Types of Companies and Business Structures: A Study

This report examines the different types of companies and business structures, including micro, small, medium, and large businesses, as well as sole traders, partnerships, limited liability companies, public limited liability companies, and cooperatives. It also explores the impact of external factors such as political, economic, social, technological, legal, and environmental factors on business performance. The report concludes that effective business practices and organizational structures are essential for the growth and development of an organization.

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: Different types of companies and how they work ..................................3
Section 2: Different companies from sole traders to cooperatives and Limited
Liability Partnerships ..............................................................................................4
Section 3: Different business structures and external factors affecting business....6
3.1 Identification of different organizational structures and explaining how does
organisational structure affect business productivity...............................................6
3.2 How different external factors affect the performance of a business – PESTLE
Analysis ...................................................................................................................7
Conclusion....................................................................................................................8
Reference List ..............................................................................................................8
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Introduction
Business practices are the practices that involve a particular action, regulation,
operation, method or rule that helps in attaining the objectives of business. It basically
involves the information that relate to business plans, financial information, products,
services, intellectual property, sources of supply, advertising plans, marketing plans,
methods and processes of manufacturing. It also includes the responsibilities that are to be
endured by the holders and owners of business such as directors, stakeholders and
government authorities (Akgün, and Karataş, 2020). An effective business practice is very
essential for the growth and development of the organisation. These practices include the
practices of increase of sales with development of new markets, improvisation of the skills of
workforce, reduction of waste and improvisation of quality and many more. The aim of this
report to examine the working of different types of companies from sole traders to limited
liability partnerships. It will also cover the external factors and business structures that will
affect the business.
Section 1: Different types of companies and how they work
Micro business:
It is a business that runs on a very small scale with employment of less than 10 people
in order to do microbusiness with a microenterprise. Such type of business is started from a
very small amount of investment that can be taken from a bank or other organisation. A
single owner will take the authority or ownership of a micro business which can also be
termed as sole proprietorship. A single owner will handle all the operational functioning of a
microbusiness with full control over its work of management. The functioning of such
business as is very easy as it is run on a very small scale (Capik, and Dej, 2019). The reach
in microbusiness is very limited and it is up to the investment that is done in the business.
The liability in microbusiness is very less and limited. Some of the examples of micro
business are small organisations, freelancers and independent contractors.
Small business:
An organisation that is owned by a private company or corporation with a lesser
revenue in comparison to the business that is run on a large level. Such type of business has
fewer employees for running of business on a small scale level. It basically includes the
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business that involves the technical skills of workers with the skills of workers used in
handicrafts. A local business can be promoted through the small scale business in the form of
selling local art, paintings and handicrafts. The main characteristic of small scale business is
that it includes less number of workers with less investment of capital and lesser operational
functioning of machines. It also helps in decreasing the poverty in the community by giving
employment to people at their own home with the work of stitching, painting, drawing the
local artefacts.
Medium size business:
Under the Companies Act 2006, medium sized business is a business with the
workforce of almost 250 workers working in an organisation. The businesses that is owned
and managed by the family may also be in the form of medium sized business. In this type of
business the ownership is separated from the management of business. They are well
established business with financial capability of lending to the lenders and contributing
through investors in the business (Hänninen, Saarela, and Simunaniemi, 2019). Short term
cash flows may be controlled or regulated by the medium sized business in order to balance
the debts and financial rotation of the organisation. It mainly deals with more banks or
financial organisation in order to ensure security of its business with rotational flow of
finance in the organisation.
Large size business:
A business that includes more than 250 employees and it is above the category of an
average sized business with operational functioning of business on a larger scale. Such type
of business is run on such a large scale which mostly targets the national and international
markets. A company with almost employment of 500 workers consists of large sized business
and some of the large sized countries in the world are Apple, Amazon and Google. The
revenue of a large sized business is in huge capital amount with high amount of cash flow
within the organisation. The reputation and value of a large sized business is very high in
comparison to the other kinds of business.
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Section 2: Different companies from sole traders to cooperatives and Limited Liability
Partnerships
Sole trader business:
A type of business that is run by a single person who can also be known as individual
entrepreneur, sole trader or sole proprietor. The business is run and managed by a single
person who takes the whole responsibility of the work is owner of his own business. A sole
trader is not under the domination or authority of any person or individual and handles the
business with his own responsibility (Lim, 2018). The business of sole trader is basically
self employed with the self duty of handling and managing a business. There is no separate
legal identity of sole trader business which is separated from its owner as the business is run
by the individual person. The registration of name of business is required from a sole trader
in order to control and manage the business. They can also be called as a person who works
on their own terms and is liable for the actions and functions performed in the business.
Partnership:
The arrangement between two or more persons in order to operate a business in more
effective manner is referred as partnership. The business of partnership is mainly done to
share the profits among the partners of the organisation. The liabilities and profits shared by
the partners in partnership will be equal and according to the investment of the partners. The
responsibility in the business is shared by the partners in the form of co-owners of the
company or organisation. The partners in a business are responsible for sharing the losses and
even the income that is generated through the business. There is a written and formal
agreement among the partners in a partnership. Such kind of agreement imposes liability
upon the partners with legal obligation upon the partners (Pieroni, McAloone, and Pigosso,
2020). The main advantage of partnership is that liability and losses are shared among the
partners which in turn reduces the burden and responsibilities within the partners in
partnership.
Limited liability business:
A limited liability company (LLC) is an entity or company where there is no personal
liability of the owners of company. The owner is not personally responsible for the debts or
liabilities of a company in a limited liability company. It basically means that the liability of
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the shareholders is limited up to their investment in the business and is not beyond the
personal liability of the owners in business. It is the structure of business that mainly protects
the personal assets of the shareholders with the operational functioning of limited liability.
