Types of Companies and Business Structures: A Study on Business in Practice

This report discusses various types of companies such as micro, small, medium and large size business along with their characteristics. It also describes various forms of companies such as sole trader, partnership, limited liability, public limited liability and cooperative along with their characteristics. The report also highlights different organizational structures and how they affect business productivity. Additionally, it analyzes external factors affecting business performance using PESTEL analysis.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
Submitted by:
Name:
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Table of Contents
Introduction...................................................................................................................2
Section 1.......................................................................................................................3
Discuss various kinds of companies and how they work ........................................3
Section 2.......................................................................................................................3
Describe various forms of companies from sole traders to cooperatives and
Limited Liability Partnerships ..................................................................................3
Section 3.......................................................................................................................4
Different business structures and external factors affecting business.....................4
Conclusion....................................................................................................................6
Reference List ..............................................................................................................7
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Introduction
The term company is defined as the legal entity incorporated in order to
operate and engaged in the business activity and enhance their profitability and
productivity. It is mainly group of individuals working together in order to achieve
desired goals and objectives and enhance overall performance of the company and
satisfying the needs and wants of the customers (Gonias and et. al., 2018). This
report highlights various types of company along with their characteristics also
various forms of companies including their characteristics. In addition to this various
business structures and how these influence the productivity of the business is also
highlighted in this report. Furthermore with the helps of pestel analysis how various
factors influence the performance of the business is also highlighted in this report.
Section 1
Discuss various kinds of companies and how they work
Micro business:
It can be defined as a business firm whose workings and operations are on a very
small scale. This type of business employs up to 10 employees only which includes
the owner as well. This type of business comes under small scale business.
Example: Small farmers, boutiques etc.
Characteristics:
 Requirement to start a micro business is around less that $50000.
 Requires maximum of 10 employees to run the business.
Small business:
This is a type of business which works with less investment in capital and small
workforce on a very small level. The productions of goods and services are on a
small level in this type of business. The role played by small business contributes to
the economic development of a country on a considerable scale (Tkachenko and
Pervukhina, 2020).
Example: Bakeries can be example of small business.
Characteristics:
 The management activities are solely controlled by the owner.
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 Small scale business are highly labour-intensive.
Medium size business:
This can be defined as a business type which are owned privately and its workforce,
capital management and assets are comparatively larger than small business and
smaller than large business respectively (Shahin, Mohamadi and Nazari, 2018).
Example: Captify is one of the example of medium size business.
Characteristics:
 In case of investment in manufacturing sector in plant and machinery should
be more than 5 crores and less than 10 crores.
 While in the case of service sector, the investment should be more than 2
corers and less than 5 crores respectively.
Large size business:
These are those type of business which are involving high level capital investments,
huge infrastructure and huge workforce to run its working. They are majorly working
with a focus of bringing foreign reserves and increasing employment with high level
economic growth of the country as well.
Example: TESCO
Characteristics:
 The play a major role in creating potential opportunities for the small scale
and cottage industries.
 They are involved in producing basic and capital goods.
Section 2
Describe various forms of companies from sole traders to cooperatives
and Limited Liability Partnerships
Sole trader business:
This is type of business or a firm are owned, managed and controlled by a single
person who is called as the sole trader. The same person is the manager as well as
the organizer of the business firm (Saito and et. al., 2020). In such type of business
the owner have no legal identity detached from its owner.
Example: Beauty Parlour etc.
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Characteristics:
 The owner is responsible for all the operations of the business and takes the
charge of all the risk and uncertainties.
 The decision regarding amount of capital investment that is to be made in the
business lies with the owner only.
Partnership:
This is a form of business that can be defined as the relationship between different
persons who are in a agreement to share the profits and losses of the business
(Guimarães and et. al., 2018). The persons entering into partnership are called as
'partners'.
Example: NotOnTheHighStreet.com
Characteristics:
 This type of business works on the basis of an agreement between the
persons who are running the business operations.
 The profits and losses earned are distributed among the partners based on
the agreement.
Limited liability business:
It is a type of business that focuses on the limited liability with a separate legal entity.
It includes aspects of partnerships and companies both. Major offerings from limited
liability companies are protection and flexibility (Gaspar and Leal, 2020).
Example: Oxfam
Characteristics:
 There is no harm to the personal assets of member of the company. They
can be protected from the liquidation.
 The operations of the business can be performed with the presence of only
one member as well.
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Public limited liability business:
It is a type of business which is having a limited liability. It also offers its shares to the
general public. The liability of the buyer who buy shares is limited. These type of
business are majorly listed on the stock exchange. The trading of the shares are
done publicly (Gali and et. al., 2020).
Example: Barclays PLC
Characteristics:
 The legal existence of the company and its member is separate from each
other.
 There is a requirement of minimum seven members with no maximum limit to
form this type of business.
Cooperative:
It is a type of business organization which is owned and operated by a group of
individuals for a mutual benefit. This form of business brings people together in a
democratic manner with an essence of equality. The voting rights are also equally
shared.
Example: Central England Cooperative etc.
