Different Types of Businesses and Organizational Structures

This report discusses the different types of businesses based on their scale of operations and legal structure. It explores micro, small, medium, and large businesses, as well as sole proprietorships, partnerships, and limited organizations. The report also examines various organizational structures and their impact on productivity. Additionally, it analyzes the influence of the external environment on business operations.

Individual Report

INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
Concept of different businesses on the basis of their scale of operations.................................................3
Concept of different types of businesses on the basis of their legal structure..........................................4
Different type of organizational structures and their impact upon productivity of firm...........................7
Impact of external environment on operations of business......................................................................8
CONCLUSION.........................................................................................................................................10
REFERENCES..........................................................................................................................................11

INTRODUCTION
In an economy, there are various sectors of getting earnings for lives and one of them is
to involve in business. There are several ways of involving oneself into business and there are
certain levels on which a business can operate. This report is focusing on discussion of different
types of business on the basis of size, such as, micro, small, medium and large size businesses. In
addition to this, a business can also be divided into different categories on the basis of their legal
organizational structure, such as, sole trader, partnership, limited liability business, public
liability business and cooperative. Furthermore, there are different organizational structures those
can be adopted by a business within the place. These organizational structures are also affecting
the productivity of the business (CHIRIEAC, 2017). To analyze the company’s performance and
its operations, it is essential that there is an inspection into external environment and their impact
on firm.
MAIN BODY
Concept of different businesses on the basis of their scale of operations
There are several levels and scales on which a business can operate in a market place.
These levels are divided on various ratings. Some of the major types of business divided on the
basis of scales of their operations are micro, small, medium and large organizations.
Micro organizations
Micro organizations are the very small scale of firms and they are coming at the lowest level of
economy.These are often known as micro enterprises. These can be defined as those
organizations which fulfill any two of the conditions mentioned below:
 a turnover of £632,000 or less
 £316,000 or less on its balance sheet
 10 employees or less
Small sized organizations:

The definition of a small and medium-sized enterprises (SME) varies around the world, but in
the UK a business is held to be an SME if it meets any two out of the three following criteria:
 turnover of less than £25m
 fewer than 250 employees
 gross assets of less than £12.5m
Mid size business:
Technically speaking, mid-sized businesses could also fall into the SME category however the
UK government defines a mid-sized business specifically as having either or both of the
following:
 UK turnover of £10 million or more
 At least 20 employees
Large size business:
Large businesses are defined as those with more than 250 employees, and account for 40% of
UK employment and more than half of turnover.
Concept of different types of businesses on the basis of their legal structure
A Sole proprietorship commonly known as sole broker is a business set up which is
owned and operated by an individual. He is the owner and manger both of the firm. All decisions
are taken by this individual only. From legal point of view, the owner or the manager or the sole
proprietor is not treated as a separate legal entity from the business. This single identity of
business and owner results in responsibility of that individual for all the obligations on business
and also for all the legal issues. He is only investor in the business and this fund is termed as
capital. For this investment, owner is getting all the profits that are generated from that business.
All obligations or liabilities created by the business are liable against that trader. All risks are
borne by him and there is no outsider participating either in profit or loss sharing, nor in taking
up the risks. Due to no separate legal entity in eyes of law, there is an unlimited liability of the
proprietor and his own personal funds can be used to pay off the debts of business, in case of any

insufficiency produced by the business. There can be employees or agents appointed by the
proprietors, but in that case also, the sole responsibility lied on the hand of sole proprietor and no
one can participate in risk taking activity. Sole proprietorship is the simplest form of business
and can be started with some nominal formalities on paper. The most common example for these
types of ventures is SME’s. they are talking up the status of sole trader and are requiring just a
little time to fulfill their tasks. This type of business is operating on a very small scale and
therefore, the business overheads come at very nominal rate.
Partnerships: this is an association of two or more individuals who have come together to share
profits and losses on an agreed rate to take off a business activity. All the relationship between
participants in this business activity is mentioned in a document which is referred to as
partnership deed. These participants are called as partners. This deed contains all information
related top extent of control of each partner, their respective roles and responsibilities in the firm
and also the structure of the firm, etc. the basic motive of this document is to present
stakeholders with a clear picture of roles of partners in the firm and it also ensure that operations
of the firm are taken forward in a best possible manner. This agreement can be written or oral
between partners. The partnership act do not present any requirement that this document should
be in written. Yet, if this document is presented in a written manner, than it will be termed as
partnership deed. Similar to sole proprietorship. Similar to sole trader, partnership also presents
partners with unlimited liability that means that in case of any insufficiency presented by firm,
partners will be liable to settle off the charges against firm. There are many cases in the market
place, which have started their business in the legal structure as sole proprietorship, but gradually
converted themselves into partnership firms.Some of the partnership firms also enjoy the benefit
of limited liability and these firms are known as limited liability partnership. This type of
contract is continuously gaining recognition in the market. The main characteristic of this firm is
that partners have limited liability and they do not have to stake their personal capital to settle off
the liabilities on account of firm.
Limited organizations: These are the companies those are incorporated with a view of
enjoying the benefit of limited liability. These companies have separate legal entity in eyes of
laws. This means that owner or management have separate legal status than that of the company.
In UK, these organizations are incorporated with an identity of legal person in the company’s

