed among various levels of the organisation. The firm has to
remain efficient and focused to have an organisational structure in their workplace. There are
various types of organisational structure which are detailed below-
 Functional structure- It is a type of organisational structure which helps the firm to
organize their company into different departments on the basis of expertise. In this
organisational structure, there is a top down hierarchical structure and each department
has to report to their senior management. Through this organisational structure, the firm
can offer stable work environment to their employees and the department may leads to
greater efficiency. Marks and Spencer has to follow this type of organisational structure
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in their workplace as it can enables better teamwork and also helps the organisation to
achieve their goals.
 Divisional structure- It is a type of organisational structure where the people are
grouped together on the basis of product or service they provide. This type of
organisational structure is used by the large organisations. It is a type of organisational
structure which helps those businesses who wants to concentrate on a single product or
service. Through this structure, Marks and Spencer can concentrate on their single
product or service (Lepinoy, Heide and Moore, 2022).
PESTLE analysis is a framework or model that studies the key external factors affecting the
business. This type of framework is commonly used to evaluate the business environment in
which a firm operates. The macro environmental factors include political, economic, social,
technological, legal and environmental factors.
 Political factors- These are the factors which drives by the government actions and the
policies. The political factors include corporate taxation, free trade disputes, other fiscal
policy initiatives, antitrust and other anti-competition issues. The tax rates of the
government affects Marks and Spencer as if the government tax rates increases, it will
automatically increase the cost of products or services which may reduce the overall
sales of the company.
 Economic factors- The economic factors include interest rates, exchange rates,
inflation rates, etc. which affects the business. The lower interest rates can help the
company to arrange financial resources.
 Social factors- The social factors include attitudes, beliefs, traditions and
demographics. Marks and Spencer has to hire local peoples to benefit the society as it
leads to increase the employment.
 Technological factors- It can affects the firm in a positive as well as negative manner.
Marks and Spencer has to adapt to new technologies and innovations to maintain a
competitive edge in the market (CUNDARI, 2020).
 Legal factors- The legal factors include the industry legislation, licenses and permits
required to operate, employment and consumer protection laws, protection of
intellectual property. Through this regulations and laws, the firm may serve as a
protective layer and it is mandatory for them to understand the laws carefully.
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 Environmental factors- It includes the natural factors like weather, climate change
and pollution which can affects the business. Marks and Spencer has to concentrate on
these factor as they are working in a retail industry (Beynon-Davies, 2021).
CONCLUSION
In this report, we concluded about the various types of business on the basis of their sizes and
types and also analysis the organisational structure adopted by the Marks and Spencer which
helps them to achieve their goals. The report also discuss various types of companies such as
sole trader business, partnership, limited liability business, public limited liability business and
cooperative. Further, we also analysis PESTLE model to understand the various external factors
that affects the organisation. At last, Marks and Spencer has to focus on their political and social
factors as they are a multinational company and the changes can be positive as well as negative
for the company.
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REFERENCES
Books and Journals:
Beynon-Davies, P., 2021. Business Motivation, Strategy and Evaluation. In Business Analysis
and Design (pp. 317-337). Palgrave Macmillan, Cham.
CUNDARI, V., 2020. Creating Shared Value: the way to reimagine social change. How to make
social problems a profitable business solution.
Fleacă, B. and Jakubiak, M., 2018. Modeling Processes to Meet Organisational Objectives.
FAIMA Business & Management Journal, 6(2), pp.57-65.
Harris, T., 2019. What is a company?. In Start-up (pp. 39-51). Springer, Cham.
Lepinoy, O., Heide, G.V.D. and Moore, C., 2022. Some Changes Are Invisible to the Eyes:
Transformation of Business Models, Organizations, and Cultures. In Innovation in
Construction (pp. 355-408). Springer, Cham.
Opute, A.P., 2020. Small and medium enterprises marketing: Innovation and sustainable
economic growth perspective. In Entrepreneurship marketing (pp. 13-30). Routledge.
Roper, S., 2018. Understanding micro-businesses in Northern Ireland.
Wang and et.al., 2021, August. Micro-Enterprises Risk Management under Epidemic. In 2021
5th International Conference on Business and Information Management (pp. 101-104).
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