Characteristics:
 The existence of such type of organization is voluntary which comes with a
common objective. There is no involvement of coercion or intimidation in such
business format.
 One basic feature of this type of business is that it works on service motive
rather than profit earning & its operations are driven by values (Rojas-Lema
and et. al., 2018) .
Section 3
Different business structures and external factors affecting business
Different organizational structures
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Organisational structure is defined as the proper system that helps in
effectively showcasing how particular process needs to be directed to achieve
desired goals and objectives. It is the proper methods followed by the business in
order to effectively divide the roles and responsibility among each and every
employees (Thaichon and et. al., 2018). The different organisational structure
followed in the company are mentioned below:
Functional structure: The first type of organisational structure is the
functional structure, this helps the business organisation to effectively organise the
workforce specifically on the basis on their skills and capabilities. This allows the
organisation to structure each department vertically including the roles from the top
management to finance and sale units to buyers. This also helps the employees to
have clarity of role and responsibility.
Divisional structure: Another type of organisational structure is the divisional
structure, under this organisational structure allows to group each and every
organisational function into the division for the smooth working. Each and every
division has all the required information and resources so that work can be carried
out smoothly and effectively such as IT, marketing, human resource and so on.
How does organisational structure affect business productivity
Organisational structure plays an essential role in the overall growth and
development of business organisation. It allows the business organisation to have
clarity of roles and responsibility among the employees which lead them to avoid any
kind of misunderstanding regarding the work. This will helps them to effectively carry
out their work and enhance the overall performance and profitability of the business.
It also helps the business organisation to divide each organisational function into the
division carrying their own information and resources (Leminen and et. al, 2018).
Division of each functions helps business organisation smoothly carry out work
related to their division, employees are also hired as the skills required in each and
every division making it easier for them to perform better and achieve desired goals
and objectives. Effective organisation allows different department to collectively work
towards achieving desired goals and objectives of the business and enhancing
overall profitability and productivity.
Different external factors affect the performance of a business
PESTEL analysis: It is one of the essentials strategic framework used by the
business organisation in order to analyse and evaluate various external factors
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present outside the business organisation (Hackmann, Malin and Gilley, 2018).
Various external factors influencing the performance of the business are mentioned
below:
Political factors: It includes the degree to which the government involved in
the functioning and profitability of the business. It includes the factors like
government policy, laws and rules imposed by the government. Any kind of political
changes or political instability will create unfavourable environment for the business
organisation.
Economic factors: It includes all the forces like interest rate, inflation rate,
growth rate, employability rate which create long term influence on the functioning
and profitability of the business. The developed economy will allow the consumers to
spend more on buying goods and services which will automatically create positive
impact on the performance of company.
Social factors: In case of social factors it includes any kind of change in the
behaviour and cultural attitude of the people directly impacting the operation of the
business. In order to survive in the market it is essentials for the business
organisation to effectively satisfy the social needs of the customers leading to
enhancer their overall performance (Weimann, Gerken and Hülsbeck, 2020).
Technological factors: It includes any kind of technology changes or any
advancement in the technology that leads to impacting the overall functioning of the
business. In order to gain competitive advantage in the marketplace helps the
business organisation to regularly update their technology.
Environmental factors: In includes working towards the welfare and
sustainability of the environment. It is responsibility of each and every business
organisation to work towards the welfare of the environment. As it will help them to
enhance their overall performance (Hutaibat, 2019).
Legal factors: The legal factors include the legal laws and legislation which is
needed to be followed by each and every business organisation. Strict legal laws will
directly influence the profitability and performance of the business and vice versa
Conclusion
From the above report it can be concluded that different types of companies
allows to smoothly carry out their activity and satisfy the needs and wants of the
customers through offering quality goods and services. From this report it is
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analysed that there are various types of companies such as micro, small, medium
and large size business as analysed along with their characteristics. Various forms of
companies such as sole trader, partnership, limited liability, public limited liability and
cooperative along with their characteristic are also analysed in this report. In addition
to this functional and divisional organisational structure also to analyse the external
factors PESTEL analysis is also analysed.
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Reference List
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perception of workers regarding sustainability and health issues in a
Brazilian cement company. Journal of Cleaner Production, 186. pp.313-324.
Hackmann, D. G., Malin, J. R. and Gilley, D., 2018. Career academies: Effective
structures to promote college and career readiness. The Clearing House: A
Journal of Educational Strategies, Issues and Ideas, 91(4-5). pp.180-185.
Hutaibat, K., 2019. Accounting for strategic management, strategising and power
structures in the Jordanian higher education sector. Journal of Accounting &
Organizational Change.
Leminen, S., and et. al, 2018. The future of the Internet of Things: toward
heterarchical ecosystems and service business models. Journal of Business
& Industrial Marketing.
Rojas-Lema, X.,and et. al., 2018, September. Organizational Structures in Small and
Medium-Sized Enterprises (SMEs) and Their Performance Measurement. In
Engineering Digital Transformation: Proceedings of the 11th International
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Saito, H., and et. al., 2020. Pharmaceutical Company Payments to the Professors of
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