house. At this place, these organizations are allotted with a unique company number which
becomes their identity or name in legal books. Companies that are settled under their unique
number must possess a constitution. This document is defining all the norms that will govern the
operations of the company so that shareholders and directors can easily regulate and take on their
responsibilities. As it is having a separate legal identity, therefore, it can have their own name,
they can own assets or can enter into contracts. Companies can sue or can be sued as well.
Owners and management of a corporation feels protected due the reason that they are having a
separate legal identity and this means that they cannot be hold responsible for the debts or
liabilities in name of company. They can be held responsible till the extent of their initial
investment in the company. There are two categories of these corporations. They can be either
limited by share or by guarantee. The first type of companies is that in which the liability of
owners are fixed to the extent of the mount of shares that is held by shareholders. On the other
hand, the other type of company is that in which liability is fixed to the extent of the guarantee is
given to a fixed amount and their liability is fixed to that extent only in case when company
becomes unable to pay off its debts. Companies are formed in two major forms these are private
and public companies.
Private limited companies: these are generally very small scale organizations those are
owned and operated by private individuals and their liability is limited to shares. Due to small
scale operations, the company is privately held and also has few shareholders. For example,
according to law, in UK, a private company can have maximum 50 shareholders. Furthermore,
the company is not allowed to trade their shares within general public and this will mean that
they are not able to list themselves on stock exchange. According to provisions of governing act,
in UK, there is no requirement of any minimum capital to start off business as private limited
company. Only one necessary condition needs to be fulfilled that at the time of starting or
incorporation, at least one share should be issued. There are several SME’s those are operating
under the legal structure of private limited companies. The main benefit of this structure is that it
gives protection to shareholders and also attempts to reduce the personal risk and with this it is
also giving them the advantage of raising capital through issue of shares.
Public limited companies, commonly known as PLC, are limited liability companies
those are free tp sale and exchange their shares freely basis in stock exchange. There is no

requirement of minimum capital in case of private limited companies, on the other hand, in case
of public limited companies; it is subjected to a minimum requirement of £50,000.00 in the UK.
Furthermore, there are several requirements those need to be complied with. For example,
company should appoint two directors and a company secretary and also required to file their
return every 12 months. In context of governing laws in UK, a public limited company is not
allowed to sale their shares if they do not possess a trading certificate. This certificate is issued
by companies’ house and they are also forced to include PLC to end of their name. A PLC is
basically free to issue different types of shares under head of ordinary shares, preference shares,
or redeemable shares also. The main advantage to settle down the business under legal structure
of public limited company is that they can raise huge amount of fund from general public
through issues of shares. One single disadvantage that is associated with this structure is that it
involves very high cost which is not affordable by small businesses.
Different type of organizational structures and their impact upon productivity of firm
In a formal set up of business, there are different types of organizational set up which are
explained below:
 Line organisational structure: It is a type of organisational setup in which there is a direct
relationship and communication between various levels of the company. This structure
involves only line departments which have the sole responsibility of involving
performing tasks to attain the primary goal of that firm. To illustrate, in a typical set of
firm, there are majorly two types of line departments and they are production department
and marketing department, these departments are directly involved in the process of
achieving organisational goals and objectives. In this organisational structure authority is
formed and is following chain of command. (Shaqiri and Ceku, 2019).
 Functional authority organizational structure: in this jobs and roles are categorized in two
manner:
 Line position: it is a direct chain of demand that is formed in order to
achieve common organizational goals.
 Staff position: The line officials or supervisors have the immediate power
(known as line position) to be practiced by them to accomplish the
authoritative objectives. The staff officials or supervisors have staff

authority (i.e., position to exhortation the line) over the line. This is
otherwise called utilitarian power.
Impact of organizational structure on productivity:
 Managerial efficiency: Performance of employees and other staff members depends
heavily on the hierarchical structure of the company. If there is any fault in formation of
hierarchical structure than it will lead to decrease in efficiency of performance. Every
level of the organisational structure should be active and analytical so that problems can
be solved in optimised manner and there is no problem to any staff member. On the other
hand, if the organisation is having good and strong hierarchical structure in the place, that
it will lead to effective and improved profitability and productivity as well.
 Structural flaws: There are many cases in which the adopted structure do not follow or
suits the needs and wants of organisation thoughts and policies. This results in fault in
creation of a faulty structure. For example, if an organisation is having employees who by
nature are very creative and participative, but the management has adopted style of
autocratic management and there is serious line of command in the hierarchical structure.
This may lead to feeling of dissatisfaction among employees. Therefore, it is important to
first analyse the requirements of business and then adopt a suitable structure. There are
cases when authoritative structure has also lead to smoother operations with enhancement
of innovativeness and improved efficiency.
 Growth: The main motive of an organisation is to achieve maximised growth prospective
and this cannot be achieved without a strong organisational structure. As per above
discussion, it is pretty clear that an effective organisational culture is the most important
thing to produce better profitability. Increased profitability is the main element which is
required to achieve growth measures.
Impact of external environment on operations of business
Political environment: These variables are about how and how much an administration intercedes
in the economy or a specific industry. Essentially all the impacts that an administration has on
your business could be grouped here. This can incorporate government strategy, political
steadiness or precariousness, defilement, unfamiliar exchange strategy, charge strategy, work
law, ecological law and exchange limitations. Besides, the public authority may profoundly

