Types of Companies and Business Structures

This report covers various types of companies and their functions, including micro, small, medium, and large businesses. It also explains different business structures such as sole traders, partnerships, limited liability partnerships, public limited liability businesses, and cooperatives. The report further discusses how different organizational structures affect business productivity and how external factors like PESTLE analysis can impact business performance.

Business Management with Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
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Contents
Introduction 2
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Various organizations engages in different commercial activities having a common
goals to generate profit. These organizations are engages in commercial, industrial
and professional activities. For commencing a business, it is needed to complete
formalities and documentation for incorporation of an artificial entity. This entity is
referred as company. There are various types of companies which are opted by
entrepreneur based on nature and size of business. This project report will cover
types of companies and various business structures and internal factors affecting
business.
Section 1: Different types of companies and how they work
P
Section 2: Different companies from sole traders to cooperatives
and Limited Liability Partnerships p
Section 3: Different businesses structures and internal factors
affecting business p
Conclusion p
Reference List p
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Introduction
The aim of this report to examine various types of companies along with their
functions. In addition to that, it will cover different companies and their types. At last,
it will cover types of business structures and how internal factors can affect business.
Section 1: Different types of companies and how they work
Micro business:
Micro business may be referred as a business enterprise that employs less than 10
people (Harris, 2019). They are opted by many people who are not capable of having
huge capital. These types of businesses are often run by freelancers, solopreneurs
who starts a business with very small capital. It is needed to utilize resources in a
well structured manner or it will negatively impact on its operations. It faces many
challenges than small business and for the owner of micro business, it is needed to
create operations , scaling measures and capital needs which are significant to micro
business entity. It is operated by sole proprietor and it must need to spread in
various roles for smooth functioning of business.
Working of Micro Business
 Setting up of a formal legal structure.
 Setting up of marketing, management, operations and financial plans.
 Getting business licensed and permit.
Small business:
Small business may be referred as an entity which is privately owned or sole
proprietorship which has less number of employees along with less annual revenue
than a regular sized business. These types of businesses often implement same
quality management system as found in larger organization. They also face
challenges while operating business such as fluctuation in market condition, dynamic
environment and shortage of working capital (Cott, 2021). Upper management and
internal communications are straightforwards in small businesses. This type of
business engage in producing products and services on a smaller scale. It plays an
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important role in economic growth and creates employment opportunities for many
unemployed people. The owner invests its capital in acquiring machinery and on
other essential components which are needed to operate business. These type of
business works on small scale and engages in various types of businesses. It offers
flexibility to workers
Medium size business:
Medium sized businesses may be referred as a business entity that have up-to 250
employees. These types of organizations are well established and have an
observable track of activities which can be used in decision making. It is beneficial
for investors too as they can assess current position of company and based on
financial statements, makes decision. The financing requirements in medium sized
business varies from nature to nature of business and are articulated based on short
term cash flow requirements. The financial structure of medium sized business is
actively managed by in-house professionals and manager who have experience in
this particular field (Fletcher, Pierre and Tham, 2019). The working of this type of
organization, have a hierarchy and a chain of command which is followed by
employees at every level.
Large size business:
A large size business may be referred as an above average size business that
operates at large scale and have extensive labor for its functioning. It operates at
large level and generates lot of revenue. It contributes a major part in economic
development of country. They tend to target national and international market.
Companies of large scale business have higher competitive capacity as compared to
small sized business and operates at various production facilities as well as rely on
advanced technology and techniques.
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
It may be referred as a simple business structure in which one individual is liable to
run business and owns entire business (Jaakkola and Hallin, 2018). Sole proprietor is
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responsible for his decision and enjoys higher profit. He is entitled to get all profits
and and is liable to all losses too. He undertakes the responsibility of operating
business and carry out all activities solely. A sole trader business do not have
separate legal identity to its owner. Sole trader have full control over business, on its
assets and profits.
Partnership:
Partnership may be referred as a formal agreement between two or more individuals
who are agree to manage and operate business along with sharing profit. In this type
of business, partners agrees to share profits and loss equally or as per partnership
deed while operating business. It is suitable for those who have common goal but
not have adequate capital to commence business individually. Risk is diverged
among partners and makes it less risky than sole trader (Islamy and Mubarok, 2020).
Limited liability business:
Limited liability partnership may be referred as an organization which allows for a
partnership structure in which each partner's liability is upto the amount he have
invested in business. This type of business are flexible, legal and tax entity which
allows partners to get benefit from economics of scale by working collaboratively that
reduces liability for actions of other partner. Limited liability means that in case of
failure of partnership, then creditor's cannot go after personal income and assets of
partner. It is commonly engages in professional business such as wealth managers,
law firms and accounting firms.
Public limited liability business:
Public limited liability business is controlled and managed by governmental body and
is liable to full extent if its assets but the liability is limited as per in ration of capital
contribution. Some or all partners form a limited liability similar to shareholder
corporation. Partners have power to control the business and can take decision
collaboratively. But it is controlled and managed by government and complies with all
laws and legislation.
Cooperative:
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Cooperative company may be referred as a business which is operated and owned
by and for benefits of its members. This type of business is formed when various
people identify an unmet need. A cooperative company may or may not incorporate
but should file a document stating membership responsibilities and requirements. It
is usually run by elected boards. This type of business are commonly found in
energy, agriculture, arts and financial.
