Types of Companies and Their Legal Structures

This report discusses the different types of companies based on size and scope, and their legal structures. It also explores the impact of organizational structures on business productivity. Additionally, it includes a PESTEL analysis of Tesco PLC, highlighting the external factors that may influence its operations.

Types of companies

Table of Contents
INTRODUCTION...........................................................................................................................1
MAINBODY....................................................................................................................................1
Section 1...........................................................................................................................................1
Different types of companies......................................................................................................1
Section 2...........................................................................................................................................3
Legal structure of the different companies .................................................................................3
Section 3..........................................................................................................................................5
Different types of organisational structures and its impact on business productivity. ...............5
PESTEL analysis of Tesco PLC.................................................................................................6
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Company is a form of business entity that has rise immensely in the recent decades. The
development of business entity had set different types of companies based on its scope and
liability. However, there is no exact type of the company there are many factor affects to
identify company i.e. formation, control, ownership and liability. The following report present
the different types of the companies based on its size, scope and liability to shape competitive
strategies to combat market competition. Tesco is a leading and popular retail company in UK
and also beg off as the third largest retailer company in the world (Brogi and Lagasio, 2019).
This report work also illuminates the legal structure of different company based on types of
ownership. Moreover, there are some external factor that may influence operations of Tesco,
therefore following assignment also throw light on external environmental factor by using
PESTEL analysis tool.
MAINBODY
Section 1
Different types of companies
A company is a legal business entity that is formed with association of people that share a
particular common business objective.
Types of company based on size an scope-
Primary aim of every company is to earn profit, but its profit depends on the nature, size
and scope of the business organisation, according to Company Act 2017, companies based on
size are as follows-
1. Micro company-
A micro company is a type of very small organisation with limited scope. Micro
companies have not come under the section of the class 18 of companies listing in the fifth
schedule of the Company Act 2014. Moreover, micro company in UK have separated
accounting standard i.e. FRS in UK GAAP. Boss Brewery is a type of micro company which is
popular winning brand because of its craft brewery at South Wales (Chung, Jo and Lee, 2021) .
Boss Brewery is leaded by the solo lady and employed only 7 employees, however its revenue is
more than 1 million.
Characteristic & features of micro company-
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 Most of the micro company have single owner (in context to Boss Brewery, it is managed
and controlled by Sarah John.
 A micro organisation has only strength of employees less than 10, in reference to Boss
brewery, they have 7 employees. A micro company has annual turnover of less than 2 millions, Boss brewery has annual
turnover of 1 million.
2. Small company-
As per company's act of UK, a small company that is smaller in size and have annual
turnover less than 50 millions pounds. In UK, 60% organisations are small companies. Mostly
all the star-up are a kind of small company. Webexpenses is a type of SaaS organisation that is
providing software to various business organisations for improving the visibility of the expenses
by using online expense management system. Webexpenses has 69 employees
Characteristic & features of small company-
 A small company doesn't have annual turnover more than 50 millions pounds.
Webexpenses has annual turnover of 11 millions pound in 2020.
 A small company does not have employees more than 100, Webexpenses has 69
employees (Hensmans, 2019). Small companies are owned by a single or on partnership basis.
3. Medium company-
A medium company is one that has annual turnover more than 50 million pounds and has
blandish hierarchies. Smith brothers (contracting) Ltd is a medium size engineering service
company in UK. There are nine medium size company listed under the title of Smith brother
(contracting) family company with employees more than 120.
Characteristic & features of medium company-
 A medium size company has turnover more than 50 million pounds, Smith brothers
(contracting) Ltd, annual turnover of approx 68 million pounds in 2019.
 Medium size company are owned based on single, partnership, franchise, and limited
liability company. Medium size companies contributes much in the GDP of UK as well as medium size
company provides more employment opportunities.
4. Large company-
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Large size company enjoyed larger economy in the globalisation shed and has separate
market entity due to its multiple business operations, however, large companies have unlimited
liability. Tesco is a large retail multinational company with more than 55000 employees across
2500 stores (Hui and et. al., 2020).
Characteristic & features of large company-
 Large company has more number of employees in the complex organisational
hierarchical structure, Tesco has approx 55000 worker.
 Large company has more scale of business operations on routine basis. Tesco have 2500
stores across the various countries.
