Types of Companies and Business Structures - Desklib

This report by Desklib covers different types of companies and business structures, including micro, small, medium, and large businesses, sole traders, partnerships, limited liability companies, public limited companies, and cooperatives. It also explains how organisational structure affects business productivity and how external factors like PESTLE analysis impact business performance.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
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Name:
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Contents
Introduction
Section 1: Different types of companies and how they work
Section 2: Different companies from sole traders to cooperatives and
Limited Liability Partnerships
Section 3: Different businesses structures and external factors affecting
business
Conclusion
Reference List
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Introduction
There are many companies available in the business environment which are
discussing in this report. It is necessary for every organisation and individuals to understand
the types and sizes of organisations (Hońko and et. al., 2020). This report will be cover
micro, small and medium size business. It also covers different types of companies which
include sole trader, partnerships, limited liability business, cooperative, etc. in addition to
this,it is vital for organisations to analyse different structures and external factors that
influence organisation' performances.
Section 1: Different types of companies and how they work
Micro business:
It is found in UK that they have 5.7 million micro- businesses in 2020. This number
shows the importance of micro business. This type of business is necessary for those people
that have not enough money to launch a big organisation (Nourani, Devadason and Chandran,
2018). So they start their micro business in order to fulfil their basic needs. The owners of
micro business are not focusing on additional factors such as infrastructure because it
increase cost. They are just focusing on increasing the sales so that they can earn money. The
example of this business is Marshfield Bakery. Some important characteristics are mentioned
below:
 In micro business, the employees should be less than 10 and their turnover needs to be
under £2 million.
 The capital under this business is generally small.
Small business:
This is necessary for individual that they should show their interest in the small
business. The reason is it plays a vital role in national and international economy. Small
organisations give contributions to the growth rate of economy. Currently, it is find out that
government is trying to increase the number of small organisations. CafePod Coffee Co. is
the example of small business. Characteristics of small business are mentioned below:
 In small business, the number of employees are less than 50 and turnover should be
under £10 million.
 It provides employment opportunity to people so that they can earn revenues and
income. This will lead to improve in standard of life.
Medium size business:
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Medium size organisations are refers to be one which is larger than small
organisations. Day by day the role of medium size business is increasing because of
increasing turnover and employees in small business converts into medium size (Panwar and
Aggarwal). The example of medium size organisation is Captify. Some important
characteristics are mentioned below:
 Number of employees are less than 250 and the turnover should be between £10
million to £50 million.
 These businesses are expand their business with the help of import and export to
different territories.
Large size business:
Large size organisations plays an important role in the GDP growth rate of global
economy as their contribution rate is very high. This is necessary for them that they should
follow all the rules and regulations of different nations governments as they trade on
international level. Due to this, they are facing many challenges as business environment is
dynamic in nature. Characteristics of large size business are mentioned below:
 The number of employees are more than 250 and turnover should be more than £50
million.
 These types of businesses has a main focus on maximizing profits and that's why they
are improving their marketing function.
Section 2: Different companies from sole traders to cooperatives
and Limited Liability Partnerships
Sole trader business:
Sole proprietorship or sole traders is one of the most commonly used business ventures that is
owned by individual. It is an unincorporated company which is simple and relatively easy to
establish with less amount of investment and documentation but also comes with a least
amount of financial and legal protection for the business owners. Unlike partnership or
corporations, sole proprietorship does not create its separate legal entity for the business and
owners shares the same identity as business thereby business owners are entitled for all
liabilities generated by the business firm (Ryu and et. al., 2017). This structure is chosen if
an entrepreneurs wants to retain complete control over business activities.
Partnership:
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This type of legal structure for the business firm is formed by two more people, known as
partners, who give their mutual consent to enter into the partnership with the aim of working
towards the shared objective. Like sole proprietorship, partnership firms are also entitle for
the tax benefits, as income generated by the business is treated as personal income of partners
thereby is only taxed once. Here in such structure business owners are responsible for the
liabilities of the firm and there is a partnership deed which a contractual agreement between
the partners highlight their roles, responsibilities and duties in each aspect of business.
Limited liability business:
Limited liability companies which is widely known as LLC is the combined aspects of
partnerships and corporations as they enjoy the same tax benefits as partnership firms and the
liability with that of corporations businesses. Owners of LLC are referred as the members
instead of shareholders and no matter how many members are there in a particular LLC, there
must be essentially adequate number of managing members in order to manage and govern
the daily business business operations. Unlike corporations, LLC are not taxed as a legal
separate entity rather all the profits and losses are transferred from business to members of
LLC who in turn show these profits as their personal income (Alkaraan,2020). One of the
salient feature of LLC is that it requires less paper work as compared to corporations and
members are not personally liable for the business actions and decisions.
Public limited liability business:
PLC or public limited company is a type of public limited company under the United
Kingdom law whose shares are freely traded and sold in the open market to public. A public
limited company can be listed or unlisted from the stock exchange. The use of PLC
abbreviation after the name of company is mandatory which helps in communicating with the
investors and any others who is dealing with the company that specified company is a
publicly traded company.
Cooperative:
A different type of legal structure that is fully owned, managed and operated entirely for the
benefits of the members of the organization that makes use of its rendered services. Whatever
is earned by such business firms are distribute among the members of business and is used for
the further benefits of the members without any need to be paid out to external shareholders.
Unlike other businesses which have shareholders, shares of cooperatives are sold to the
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concerned members who has legal right to make decisions in business and provides direction
for the success and growth of cooperatives.