Section 3: Different business structures and external
factors affecting business
3.1 Identification of different organizational structures and
explaining how does organisational structure affect business
productivity
Functional organizational structure- This type of organizational structure is used to
organize workers and they are grouped based on their skills and knowledge. In this
structure, each department is allocated to head and roles and responsibilities are
being assigned. Functional organizations have specialized units which reports to a
single authority, called top management. Each department is liable for this role as
they have own vertical structure. Workers in functional structure communicates with
each other and then department head communicates with other department. All the
departments of an organization needs to be streamlined for smooth functioning of
business. There are various advantages to functional structure as by grouping
employees of similar grades or skills can make work more effective and efficient.
Time taken in learning is not that much as there is little change in roles of workers.
The hierarchy of functional structure is simple which makes it easier for subordinates
to report to one manager rather than more manager. This facilitates in streamlining
communication and helps in minimizing confusion among employees. As the work is
standardized and makes it easier for employees to boost self confidence (Martinez
and et al., 2022). In addition to that, it also leads to increased morale among
employees and company can reduce cost by retaining employees. Many companies
have opted this type of organizational increases which leads to increased
productivity of employees. Subordinates are aware about their roles and
responsibilities so it makes it easier to attain organizational goals effectively and
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efficiently. It is imperative for company to effectively use this structure as it facilitates
in increasing overall productivity of company. It also facilitates in reducing employee
turnover by which company can save its overall cost of hiring and training cost. In
addition to that, it also provides foster working environment to employees in which
they feel valued part of organization as well as works with peak potential in order to
attain organizational goals within time frame period.
Divisional structure - In this type of organizational structure, various departments
are created on the basis of territory, products or region. For each unit, divisional
manager is responsible for performance over their division. It also organize activities
of business around market, geographical, services and products groups. Each
division consist have different set of functions and makes it easier for divisional
manager to take decision. Thus type of structure is useful in decision making as it is
clustered at division level so as to react more quickly to local conditions. It is
beneficial for those companies who has many regions, products and markets. This
organizational approach makes it easier to assign responsibilities for results and
actions. It is highly beneficial in those market in which there is great deal of
competition in which divisional managers can shift direction by altering strategies for
betterment of business. This structure allows in taking decision downward in
organization that may help in enhancing productivity of company. Along with this, it
facilitates in taking decision faster in case of dynamic business environment and
makes company more efficient.
3.2 How different external factors affect the performance of a
business – PESTLE Analysis
PESTEL analysis may be referred a business framework which is used to identify
various external factors which may affect business operations (Dungan, 2017). It is
needed for company to undertake this framework while framing strategic planning.
By this, company can mitigate risk by altering its current strategies. Following are
some factors which can affect company's performance.
 Political – These factors came from governmenyt influences and have ability
to affects business in either positive or negative manner. It encompasses
various factors such as change in political power, change in tax policies,
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change in fiscal policies and tariff rates can highly impacts business
operations.
 Economical- These factors relates to economic performance of company. It
may include change in demand and supply of products and services,
fluctuation in exchange and inflation rates. High inflation rates can adversely
impact on business. Change in interest rates, economic growth pattern and
Foreign Direct Exchange can be taken into consideration in economical
factors.
 Social -Every country have different set of values and unique mindset. This
uniqueness in taste and culture impacts on sales volume of company. Social
lifestyle and domestic structures are some elements of social factors which
affects functioning of organization.
 Technological – It is an important factor which is affecting business in
modern era. It have a significant impact on consumer behavior and
companies have to make their process automated so as to provide convenient
to customers. Rapid change in technology affects business in positive way but
for small companies, it becomes complex to integrate technology due to high
cost.
 Legal – Laws and legislation changes from time to time and it highly affects
business operations. Organization needs to comply with all rules and
regulations for smoother functioning of business.
 Environmental – These factors relates to natural environment and it affects
various industries such as agriculture and farming. Due to natural calamities,
kt affects business operations.
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Conclusion
from the above project report, it was concluded that there are various types of
companies such as micro, small, medium and large and categorized on the basis of
certain factors. In addition to that, in sole trader, business is commenced and
operated by proprietor while on the other hand, in partnership, business is operated
and controlled by two or more individuals having same objective for commencing.
Different type of organizational structure helps company in making it more productive
and efficient. At last, various macro level factors affects business organization in
either positive or in negative manner.
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Reference List
Cott, P., 2021. Legal matters: What is the best business structure for you?., pp.36-37.
Dungan, A., 2017. Sole proprietorship returns, tax year 2015. Statistics of Income. SOI
Bulletin, 37(2), pp.2-28.
Fletcher, K., Pierre, L.S. and Tham, M. eds., 2019. Design and nature: A partnership.
Routledge.
Harris, T., 2019. What is a company?. In Start-up (pp. 39-51). Springer, Cham.
Islamy, F.J. and Mubarok, D.A.A., 2020. The effect of organizational structure on the
implementation of knowledge sharing. In Advances in Business, Management and
Entrepreneurship (pp. 547-551). CRC Press.
Jaakkola, E. and Hallin, A., 2018. Organizational structures for new service
development. Journal of Product Innovation Management, 35(2), pp.280-297.
Martinez and et al., 2022. Pestel Analysis and the Porter's Five Forces: An Integrated Model
of Strategic Sectors. In Handbook of Research on Organizational Sustainability in Turbulent
Economies (pp. 292-314). IGI Global.
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