affect a country's schooling framework, foundation and wellbeing guidelines. These are all
factors that require to be considered while surveying the appeal of a likely market.
Economic factors: these are the elements that are the determinants of economic performance.
Examples can be economic growth, exchange rates, inflation rates, interest rates, disposable
income of consumers and unemployment rates. All these elements are impacting the
performance of company either indirect or direct manner. These factors are affecting the
performance of a company as these factors are related with the impact on purchasing power of
the company. All these elements are affecting the main driving forces of a market and they are
demand and supply ( Smerek and Vetráková, 2020).
Social factors: This component of the overall climate speaks to the segment attributes, standards,
customs and estimations of the populace inside which the association works. This inlcudes
populace patterns, for example, the populace development rate, age appropriation, pay
circulation, vocation perspectives, wellbeing accentuation, wellbeing awareness, way of life
mentalities and social boundaries. These variables are particularly significant for advertisers
while focusing on specific clients. Furthermore, it likewise says something regarding the nearby
labor force and its eagerness to work under specific conditions.
Technological factors: These are the elements those relate with dynamically changing technology
and innovations those are coming up and affecting the operations of a company and also
industry. These impacts can prove to be favorable or unfavorable. This whole process relates
with technological incentives, range of innovation and automation in industry, research and
development tasks and also the technological alignment that employees of an organization has in
the company. These factors may also impact the decision making process of a firm of making
entry into a new industry. These factors are influencing the decision of launching a product or
outsourcing some processes, etc. These factor my impact the cost statement as well. For
example, if an organization is using latest technologies than it may lead to saving of cost in huge
manner and also if the company is using obsolete technology than it will lead to disruptive
operations with increased cost.
Environmental factors: these factors are coming up in front line of external environmental
impacts and are impacting the organization in huge manner. These impacts have received

attention in latest times only. This is due to shortage of natural resources and increased over
exploitation. Companies are leaving increased carbon footprints, pollution levels have increased.
These all things are leaving a bad impact over natural surroundings. These impacts are
incorporating huge changes natural ecological balance and thus, becomes important that
management takes care of these factors. Companies are adopting various practices, one of the
major practices is corporate social responsibility. Under this, companies are coming up with
several programs those support the idea of sustainability and environment protection acts.
Legal environment: Despite the fact that these elements may have some cover with the political
variables, they incorporate more explicit laws, for example, segregation laws, antitrust laws,
work laws, customer assurance laws, copyright and patent laws, and wellbeing and security laws.
Plainly organizations need to realize what is and what isn't lawful to exchange effectively and
morally. On the off chance that an association exchanges around the world this turns out to be
particularly precarious since every nation has its own arrangement of rules and guidelines.
What's more, you need to know about any possible changes in enactment and the effect it might
have on your business later on. Prescribed is to have a lawful counsel or lawyer to assist you
with these sort of things.
CONCLUSION
From this report, it can be concluded that there are various types of legal business
structures and organizational structures that are defined in business terms. These all different
organizational structures are impacting the productivity level in different manner. External
environment also have different impacts on business and its operations.

REFERENCES
Books and Journals
CHIRIEAC, R.M., 2017. Types of Offshore Companies. Conferința Internațională de Drept,
Studii Europene și Relații Internaționale, (V), pp.141-146.
Kypta, U., 2017. What Is a Small Firm? Some Indications from the Business Organization of
Late Medieval German Merchants. In The Company in Law and Practice: Did Size
Matter?(Middle Ages-Nineteenth Century) (pp. 10-33). Brill Nijhoff.
MISHULINA, O.V. and et.al., 2019. Comprehensive Assessment of Business Activity of a
Commercial Organization. Journal of Advanced Research in Law and Economics, 10(6),
pp.1824-1834.
Rinnekangas, R., 2017. Knowledge Management in Small and Micro Organisations: Case Study
on Knowledge Retention in Arts Consultancy.
Shaqiri, M. and Ceku, O., 2019. Types of Organization of Business Organizations and Their
Impact on Business Success.
Smerek, L. and Vetráková, M., 2020. Difference in human resources development in various
types of companies. Polish Journal of Management Studies, 21.