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
There are many types of organisational structure which used by organisation. Every
organisation has different organisational structures (Dervishi, 2020). Organisational
structures defines the ways of working of employees that how they can accomplish their
goals. This is necessary for organisations that their structures should be according to the
business strategy so that the will not face any ambiguity. It is found that organisational
structures gives a great impact on employees' productivity and performances. It has some
important organisational structures that are explained below:
Functional Organization Structure
This structure is refers to the one in which employees of organisation is grouping in
the similar task. That means organisation activities are grouping into departments according
to their work. For example, human resource department support only human related issues
that include recruitment and selection of employees. Some more department are marketing,
operational, financial, etc. these departments perform functions according to their activities.
They are not expanding their work with another department. Normally this structure Is most
widely used by organisation. These types of departments can be easily find in every
organisation as it provides specialisation in employees' performances. It decreases the
duplication of work.
Divisional Organization Structure
It consists of parallel divisions. The team is divided on the basis of products and
services. It can be divides on the basis of customer segments, and a geographical location
(Anam, Hassan and Kamruzzaman, 2019). This is necessary for organisation that they should
provide a purpose and objectives to each division so that they can achieve them effectively. It
is really helpful to increase performances and productivity of employees as they will be able
to know their roles and responsibilities.
Matrix Structure
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In this structure, organisation is using both types of structure that include functional
and divisional. Day by day the business complexities and competitiveness are increasing and
that's why it becomes necessary for every organisation that they should use both organisation
structure for overcoming with these challenges. It increase the productivity of employees as
they use both structure in which work is distributed to each employees so that they will not
face any problem of ambiguity.
3.2 How different external factors affect the performance of a business –
PESTLE Analysis
An organisation is surrounded by may factors which can be internal as well as
external. It is vital for organisations that they should analyse all factors as it affects on
organisation's performances. Internal factors are generally controllable which can be improve
with the help of taking necessary corrective actions (Prantl and Mičík, 2019). But external
factors provide an impact of performances of business. This can be done with the help of
PESTEL analysis model which consists of 6 important factors.
PESTLE Analysis
It is the external environment analysis tool which is effective in order to analysing the
macro environment factors. Unilever is undertaken to analyse the impact of external factors.
All the factors are mentioned below:
Political Factors: Unilever is the multinational organisation, due to this they are
facing many political problem as they have to trade in international business environment.
There are many policies which comes under political factor should be analysed by
organisation. Brexit is an important element of this factors that gives an impact of
organisation. It may be gives a negative impact on organisation's function as European Union
and UK has now different rules and regulations after Brexit.
Economic Factors: This factors should be considered by Unilever as currently every
economy is facing a recession due to COVID-19. Pandemic gives a great shock on economy.
Due to this, every organisation has suffered as they had to close their stores in order to stop
the propagation of virus (Rashidi and et. al., 2018). These gives a bad impact on their
performances and productivity of employees as they are suffering from isolation.
Social factors: day by day the demands of customers are increasing which gives a
great impact on organisation. Now Unilever needs to analyse the demands and wants of their
customers so that they improve their performances. It is found that if organisation is not
considering social factors then they can be adversely impact on their organisations.
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Technological Factors: Technological factors are increasing day by day due to
regular up gradation in technologies. This becomes necessary for every organisation that they
should upgrade their systems. It is necessary for Unilever that they should upgrade their
payments systems.
Legal Factors: It includes all legal rules and regulations which is necessary for
organisation to consider in their business practices. Otherwise Unilever may be have to face
some legal actions. Some important legal factors are taxation policies, employment laws,
equality laws, health and safety laws, etc.
Environmental Factors: It is found from the report of Global Risk that global
economy is facing many environmental issues. The reason is increasing in pollutions due to
the activity of humans. This is necessary for organisation that they should make ensure about
reducing in greenhouse gas emission. Unilever is currently doing very well in the
environmental factors as they are using natural products in manufacturing process.
Conclusion
It can be concluded from the above discussion that there are many types and sizes of
business available in the market. A person can choose any of the organisation according to
their capacity. It also depends on the financial stability of organisation. In addition to this,
this report was also discussed the importance of organisational structure which is necessary
for every organisation as it affects on performances and productivity of employees. It is
analysed that organisation need to perform a PESTEL analysis as they are affecting by many
external factors that include social, political, economical, etc. which gives a great influence
on business.
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Reference List
Alkaraan, F., 2020. Strategic investment decision-making practices in large manufacturing
companies: A role for emergent analysis techniques?. Meditari Accountancy
Research.
Anam, S., Hassan, A. and Kamruzzaman, M., 2019. Effect of financial determinants on
return of assets (ROA) in manufacturing companies of Bangladesh. The Business &
Management Review, 10(5), pp.102-102.
Dervishi, B., 2020. Investments and portfolio structure of private pension and insurance
companies in North Macedonia. International Journal of Research in Business and
Social Science (2147-4478), 9(5), pp.227-234.
Hońko, S., and et. al., 2020. Effects of COVID-19 in the Financial Statements of Selected
Companies Listed in Warsaw Stock Exchange. European Research Studies, 23(2),
pp.854-871.
Nourani, M., Devadason, E.S. and Chandran, V.G.R., 2018. Measuring technical efficiency
of insurance companies using dynamic network DEA: An intermediation
approach. Technological and Economic Development of Economy, 24(5), pp.1909-
1940.
Panwar, M.S. and Aggarwal, K., Economic Development in India with Special Reference to
Non-Banking Financial Companies-A Review.
Prantl, D. and Mičík, M., 2019. Analysis of the significance of eWOM on social media for
companies.
Rashidi, A., and et. al., 2018. The Importance of Risk Management in Life Insurance
Companies. International Advisory Board, p.171.
Ryu, J., and et. al., 2017. A flood risk assessment model for companies and criteria for
governmental decision-making to minimize hazards. Sustainability, 9(11), p.2005.
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