The partners or owners of the business are not personally liable towards the losses and debts
of the company.
Public limited liability business:
A public limited liability business is a business where the shares are given to the general
public. There is limited liability of the buyers of shares of company where they are not
personally responsible for the losses occurred in business. The buyers of the company are
only responsible till their purchase of shares in the company. The liability of the shareholders
is only limited to their investment in the company (Sweeting, 2022I). The shareholders
owns the public limited liability business with management through the directors of the
company. Its main advantage is that it is able to raise money by issuing shares to the public.
The shareholders or buyers are also able to raise funds by getting a loan from financial
institutions such as banks by placing their assets in the bank.
Cooperative:
A cooperative business is a business which is operated for the functioning of the members of
company in order to meet their needs and demands for growth and development of the
organisation. The economic, social and cultural needs of an individual is met with the
association of co operative. The main characteristic of cooperative is that open and voluntary
membership within the association where people can join the association irrespective of the
caste, creed or colour. The people who can follow the rules and regulations of the society can
join in such cooperation. Some of the examples of the cooperatives are the Indian farmers
fertiliser cooperatives, Amul and others.
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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
The activities of business that are performed to achieve the goals and objectives of the
organisation refers to the organisational structure of a business. The productivity of
organisation is impacted through various organisational structure which are mentioned below:
 Functional organisational structure – The functional structure of an organisation
depicts a high level of responsibility among the cooperation in order to function in an
organised manner. The department in such organisational structure is managed in an
independent way for the effective functioning of business.
 Divisional organisational structure – The divisional structure of an organisation
depicts the separate functioning of business in a company (Vilmos, 2020). Such
divisional functioning can be in the form of marketing, sales, etc. The companies that
are operating on a large level uses the structure of divisional functioning in the
organisation.
The following of business structure basically affects the productivity of business on a large
level. Therefore an organisation that is not organised will radiate low productivity with lesser
functioning within the organisation.
3.2 How different external factors affect the performance of a business – PESTLE Analysis
The performance of a business is affected by various external factors which are mentioned
below:
 Political factors – The changing policies may impact the operational functioning of
organisations due to the changing political factors. The implementation of new
policies from time to time makes it very difficult for the organisation to adapt to the
changes.
 Economic factors – The organisations are required to work harder in order to have a
stable economy for the operational functioning of business in organisations. The
profits earned by the business should be in such a manner that economic cycle of the
organisation is maintained.
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 Social factors – The people are more inclined towards the business where there is
more growth in the market with the continuos change in taste and preference of the
customers.
 Technological factors – The growth of technology has a huge influence on the
operational functioning of business in an organisation.
 Legal factors – The rules and regulations affects the conduct of operational
functioning of business and also ensures the smooth functioning of an organisation
with the liability of legal obligation in the company (Yekti, 2020).
 Environmental factors – The change in the conditions of weather with the changing
climate may have a huge impact on the operational functioning of business.
Conclusion
From the above report it is concluded that, business practices are very essential as they help
in maintaining the operational functioning of the organisation. They are the guidelines or
ideas that helps in structuring the functioning of an organisation for effective course of
action. There are different kinds of business such as micro, small, medium and large business
that functions in a different way with the differentiating strength of employees. There are also
different kinds of companies such as sole trader, partnership, limited liability, public limited
liability and cooperative that run on different level for the growth of organisation. The
functional and divisional organisational structure of an organisation helps in achieving the
goals and objectives of business in order to function in a proper manner.
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Reference List
Akgün, A.I. and Karataş, A.M., 2020. Investigating the relationship between working capital
management and business performance: Evidence from the 2008 financial crisis of
EU-28. International Journal of Managerial Finance.
Capik, P. and Dej, M., 2019. Spatial organisation and movements of firms and industries: the
role of firm and place in (re) location research. In Relocation of Economic
Activity (pp. 1-11). Springer, Cham.
Hänninen, K., Saarela, M. and Simunaniemi, A.M., 2019. THE KNOWLEDGE GAPS THAT
PREVENT MICRO-FIRM OWNER-MANAGERS'FROM DEVELOPING THEIR
BUSINESSES IN NUTS-3 AREA. In ICSB World Conference Proceedings (pp. 1-5).
International Council for Small Business (ICSB).
Lim, W.M., 2018. What will business-to-business marketers learn from neuro-marketing?
Insights for business marketing practice. Journal of Business-to-Business
Marketing, 25(3), pp.251-259.
Pieroni, M.P., McAloone, T.C. and Pigosso, D.C., 2020. From theory to practice:
systematising and testing business model archetypes for circular economy. Resources,
conservation and recycling, 162, p.105029.
Sweeting, R.C., 2022. UK venture capital funds and the funding of new technology-based
businesses: Process and relationships. In Venture Capital (pp. 315-336). Routledge.
Turaev, I. and Ganiev, F., 2021. Management Strategy of Small and Medium Enterprises
during the Pandemic Covid-19. Journal La Bisecoman, 2(1), pp.7-12.
Vilmos, L.A.K.A.T.O.S., 2020. CONTROLLING TOOLS FOR DECISION-MAKING IN
MICRO, SMALL AND MEDIUM-SIZED ENTERPRISES. Annals of the University
of Oradea, Economic Science Series, 29(2).
Yekti, P.C., 2020, February. Exploration of social responsibility implementation model in
small and medium micro enterprises. In Facing Global Digital Revolution:
Proceedings of the 1st International Conference on Economics, Management, and
Accounting (BES 2019), July 10, 2019, Semarang, Indonesia (p. 199). Routledge.
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