Types of Companies and Business Structures: A Study

This report discusses the different types of companies and business structures, including micro, small, medium, and large businesses, sole traders, partnerships, limited liability businesses, public limited liability businesses, and cooperatives. It also covers the impact of external factors on business performance through a PESTLE analysis of Marks and Spencer.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
Submitted by:
Name:
ID:
1

Contents
Introduction 3
Section 1: Different types of companies and how they work
3-5
Section 2: Different companies from sole traders to cooperatives
and Limited Liability Partnerships 5-7
Section 3: Different businesses structures and internal factors
affecting business 7-8
Conclusion 9
Reference List 10
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Introduction
A business is an occupation, trade, profession or commercial activity which include
the process of providing goods and services for the purpose of gaining profit. Here profit not
only means money but it can be the benefit in any form. In simple words, it can be said that
business is an organisation which include people with the purpose of achieving common
goals and objectives. Vision of a business organisation implies the plans which are made for
the purpose of achieving organisational goals and creating the values which leads to the
growth of organisation in future. Business organisation should create a good and healthy
working environment so that people want to work there by developing themselves by
coaching, information and feedback. Below mentioned report deals with the various types of
companies which comprises the several entities from sole trade to cooperatives. In addition to
this, it also cover the business structure with the help of PESTEL analysis.
Section 1: Different types of companies and how they work
In the economy of United Kingdom, the companies have been divided in three types
on the basis of scope and size of organisation which include Charitable Companies, Profit
Earning and Financial Institutions (Ben Youssef and et.al., 2018). But on the basis of capital
investment and number of working employees in the organisation, companies are also
divided into several types which are discussed as below:
Micro business:
According to the Small Business Administration (SBA) micro businesses are such
type of business which include 1 to 9 employees. Different economy has defined micro
business in different terms. Generally, micro business can be identified on the basis of
employees and the total turnover as it involve less than 9 employees and annual turnover is
less than £2 million. It is also known as microenterprise, as traditional businesses while
referring to small business financed by microcredit, this term is usually used. These
businesses can be considered as the trademark of developing the country along with the
economy. UK government performing several activities for the purpose of developing micro
businesses in low income areas as it will improve the living standard of people and improve
economy as well. Street Vendor, plumbers, shoemakers, carpenters are some examples of
micro businesses.
Characteristics
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 Ownership: Mostly it has been found that the owner of micro businesses have
single owner.
 Limited Reach: Micro businesses are restricted to perform their business operations
in a limited area.
Small business:
Small Business Administration (SBA) has develop a table of employees and turnover
as per the industry but with the help of a group study it has been found that these businesses
include more than 10 but less than 50 employees along with the annual turnover of less than
£10 million. Privately owned company, partnership and sole proprietorship are some type of
small business. The area of operations of such businesses are wider than micro businesses but
they also have a small area (Ermasova, N and et.al., 2017). In simple words, it can be said
that the they perform business operations on a small scale.
Characteristics Lower revenue and profitability: The revenue of such businesses are less than the
companies which result in less profitability.
 Small Market Area: These businesses have a very small area to perform the business
operations. Usually, they serve single communities which include convenience store
in a rural township.
Medium size business:
Growth and development of small businesses result in the medium sized business. It is
larger in size as compared to the small businesses as it include more than 50 but less than 250
employees and annual turnover should not be more than £25.9 million. There area of
operations is large and these businesses have various branch. It is also found that the total of
the balance sheet of these businesses are not more than £12.9 million.
Characteristics Limited Investment: The amount of capital which is required by the owner to start
such business require less because they are operating on a small scale (Woermann
and et.al., 2019).
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 Labour Intensive: Generally these business use a small involvement of technology as
the machines are too costly. So they are require to use more labour intensive
techniques.
Large size business:
It refers to the business which is done on a large scale as they are operating the
business functions ion huge level with the involvement of more than 500 employees and the
annual turnover of more than 1.5 billion euros. Basically, the mining and manufacturing
industry comes under this business as they are required to invest in several new advance
technology which is possible only because of high investment (Chaffey, D and et.al., 2019).
Characteristics Higher Employment Opportunities:Large business include large human capital so
that they can complete their tasks. Hence they provide employment to various
people.
 High use of technology: These businesses also have a huge brand recognition which
is a positive factor for organisation. In order to maintain the brand image and earning
large profit, they are required to use the technology which make the work easily.
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
It can be defined as the business which is managed and owned by a single person. The
owner of sole trade is responsible for all the tasks and operations which are being performed
in the organisation. All the decision making power regarding the organisation is in the hand
of owner itself. Owner of organisation is considered as the manager and take the effective
decisions.
Characteristics One man control: The owner of sole trade takes all the decisions and he is
responsible for directing and controlling the affairs of enterprise (Frishammar and
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et.al., 2019). Owner is completely free to taken any decision as they have complete
control over the business.
 Personal Organisation or common identity: There is no any separate legal entity of
business organisation. Owner of business and business organisation are consider as
same.
Partnership:
Partnership can be defined as the business which is operated by two or more than two
people on the basis of a contract. That contract is known as Partnership deed, which state
about all the terms and conditions of business along with profit and loss sharing ratio. The
combination of skills and capital implies perfection in the business operations and it leads to
the generation of higher revenue. Along with this, it is also found that there are various
obligations which may present in front of partners, they are also classified under partnership
deed.
