Understanding Business Organisations: Advantages and Disadvantages of Sole Trader and Partnership

This article discusses the advantages and disadvantages of sole trader and partnership business organisations. It also covers tall and flat structure of company along with different functions of business and the impact of organisational culture on business.

Understanding
Business
Organisations

Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Sole trader....................................................................................................................................3
Partnership...................................................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business organisation may be defined as a commercial entity which is engaged in various types
of activities such as professional, industrial and commercial in order to earn profit (Jansen,
Steenbakkers and Jägers, 2017). Profit maximisation is the main purpose of any business
organisation. It is concerned with managing the resources in such a manner that yield higher
profit. It is established on the basis of rules and regulations formulated by government. This
project essay will cover advantages and disadvantages of various types of business organisation
such as sole trader, proprietor and partnership. In addition to that, it will also cover tall and flat
structure of company along with different functions of business. At last, it will cover a brief
discussion of organisational culture and how positive culture can impact business organisation.
TASK
Sole trader
This type of business is also known as sole proprietorship and is run and manage by a single
person. He is entitled to take the whole profit of business. Following are advantages and
disadvantages of sole trader.
 Fewer Fixed overheads – the cost of commencing sole trader business is minimal and
incurs less cost as compared to company and other types of business.
 Complete control -The sole trader is having all the control o0ver business and can take all
the decision which will help him in generating more profit.
 Financially rewarding – The profit is not distributed as there is only a single owner and
he is entitled to have all profits (Rye 2020).
Disadvantages
 Unlimited liability –The sole trader is having unlimited liability that means that he is
liable and responsible for any outstanding expenses such as tax and rent payment.
 Sole responsibility – The sole trader is responsible for all the actions and responsible
for their decision. if the decision taken by him do not bring profit then he is the
person liable for same.
 Barriers to finance – In case of sole trader, it becomes difficult for them to opt
credibility and finance because of its unlimited liability.

Partnership
In this type of business organisation, two or more individual come together upon mutual
agreement to carry out a business enterprise and profit sharing equally or based on their
agreement (Formosa,, 2018).
Advantages
 Sharing the burden –As compared to sole trader, it allows to share loss in their
proportion rather than on shoulders of one as in case of sole trader.
 Access to knowledge and skill – Each individual is having special skills and that
they can utilise in their business in order to make more profit. This allows to
access various skills and knowledge to use in their business.
Disadvantages
 Difficult to take decision – It becomes difficult in case of partnership to take
decision as every partner have their own perception and knowledge and based
on that their opinion may be differ.
 Personally demanding – It may be possible that a person who is more active
in group can demand more profit because of his efforts that he have
contributed.
Tall structure may be defined a type of organisation structure in which the top management
authority, CEO sits on top of company and a chain of command having various levels
underneath. In case of hospitality industry who is having a long chain of business enterprises, the
CEO manages all the function and monitors each level so that he can take effective measures in
order to provide better customer experience (Bratton, Gold, Bratton and Steele, 2021). A flat
structure may be defined as a structure that have lower levels of hierarchy. This type of structure
is often taken by the small industries such as hotels and tourism industry. They do not have long
chain of command. The span of control is narrow in case of tall structure. Hospitality companies
opt this structure and the span of control in flat structure is wide. The cost of managing in
hospitality industry who is having tall structure is costly as there are many levels of hierarchy to
be considered. But in case of flat structure, the cost is lesser as there are not many levels of
hierarchy.

Human Resource Management facilitates in smooth functioning of business. The process starts
from formulating the policies that are required for job requirement and ends up at successful
business growth (Fletcher, Pierre and Tham, 2019). Thus, Human Resource Management is a
thread that binds all the resources of company in order to attain its objectives in a time frame
period. In today’s business world, organisation become more people centric rather than profit as
this approach will help them in getting more enhanced and skilled employees. It plays a crucial
role in defining success of any business organisation. It contributes in overall development and
growth of business enterprises. Production function may be defined as a process of getting
maximum outputs by minimum input. It helps in maximising the profits of company along with
minimising their expenses. This contributes the firm in becoming more efficienet so that it can
maintain a sustainable position in market. There are various strategies that helps the manage in
identifying the opportunities so that he ca take effective decision in order to yield maximum
output. It helps in understanding the number of inputs needed to obtain a specific number of
output. Operations functions may be defined as the process of managing the process of
formulation of goods and services. There are various steps involved in this step such as planning
the process, organizing the available resources and coordination with all elements in order to
effective control the whole process in order to produce goods and services of a company. This
business function requires effective formulation of strategies so that they can contribute towards
attainment of objectives. It also involves finance in order to meet daily business operations
smoothly. It is one of the essential element that is required for smooth functioning. It involves a
wide range of activities that are required to run a business. The employees should be provided
with training sessions so that they can enhance their skills and can perform task effectively and
efficiently. The business functions help in driving the enterprise towards attainment of goals. It is
the responsibility of top management to formulate effective strategies and allocate task to their
employees based on their skills and knowledge in order to accomplish in an effective manner.
The business functions must be carried out in an ethical manner as it reflects sustainability of
company. If these functions are not perform properly then it becomes difficult to achieve
organisational goals (Stone, Cox and Gavin 2020).
Organisational culture may be defined as the collection of underlying beliefs, values and
assumptions along with way of interaction that helps in creating a unique psychological and

social environment within an organisation. Every business organisation is having different set of
culture that makes it unique from others. In order to better understand the culture of company,
one should know the priorities. It helps in aligning the company’s vision and values with
employee engagement, productivity, retention ratio and many more. It is equally important as
business strategy and have the capability to bolster or erode the organisation. So it is needed to
have a positive culture that motivate the employees in working with their peak potential. It is
important to have a foster environment that push the workforce towards the attainment of goals.
It positively impacts on the functioning of business. A positive organisation culture helps in
increasing the employee engagement as they can feel valued and will contribute their best. It also
facilitates in reducing the turnover of employees as it makes the employees satisfied which lead
to reduced employee turnover. It also helps in increased productivity of company by providing
positive environment that makes employees satisfied and comfortable.
CONCLUSION
From the above project essay, it has been concluded that business management function plays an
important role in managing and developing business enterprise. In case of hospitality industry, it
is needed to formulate effective business strategy that allows them to render with better customer
experience. Every business organisation wants to expad its business oprations and it uses various
strategies that help in expansion. The business practices should be ethical so that it can place a
sustainable position in industry. For example, if a company is not operating its business in an
ethical way then it might not position and maintain its goodwill in market. The whole business
industry wants to make profit but it is needed to carry out function properly along with wellbeing
of workforce in order to make them satisfied in job.

REFERENCES
Books and Journals
Jansen, W., Steenbakkers, W. and Jägers, H., 2017. New business models for the knowledge
economy. Routledge.
Rye, J., 2020. What is the difference between a sole trader and a limited company?. In Setting Up
and Running a Therapy Business (pp. 132-134). Routledge.
Formosa, A.M., 2018. From a sole trader to a company: a legal and financial analysis (Master's
thesis, University of Malta).
Fletcher, K., Pierre, L.S. and Tham, M. eds., 2019. Design and nature: A partnership. Routledge.
Bratton, J., Gold, J., Bratton, A. and Steele, L., 2021. Human resource management. Bloomsbury
Publishing.
Stone, R.J., Cox, A. and Gavin, M., 2020. Human resource management. John Wiley & Sons.