Types of Companies and Business Structures: A Study

This report provides an in-depth analysis of different types of companies and business structures, including micro, small, medium, and large businesses, sole traders, partnerships, limited liability companies, and cooperatives. It also explains the impact of external factors on business performance through PESTLE analysis. The report includes subject matter related to BSc (Hons) Business Management with Foundation, course code BMP3002, at an unspecified college or university.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
Submitted by:
Name:
ID:
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Contents
Introduction 2
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 the scope and function of the micro, small,
medium and large business. The importance of establishing this business is develop
the rural as well as the urban sectors. It furnishes the job opportunities on the large
scale. The next step is to discuss the forms of business organisation like sole
proprietor, partnership, cooperative society and the companies according to the
liability basis. There is the study of functional or divisional structure and the vital use
of these structures on the organisation productivity. The last part is to study the
external factors which has severe impact on the actions of the company (Medina,
Thanikonda, and Krishnan, 2020).
Section 1: Different types of companies and how they work
Micro business:
It refers to that type of enterprises that sell the goods in the remote or local areas. It
is started by the few number of people with the small amount of fund is called the
micro finance. Example: tailor shop, beauty saloons.
Characteristics of micro enterprises
1. It provides on employment opportunities on the rapid scale to the rural sector.
2. It reduces the gap between rich and poor by treating them equally. The
purpose is to develop the backward areas for the improvement of the nation.
3. It will modify the standard of living of the person instead of the work done by
them.
4. It promotes the development of the small municipalities, towns and the small
villages and helps in the economic development.
Small business:
The businesses which operates on the small scale with minimum capital, workers
and the few equipments is called the small businesses (Corlett, 2020). The
investment in this type of businesses should not be more than one crore. Example-
Bakery shop, handicraft work.
Features of small businesses
1. These company is more depends on the labour and workforce rather than the
technology.
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2. These industries are small in size so it is easier to adapt the changes if
required.
3. These businesses have limited portions of operations and they have low
reach to the customers for the product.
4. They effectively utilised the local or available resources and reduces the
chances of the wastage.
Medium size business:
It refers to that type of businesses which requires capital investment of more than 1
crore rupees (Kaneko, 2022) (Kusumapratiwi, and Sudhartio, 2020). The labour
required in this is more than 100. The investment in fixed assets like plant and
machinery or other assets involve huge cost. Example- industry of paper bag, toy
industry.
Features of medium scale industries:
1. It helps the entrepreneurs to initiate the business idea with the support of the
government. It gives the chances to showcase their skills and the talent.
2. It helps to promote the industrial sectors of the nation by setting up the
businesses in rural as well as urban areas.
3. It helps the natives of the country to tackle with the competition in the industry
by meeting with the expectations of the customers.
Large size business:
It refers to that type of business which require more work force, resources, big
infrastructure facilities and large amount of capital. The investment in the assets of
the organisation should be more than 10 crore. Example- Clothes industry, Iron and
steel industry
Features of the large scale industry:
1. These industry uses the updated technology to improve the manufacturing
process. It helps to enjoy the advantage of economies of scale by producing
the goods in bulk quantity.
2. They hire the most trained skilled workforce in the company to accomplish the
targets and goals.
3. It renders the employment to large no. of people because it runs on the big
scale. It improves the status or the life style of the people.
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4. The goods are produced on the large scale it helps to reduce the price of the
product and make them affordable to the customers.
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
The sole proprietor is known as the trader-ship, personal entrepreneurship. It
is type of firm or entity that is owned and operate by the one individual. In these type
of enterprise, there is no restriction legally among the owner and the business
enterprise. There is no mandatory to do work alone. If they want then can easily hire
the employer. For illustration- freelancer designer, local grocery store, local store of
cloth and so on(Avechkina, 2019).
Features of the sole trader-ship
 Full control: These type of enterprise runs by the single person so there is
full control of the owner on their business. They do not require to consult with
anyone such as directors and so on.
 Unlimited liability: They predict all the responsibilities for debts of the
enterprise. There is not any restriction or limitation of the debts.
Partnership:
The partnership refers to the business where an agreement has been
prepared between two or more individuals. In this agreement, they all are accept or
agree to be responsibilities of the distribute and co-owners for operating the
business and share the earnings or profits or losses that the enterprise occurs. For
example – Law firms, group of physician and accounting, real state investment firms
and so on.
Features:
 Business motive: It is very necessary part for the organization to take
several type of business. They should have the gaining motive.
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 Sharing of the profits: It is the most significant component. The partners of
the organization have to share the profits and losses for the concern of
trading.
Limited liability business:
It refers to the structure of corporate in the united states. In this business, the
owner are not responsible for the debts and the liabilities of the corporation
(Krishnamoorthi and Mathew, 2018). These kinds of companies refers to the hybrid
entities which cartel the features of the enterprise with partnership and sole
proprietor.
Features:
 Flexibility in taxation: The LLC contains the lot of flexibilities in the manner
of tax treatment. The IRS does not identify the limited liability companies as
detached tax entity. The organisation must file their laxes as a single member
of the LLC or partnership.
 Separate entity: It is separate legal enterprise that have own property. They
also have the rights to sell or buy the property by own. It is different from
owner because they are responsible for all the compel of the company but
owner are not.
Public limited liability business:
It refers to the company that is maintained by the directors. These kind of
company owned by the shareholders. There are number of obligations that the
company has to meet cause of being pubic, making financial reports and so on.
These company also listed in the stock market.
Features
 There is no criteria of paid up capital. An individual can corporate the public
corporation.
 There is mandatory of 3 directors to operate the enterprise with 15 directors
maximum.
Cooperative:
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It is an association of organization that controlled by the individuals to meet
their ordinary economic, cultural and social needs and aspiration by democratically
controlled company.