 Large company has annual turnover more than 50 million pound, Tesco have 1.3 billions
turnover as stated by the financial statement of the company.
Section 2
Legal structure of the different companies
In the eye of separate business entity, every company whether small or large has a
separate legal structure that illuminate how company should be operate to attain company's goal
and objective. Some form kinds of company entity are as follows-
Legal entity
type
Explanation Characteristics
Sole trader
business
Sole trader company are basic and simple
business structure where only single
person is managing, controlling and
funding the company. Sole business
trader company doesn't need to be
register with state, only need local
market license to start business (Iovino
and Migliaccio, 2019). Boss Brewery is a
type of sole trader company in which
business operations are managed and
controlled by Sarah John.
 All business liabilities,
profits and risk are subject matter
of owner only.
 There is need of very law
requirement to start businesses.
 No differentiation between
business and personal income.
 Suitable for micro and
small size companies.
 Have annual turnover less
than 1 million and employees not
more than 10.
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Partnership In partnership company there is need of 2
or more than 2 person who agreed upon
the mutual partnership deed to share a
portion of profit as well as business
liabilities. Partnership is a form of
business expansion strategies for many
small sole business trader. To expands
business operations outside UK
Webexpenses has integrated with
CIPHR to provide expense management
software with additional benefits of
streamline HR system. Other than this
 It is a form of business entitiy
in which more than 2 and less
20 people are given their
consent to start a business.
 There is agreement between
partners for the lawful
business called partnership
deed
 There is need of competence
of partnership, to provide HR
solutions with expense
management system,
Webexpenses has integrated
with CIPHR with competence
enter into partnership contrat.
Limited
liability
company
In limited liability company at UK,
company separate its business entity
from its owener and have separate legal
structure. LLC company are also known
as company limited by shares. In which
shareholder receive 100% of their
promised output. Smith brothers
(contracting) LLC is a company by
limited liability company by the shares in
which its shareholder have ownership
rights of its 9 companies.
 Having separate business
entity, LLC company can
owned and sales any asset on
its company name.
 Basically in LLC company,
owner of the business does
not posses personal liability
for business debts.
Public
limited
liability
company
A public company is one whose major
share ( about 51%) are owned by the
government of the UK. A public
company also has the right like private
 Public company are being
established by the
government of UK to act as
the accelerator for society
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company to sell out its share for raising
funds. Moreover, public limited
companies delivers low level of liabilities
to its shareholders. Tesco PLC is a type
of public and it is renowned name in the
UK retail industry and world's third
largest retail company (Jonathan, 2020).
welfare.
 There are 2 director and a
secretory as the owner of
PLC company.
 Usually, public companies
are larger in size.
Cooperative
company
A cooperative company is a type of
private company that is managed and
owned by its members. Black star co-op
pub situated in UK offer prime offer to
its members.
 Cooperative company are
formed to achieve specific
goals of the members.
 Cooperative company are
normally owned by its
member.
Section 3
Different types of organisational structures and its impact on business productivity.
1. Functional organisational structure
In functional organisational structure people are group together based on work speciality.
However, functional organisational structure is more effective, strong and productivity structure
for Tesco because this structure feature department based on its functional such as store
department sales department and customer service department. However, functional structure is
more suitable in context of Tesco to provide excellent customer service. To ensure effective
business productivity, Tesco need to ensure management hierarchy to adhere employee
performance in right direction.
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(Source: Functional organisational structure, 2020)
2. Matrix-
Matrix organisational is benefited with flexibility feature, Tesco can focus on priority of
project. In matrix structure, Tesco leveraged dual responsibility and authority for a employee,
however this may cause problem and confusion when employee receive order from two different
authority, it can weigh high employee workload and lower the business productivity
(Nwachukwu and Chladkova, 2019).
3. Divisional organisational structure-
Divisional structure operates like autonomous divisional units for a company that is
offering more than one product to customer. In divisional structure, organisational functions are
grop into a separte division where every product and service had its own employee head.
However, adaptability of divisional structure is a issue for Tesco as economy of scale is lost in
this strucuture and it is not as effective and specialised in compare to functional structure.
(Source: Divisional organisational structure, 2019)
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Illustration 1: Functional organisational structure, 2020
Illustration 2: Divisional organisational structure, 2019

PESTEL analysis of Tesco PLC.
