Types of Companies and Business Structures: A Comprehensive Guide
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This report discusses different types of companies and how they work in the global environment. It addresses different business structures and all the factors that affect businesses. At last, the report addresses the PESTLE analysis that impacts the performance of the company.
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BSc (Hons) Business Managementwith Foundation BMP3002 Business in Practice Assessment 1 Types of Companies Submitted by: Name: ID: Contents 1
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Introduction2 Section 1: Different types of companies and how they work P Section 2: Different companies from sole traders to cooperatives and Limited Liability Partnershipsp Section 3: Different businesses structures and internal factors affecting businessp Conclusionp Reference Listp Introduction 2
Businesses practices are generally set of practices that need to be followed in order to gives the best outcome to the consumer. Business practices includes standards, protocols and different set of procedure that must be followed by that particular business. Business practice can only be developed by setting goal for the organization. This report will be discussing different type of companies and how they work in the global environment. It will also be addressing the different business structure and all the factors that affect businesses. At last report will address the PESTLE analysis that impacts the performance of the company. Section 1: Different types of companies and how they work The different types of companies work differently according to their purpose and the goal of the organization. Basically there are four types of businesses that work in the external environment and that are as follows- Micro business: Micro businesses are businesses that are smallest of small businesses. This business works at small places and works in every sector be it retail, construction, social or heath care. Further, the micro business is the one business that has less than 10 employees and turnover of which is less than pound 2 million. These businesses run on small scale with fewer people so that risk associated with can be minimized easily. Further, the businesses are smallest of small businesses. They work on very small scale but their Is capability to make this business a large size business if the employees and owners give their 100% to the company. Small business: Small businesses are those business that work with fewer than 49 employees and has turnover less than pound 25 million. Though, These businesses works on large scale than the micro businesses but still there are not enough to beat medium size businesses and large sector businesses. The structure of these businesses are defined in such a way that the risk associated with these businesses is not that large and it can be avoided easily by the company they work in (Julien, 2018). Medium size business: The Medium size company can be defined as the business with up to the 250 employees. These businesses can be family owned (Ali and Saeed). These businesses can also be said as a complex entity which means that ownership in the business is separated that from the management. The structure of this business organization is divisional in nature means that medium size businesses are divided into separate divisions on the basis of 3
products and services that the organization provides to them. There are various branches that works in the same direction for achieving the goal for the company. This can also be divided on the functional reporting means the organization will be divided into the department on the basis of different functions. Large size business: Large size businesses are those businesses who have more than 250 employees and these businesses account for the 40% employment of. Growth of large size businesses has increased suddenly in market after globalization as large size business generally work in more than one country, the risk associated with these businesses are quite high. The business structure of this organization is divided into both the divisional department and the functional department. It is very difficult to survive in the market as competition is also high and this can only be avoided by innovating different products that fulfils the demand of the consumer. This organization also tries to fill the gap between demand and supply. It also invests heavily into the research- development department. Section 2: Different companies from sole traders to cooperatives and Limited LiabilityPartnerships. There are various types of companies that operate in market today and the explanation regarding those companies is given below- Sole trader business: Sole trader business are those business where one person takes the sole responsibility to start a business (Rye 2020). These businesses are managed by the single person and the power, accountability and responsibility lie with that person only. Business of sole ownership has some features that are as follows- •Simple formation to start and close a business as there is no law to register such business. •The liability in this business is very high means there is concept of unlimited liability. •There is no separate legal entity means the business and owner of business is a same person. 4
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•The control and authority of this business totally relay on that single person. •There is high risk involved with tarting such business. Partnership: Partnership is defined as the company where more than one person starts a business. There may be two individuals or more than that, and they are called partner. Partnership deed is signed between all the partners that defines rules and regulations of the business. Partnership agreement is sole record of the partnership that should be framed in order to avoid conflicts that may occur In the organization. The features of partnership are as follows- •Partners share profit and losses as mentioned in partnership deed. •There must be mutual benefit means the goal of all the partner must be same and they should work in same direction. •Unlimited liability is another feature that is associated with such businesses. •This is defined as the lawful businesses as the contract must be signed between all the parties that will work in partnership businesses. Limited liability business: Limited liability businesses can be defined as the company where owners are not liable for all the acts done in the name of the company. This system work on the model of hybrid system means the characteristics of sole trader, partnership are amalgamated to start such a business. The simple meaning is that the owners has limited liability that is up to the amount that have invested in the company. Features of limited liability business are as follows- •There is concept of separate legal entity means both owner and business is different from each other. •Limited liability is another feature that is associated with limited liability business (Amirian 2020). •Flexibility in starting business and working in the direction of the business as there is less risk involved in it. Public limited liability business: 5