Characteristics Agreement: A partnership business can only be started after making an agreement
between the partners who are agree to do business together. This agreement can be
made in the form of oral, written or implied.
 Registration: It is necessary to do registration of partnership business under the act. It
supports the organisation to take any strict action in the court of law against other
parties for the settlement of claims.
Limited liability business:
This business is made by doing the combination of some of features of
corporation with the sole proprietorship or partnership (Williams Jr, R.I., 2018). The liability
of the owner of these businesses are limited and they are not personally liable to pay the debts
of organisation.
Characteristics Limited Liability: The most important feature of this business is that the liability of
members is limited and they are not going to pay for any legal faults of other
members, debts and many more.
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 Flexibility in Taxation: It allowed a lot of flexibility in tax treatment. The owner
have to file Limited liability Business either as a sole trade or as a partnership.
Public limited liability business:
It is the form of public company under which the firms are registered under London
Stock Exchange. These types of companies work on a huge level so they are required to have
large capital. The management of such companies issues shares to the general public so that
they can collect the sufficient amount of capital for smooth running of business operations.
They had decided minimum of £50000 as share capital.
Characteristics Separate Legal Entity: These type of business organisation have a different legal
identity which differ the organisation from their members. Any company can own
any property on their name.
 Easy Transferability: The shareholders of public limited company have complete
right to transfer their share to the public.
Cooperative:
It refers to the association which is owned and controlled by the people in order to
meeting the economic, social and cultural need (Bento and et.al., 2017). There are various
types of cooperative have been found such as consumer cooperative, worker cooperative,
platform cooperative and many more.
Characteristics Voluntary Organisation: Cooperative is a voluntary association of people who work
for a common objective. They can join or leave the organisation without any
intimidation.
 Service Motive: It's main objective is to provide service to their members. They do
not work for earning profit.
Section 3: Different business structures and external
factors affecting business
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3.1 Identification of different organizational structures and
explaining how does organisational structure affect business
productivity
Structure means a proper framework and organisational structure refers to a system
which create outlines or boundaries which explain the way of performing tasks. The
distribution of power and authorities in an organisation is also a part of the organisational
structure. Basically it state the process of performing tasks in order to achieving the
organisational goals and objectives. Functional Structure: The entire organisation have been divided in several groups
on the basis of the specialization of employees. They make various departments in
the organisation such as IT, finance, Human Resource Management and many more.
 Divisional Structure: This organisational structure divide each function of
organisation in a division (Selyutina, L.G., 2018). This division of complete
organisation has been done on the basis of product or geographies.
3.2 How different external factors affect the performance of a
business – PESTLE Analysis
PESTEL analysis is a framework which is used by organisations for the purpose of
doing evaluation of external environment of a business. If any business management want to
make effective strategy at their work place, it is essential to analyse all the political,
economic, social, technological, legal and environmental factors which are going to effect the
operations.
Marks and Spencer Group Plc is a British Multinational retailer which was founded
by Michael Marks and Thomas Spencer in 1884. it's headquarter is in London, England,
United Kingdom and performing business operations globally (Khan, O., 2020). PESTEL
analysis of Marks and Spencer is given below: Political Factors: The UK government has introduces free trade policy under which
the companies can perform their functions globally freely. Marks and Spencer is
working in UK, along with this they are also working abroad. This policy allow the
organisation to import the foreign products and make available that products at cheap
prices in there stores. On the other hand, Brexit has decided to leave the European
Union and the changes which comes because of Brexit are not clear.
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 Economic Factor: Due to presence of high competition in the market, price become
the most important factor of competition in the retail market and customer get attract
towards the low prices. Along with this, availability of budget stores in United
Kingdom work as threat to the target market of Marks and Spencer. Sociocultural Factors: Marks and Spencer is a brand which is in existence from
1800s. Hence, it has been found that they are losing the group of customers from
youth generation as the people of today's generation are not aware about it the brand
and they are finding other brands more attractive. On the other hand, they started
providing ready meals which result in the rise in the consumption of ready meals all
over the United Kingdom. Technological Factor: Introduction of technology or advancement of technology
result in increase in the sales and brand image of organisation. They had introduced
self checkout technique through which they can save the time of customer and
provide them best service. Along with this, they had also introduced the option of
online shopping under which the customers can purchase the products online and get
deliver their order at doorstep. Legal Factors: It has been found that the Marks and Spencer was involved in several
disputes which are related to the legal department for instance dispute with Frascati
Landlord which makes tough for the organisation to maintain their brand image.
Changes occurred because of Brexit is the another legal factor which affect the
organisation a lot.
 Environmental Factors: Marks and Spencer is a luxury brand and they has
developed the concept of sustainable retail industry on several occasions. These
factors are related to the multitude of environmental factors which deals with the
food, clothing and home products.
Conclusion
It has been concluded from the above report that the business organisations plays an
important role in the economy of a country. They are divided in several types which have
been discussed in the above report. Furthermore, the classification of companies are done on
the basis of the nature and number of owners of business organisations. PESTLE is a tool
which is used by organisation to analyse the external environmental factors of organisation.
Marks and Spencer is a huge brand of United Kingdom which deal with food, clothing and
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home products. This report is also highlighting the political, economic, social, technological,
legal and environmental factors which are influencing the Marks and Spencer.
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