Factors Analysis
Political In UK, there is political stability, but with the existence of Brexit, it creates
various business uncertainty. Moreover, Tesco has conducive business operation
in the political environment of different nations. Having operations in multiple
countries, only adverse affect of political factor is associated with import duty tax,
this is because Tesco imports its inventory from China. Home governance and are
encouraging Tesco to provide more employment, this in turn Tesco can meet
increase demands with its diversify workforce.
Economy Economic factors are a concern for Tesco as it can affect company's finacial
stability. Due to novel pandemic COVID -19 lock-down, many people loss their
jobs, thus income level of people fall down in various country. Due to this impact,
consumer are switching to cheap products, thus this reduce the sales ratio of
Tesco. Thus, Tesco should focus on the economical situation and lower its product
price to combat financial crises situations (Raguseo, 2018).
Social In fast phase of lifestyle, people prefer to buy everything on a single visi tunder
one roof, Tesco provide this facility to its user by providing all kinds of items
under one roof. Moreover, Tesco implied limited liability to its shareholder, so
organisation can raise more funds to invest in Corporate social responsibility. This
initiate raise brand awareness of Tesco which would raise business operations.
Technology Technology advancement with ITC have brought many opportunities to Tesco to
strengthen its business operations. Tesco introduce online shopping where user
can buy its product 24*7 and technology also made shopping convenient for
consumer to impart impressive consumer behaviour. Tesco is working on
introducing new technology for cashier less billing that evade long consumer line
for trouble free billing to improve consumer sales experience (Stalph, 2020).
Environme
ntal
Government and public have exercise immense pressure on Tesco to look over
environmental issue to benefit the society. Tesco have reduced carbon print of
60% by 2020. This societal step have levraged media coverage that broader brand
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awareness of Tesco.
Legal Legal factor are must obligatory regulations and guidelines that Tesco need to
follow up for smooth business running. In food retailing government of UK have
enforced some laws and ban unnecessary practices (Shafie and et. al., 2018). As
per the Equal pay act, Tesco is entitie of legal action if they pay under wage to
their worker, this affect organisational creditability and sustainable business
performance.
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CONCLUSION
As per the dynamics of carried out study, it has been analysed that a company is a form
of business entity that that is formed to conduct business, however it has been found that there
are different types of company based on the size segmented into micro, small, medium and large
business organisation. It has been evaluated that to form business competitive strategy a
company need to analyse and access its external business factor by using PESTEL intervention
tool.
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REFERENCES
Books and Journals
Brogi, M. and Lagasio, V., 2019. Environmental, social, and governance and company
profitability: Are financial intermediaries different?. Corporate Social Responsibility
and Environmental Management. 26(3). pp.576-587.
Chung, W. Y., Jo, Y. and Lee, D., 2021. Where should ICT startup companies be established?
Efficiency comparison between cluster types. Telematics and Informatics. 56. p.101482.
Hensmans, M., 2019. A new matrix for building platform portfolios: how companies can sustain
their leadership. Journal of Business Strategy.
Hui, A. and et. al., 2020. Exploring the impacts of organisational structure, policy and practice on
the health inequalities of marginalised communities: Illustrative cases from the UK
healthcare system. Health Policy. 124(3). pp.298-302.
Iovino, F. and Migliaccio, G., 2019. Energy companies and sizes: An opportunity? Some
empirical evidences. Energy Policy. 128. pp.431-439.
Jonathan, G. M., 2020. Information Technology Alignment: The Role of Organisational
Structure (Doctoral dissertation, Department of Computer and Systems Sciences,
Stockholm University).
Nwachukwu, C. and Chladkova, H., 2019. FIRM RESOURCES, STRATEGIC ANALYSIS
CAPABILITY AND STRATEGIC PERFORMANCE: ORGANISATIONAL
STRUCTURE AS MODERATOR. International Journal for Quality Research. 13(1).
Raguseo, E., 2018. Big data technologies: An empirical investigation on their adoption, benefits
and risks for companies. International Journal of Information Management. 38(1).
pp.187-195.
Shafie, N. A. and et. al., 2018. Effects of organisational structure on social value: Mediating role
of financial performance. Management & Accounting Review. 18(3). pp.1-30.
Stalph, F., 2020. Evolving data teams: Tensions between organisational structure and
professional subculture. Big Data & Society. 7(1). p.2053951720919964.
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