Public limited liability business is the business is the company that is registered in the companies act. This company offers shares to the general public by listing themselves on the London stock Exchange. The retail investor can easily buy the stock of the Public limited company (Halliday and Okara 2022). The buyer has limited liability means they are not responsible for the acts done by the company and which also defies that are not responsible for the losses that occurred in the name of the company. Feature of Public limited company is as follows- •The liability of members is limited up to the amount that they have invested in the company. •Company can issue shares for the public by offering Initial Public offer. •There are no restrictions for transferring hares to the another person and at the same time it is easy process. •Separate legal entity is the another feature that is associated with the company (Ochola, M.J., 2019.). • Cooperative: Cooperatives businesses are defined as the businesses that are owned, controlled and managed by the members of cooperative for their benefit (Knežević, 2021). They work either for their own members or for their surrounding community. These cooperatives should be registered to avoid conflict of interest. The features related to the cooperatives are as follows- •Cooperative society are open for the voluntary associations as anyone can join this society and leave it whenever they feel. •The democratic environment is the best part of this society. •The equitable distribution of resources is another feature of the cooperative society. Section 3: Different business structures and external factors affecting business. 3.1 Identification of different organizational structures and explaining how does organizational structure affect business productivity. There are mainly two types of business structure that helps organization to achieve 6
target of the business and the detailed analysis of this stricture are as follows- Functional Structure- The functional structure of the company divides work on the basis of different operations like there are various management system that works side by side, for achieving the efficiency level the businesses design this system. There can be any type of departmentbutgenerallydepartmentsaredividedintooperation,production,human resource, finance etc. all the departments in the company work for the same goal and in the same direction. The productivity and efficiency of company can be raised by separating departments, but this is not enough as department should also coordinate with each other in order to avoid conflicts in the organization and also to provide the best outcome and best results to the consumer of the organization (Islami and et.al., 2021). Every functional department is managed by the functional manager of the company. The features of functional structure is as follows- •Roles and responsibilities are clearly defined in order to avoid duplication of work and to make every person accountable for the work they do in the organization. •Employees specialize in particular field are sent to that particular department in order increase efficiency of the company. Divisional structure- Divisional structure of the organization meaning that the organization will be divided on the basis of the products and services they provide to its consumer Because of growing global competition companies today not only deal in particular product instead they try to increase their product ranges time to time and on the basis of which different departments will be created). This helps company to provide the best product and services in the market and the features of divisional structure are as follows- •Divisional structure are created in such a way that it increases accountability of every department. •This structure gives organization a competitive advantage over others at the same time it helps business to raise their product ranges in order to earn more profits. 3.2 How different external factors affect the performance of a business-PESTLE Analysis. The different external factors definitely affect the performance of the company (Matovic, 2020) and the PESTLE analysis of the organization is as follows- 7
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Political - Political factors are all those factors that are related with policies of the government of the country where business is operating. This political factors have both positive and the negative impact upon the performance of the company as there are laws that support the organization like the rules related to the less trade barriers but sometimes this law can also be dangerous to the company like the rules related to environmental impacts. Economic - Economic factors are related to the economy of the particular country. This also measures the financial performance of the country in terms of GDP. The higher inflation rate has negative impact upon the country as higher inflation rate reduces power of purchasing and that in turn reduces profits of the company. Social – Social factors involves life style, cultural values and behaviours of the people in the particular country. These factors impact the decision-making of the country takes this consideration into mind before launching any new product in any new country. Technological - Technology today has become an very important phenomena and raising technologies are helping business to reduce the cost of the products they serve in market and that in turn increases profits of the company. There are both favourable and unfavourable impact upon the company. Legal - Legal factors are all those factors that affect the consistency of business in particular country. There are various laws that need to be complied like the consumer laws, labour laws and different safety and security laws. Environmental - Environmental concerns are raising environmental laws in all the country and that need to be complied by every business that operated in that particular country. Business analysis all this laws before entering into any global market. 8
Conclusion Asmentioned business practice are the reasons behind the success of the company. The above report has mentioned the different types of business structure that work in the market today. The different sizes of businesses are small- size, medium-size and large size of businesses. Further, this report also addresses the business structure of functional and divisional and at last, PESTLE analysis has been taken into context. Reference List Ali, E.J.M. and Saeed, M., A STUDY OF FIRM GROWTH IN THE SMALL AND MEDIUM-SIZE BUSINESS: A CRITICAL REVIEW. Amirian, I., 2020. Limited Liability: Brief Historical Review and Analysis of Rationales. Available at SSRN 3834225. Halliday, C.E. and Okara, G.C., 2022. Challenge and Prospects of the Limited Liability Partnership and the Limited Partnership as Vehicles for Business in Nigeria. Journal of Commercial and Property Law .9(2). pp.70-81. Islami, E., and et.al., 2021. The Role of Departmentalization, Divisional Structure and Strategic Business Units (SBUs) in Enterprises in Kosovo. Calitatea .22(183). pp.18- 22. Julien, P.A., 2018.The state of the art in small business and entrepreneurship. Routledge. Knežević, M., 2021. Cooperative in the modern economic environment.Naučne publikacije DržavnoguniverzitetauNovomPazaru.SerijaB,Društvene&humanističke nauke,4(1), pp.53-63. Matovic, I.M., 2020. PESTEL analysis of external environment as a success factor of startup business. ConScienS, p.96. Ochola, M.J., 2019.The Effect of Business Model Innovation on Performance at Safaricom Public Limited Company (PLc)(Doctoral dissertation, United States International University-Africa). Rye, J., 2020. What is the difference between a sole trader and a limited company?. In Setting Up and Running a Therapy Business (pp. 132-134). Routledge. 9