Characteristics
 It is set up by the government for the welfare of the societies. It is created by
the members on the voluntary basis.
 They are not created for the profit purpose. They wants to deliver the value to
the society.
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 structure: It is the type of structure where company apportion the
departments according to the functions. The division of work leads to specialisation.
The business enterprise divides the work in to several divisions on the basis of the
individual skills, knowledge and expertise.
Features of functional structure:
1. The authority flow from top to bottom means top management delegate the
work to the subordinates and they should be accountable to the seniors.
2. In the functional structure staffs are well furnished to their tasks and know
their roles and responsibilities which helps to achieve the target.
3. It provides stability in the working surroundings where staffs know the scope
of the work and their expectations towards organisation.
Divisional structure: It refers to the structure where departments is developed on
the relay of the goods, location or territory. Divisional manager is created for every
unit. It is the person which manages the performance and has command on the each
departments. It is further separated in to functional divisions such as production,
marketing and sales.
Characteristic of divisional structure
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1. There is decentralisation of authority and it is more flexible which helps to take
quick decisions. It brings initiative talents in the organisation.
2. It brings transparency and accountability in the transactions and every
department works in their best manner to bring uniformity in the methods used
in the structure.
There are various organisation structure used in the company. It is observed that
good company structure enhance the staffs performance and motivate the staffs for
working hard. If company follow sound structure then it will the satisfied the
workforce that aids to attain the targets of the individual or the company (Rankin,
2020).
3.2 How different external factors affect the performance of a
business – PESTLE Analysis
There are various external factors that has impact on the performance of the
company. PESTEL analysis is the part of macro environment and these are the
uncontrollable factors which can not be predict in advance (Alsaffar, 2020).
 Political environment: It refers to the rules and policies framed by the
government. Sometimes the political conflict and parties disputes may have
affect on the operations of the business enterprises in the market. The
political instability, changes in tax rates or the fiscal policy will affect the
profitability of the organisation.
 Economic environment: It is related to the performance of the economy and
it is affected by the interest rate, monetary policy, gross domestic product,
employment rate and the inflation rate in the country. The increasing or
decreasing rate will affect the borrowing capacity of the company and the
customers.
 Social environment: These comprises the demographic factors like age
gender, and size of the family. It is also impacted by the customer tastes and
preferences, attitudes and the buying criteria of the consumer. The minor
changes in the customer lifestyle and the variations in the society cultural
patterns will bring major problem to meet the expectations of the customers.
 Technological environment: It means to adoption of new technologies, bring
new innovation methods and new version of manufacturing products and
services. It means to focus on the research and developing department and
use of digital platforms and automation tools to sustain the market. In today's
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business scenario everything is changing rapidly it is essential of the
organisation to upgrade the technology (Broekman, and Marshall, Sarferaz,
2022).
 Environmental factors: It is consider with the role of company in protecting
the environment use the recycling methods, carbon footprint and to reduce
the pollution. It means to bring sustainability in the environment. In recent
times most of the companies is involved in the corporate social responsibility
practises allowing their small contribution of profit in to social welfare.
 Legal environment: It means the laws legislature that every organisation
should abide to operate in it. This law can be consumer law, employment law,
health ad safety precautions and the rules and practises of the trade. These
laws helps the company to carry out its businesses operations in fair manner
with out indulging in unlawful practises.
Conclusion
It has been determined from the above report that any person can start the
Micro, small, medium or large business depends on the resources, capital or the
man power requirement. Every form of business has its own features and the
attributes. The single individual can start the sole proprietor business and two or
more persons can start the partnership firm. Person who can join or wants to leave
the enterprise at their own wish can join the cooperative society. Company can
bifurcated the divisions in to functional or organisational by considering the
functions,skills and the location or the territory. Company use the PESTEL analysis
to understand the impact of this factors on the activities of the business.
Reference List
Alsaffar, H., 2020. Marketing and Services Management Nike's Marketing Mix and
PESTEL analysis in China Marketing and Services Management Nike's
Marketing Mix and PEST EL analysis in China Hussain Alsaffar. August.
Avechkina, V., 2019. VIRTUAL SUPPLY CHAINS: SOME ASPECTS OF
ORGANIZATION AND FUNCTIONING. In Word science: problems and
innovation (pp. 104-108).
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Broekman, A. and Marshall, L., 2020 Manipulating Organisational Multidimensional
Tetrad Graphs-A Relational Algebra and Database Approach.
Corlett, M., 2020. Project Information Document-Micro, Small, and Medium
Enterprise Access to Finance Emergency Support and Recovery Project-
P174169.
Kaneko, Y., 2022. Insolvency Law Reforms in the Asian Emerging Economies.
In Insolvency Law Reforms in Asian Developing Countries (pp. 21-44).
Springer, Singapore.
Krishnamoorthi, S. and Mathew, S.K., 2018. Business analytics and business value:
A comparative case study. Information & Management, 55(5), pp.643-666.
Kusumapratiwi, P. and Sudhartio, L., 2020. Creating financial statements for
performance evaluation at the MSME ENF. In Contemporary Research on
Business and Management (pp. 36-39). CRC Press.
Medina, J.Q., Thanikonda, A.K. and Krishnan, D.S., 2020. Implementing Demand
Aggregation for Rooftop Solar Systems in Micro, Small, and Medium-Sized
Enterprise Clusters.
Rankin, C.P., 2020, July. The Benefits of Benefit Forms: Legal, Peer, and
Stakeholder Benefits. In Proceedings of the International Association for
Business and Society (Vol. 31, pp. 77-88).
Sarferaz, S., 2022. Compendium on Enterprise Resource Planning: Market,
Functional and Conceptual View based on SAP S/4HANA. Springer Nature.
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