Types of Companies - Business in Practice Assessment 1

This report discusses different types of companies and their legal frameworks, entities, features, and roles. It also highlights the impact of external market and internal environment components on businesses. The report covers micro, small, medium, and large businesses, as well as sole traders, partnerships, limited liability businesses, public limited liability businesses, and cooperatives. It also explains how different organizational structures and external factors affect business productivity and performance, respectively. The report concludes that companies need to remain ethical and fair while adapting to advancements and new market trends to meet the requirements of consumers.

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
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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
Introduction
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The organisations are broadly categorised in numerous types according to
their size, nature, liability, members and structures. An organisational structure
consists of both formal and informal models that shapes the operations of business
and determines roles or tasks of workforce along with their reporting superiors who
also considers their efforts and praise them (Chell, Hedberg-Jalonen and Miettinen,
2019). The aim of this report to examine various kinds of organisation with their legal
frameworks and entities, their features and role as well. Further, in report the impact
of external market and internal environment components are discussed that
highlights the importance of conducting marketing analysis to identify various
opportunities and threats presented outside workplace of business.
Section 1: Different types of companies and how they work
Micro business:
It can be defined as kind of small businesses, it is determined according to the
number of individuals usually, less than 10, annual profit, cost and other factors.
These business are generally operate with low amount of capital. It often serve in
small area. They have their own importance in growth of economy as these micro
business can grow largely and generate employment opportunities, enhance
purchasing power, fulfil needs of consumers at local level which lowers the price of
basic needs products.
This is one of the smallest business entity as they complete their operations
with only one to nine employees, have low capital requirements or production costs,
perform operations on small scale that are essential to run the business. Owner of
micro business usually fund their business activities microloan programs, as these
programs allow people with moderate income level to setup their own enterprise and
contribute towards growth of society (Gupta, Mejia and Kajikawa, 2019).
Small business:
A category of enterprise that run their functions at small scale of economy.
They are fulfilling the requirements of every another thing that a consumer needs.
Small business has a major position in maintaining the structure of every industry as
there are able to utilize efficiently labour and can generate employment
opportunities. These are either retail shops or services providers such as medical
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stores, grocery stores, repairing stores and bakeries. It functioned as independently
owned enterprises which needs small amount of capital to earn revenue. Generally
run by sole proprietors and all management operations are performed or controlled
by owner. Operations of small businesses are limited to specific areas as there are
less technological enhancements due to dependency on manpower. Because of
their size, they are very flexible towards market changes and can easily mould their
functions according to market trends. As resources are scare, they use material or
resources that can be available immediately and ensures no wastage (Kolk, Rivera-
Santos and Rufín, 2018).
Medium size business:
A business that is owned and controlled by specific group or family, it can be
defined as complex entity as the management is separated from owner. These are
well established enterprises with a continuous track record of cash flow that can
facilitate their funding from investors and other sources. Their financial structure are
generally managed by professionals who observe the availability of present structure
and suitability of alternative funding sources in order to meet the future monetary
requirement of business at right time. Their revenue is usually in between $1 million
to $10 million. Here, owner requires to look after management of skills in employees
and delegate duties and responsibilities to them according to interest or skills.
Medium sized businesses contributes approximately one-third from private sector in
GDP. They stimulates market competition in terms of product design and quality as
they did not allow large companies to hold monopoly in market (Kravchenko, Hroznyi
and Kovalenko, 2019).
Large size business:
An enterprise category that have above average size of business, large
activities and perform these operations at large scale of economy. Large enterprise
recruit a high number of employees to generate greater profit margin. Their targeted
market at national and global level. They functioned numerous manufacturing
facilities and depend upon advanced technologies in their production techniques.
Their operations relies on professional individuals to support better quality in
products as they have large capital and resource base for enhancing expansion and
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face competition in market. Have better access to financial resources and arrange
funds from capital and stock market because they have low funding cost as they
have high capacity of borrowing with low risk. Sources for generating revenue are
substantial that can earn from multiple segments. Organisation with proper structure
and clear division of tasks and departments, organised as a corporation with
separate burden of tax on owner from enterprise (Leiponen and Delcamp, 2019).
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
A sole proprietor is self employed individual who run the operations of their
own business, all the management activities are performed and controlled by single
person. These kind of businesses are not separated from their owner as legal entity
as all the liabilities of business are owned by owner and they are liable to pay them
whether it is tax or any loan. Owner has also receives all portion of revenue
generated and has unlimited authority or responsibility for all profit and losses. There
is no such specific registration done to start sole trader business and there are no
board of directors or shareholders. Capital is raised by owner from itself or other
sources such as bank loans or from lenders.
Partnership:
A partnership business is formed by two or more parties who come together
to combine their money and resources through a formal and legal arrangement and
agree to share revenue, losses and risks. These parties can be individuals, non profit
organisation, government and also businesses. There are particular kind of
partnership firms, in some businesses partners share liabilities and revenue equally
and in other partners have limited liability and share profit according to their share in
the firm. In partnership firm, there is no liability to pay tax on business but
responsibility to pay tax passes to all the partners according to their profit share and
revenue from other sources. Partnership is mainly known for clearly outlining all
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business responsibilities, authorities and relationships (Rajahonka, Wendelin and
Westerlund, 2020).
Limited liability business:
A hybrid business structure that combines prospects of corporations with
partnerships. These companies exists as separate legal entity and protects its
owners from being personally liable for all the debts and losses of business. Limited
liability business have the option to choose between different treatments of tax such
as regime of partnership, sole proprietorship and corporations. Flow of income in
business treated as income of its owners and members this helps owners in avoiding
double taxation. In LLC, income is taxed only as an individual instead of charging tax
at business level. Forming a LLC is not tough as it requires basic paper work, the
first thing is to select an articles of organisation which can be filed or documented
with state.
Public limited liability business:
PLC business offers share or stocks to general public, buyers of those PLC
shares has limited liability which means that shareholders are not responsible for any
kind of loss regarding the excess money that they pay in change of shares. They
need to publish periodic financial reports of business performance for the reference
of shareholders for getting knowledge about financial health of company. Formation
of PLC allows business to raise funds from public by issuing shares on stock
exchange, it attracts different investors such as mutual funds, professional investors
and hedge funds this cause rise in access to funds for investment in business than
other forms of businesses. PLC also needs to conduct annual meetings that is open
to shareholders which shows high standards of accuracy and transparency in
financial reports (Mishra and Tripathi, 2020).
Cooperative:
It is an autonomous association of individuals who come together to meet
their cultural, social and economic requirements. This category of business is
democratically managed and controlled by their members jointly like other traditional
businesses, every member gets a fair chance to contribute in business operations
and make choices about running the operations of business. The biggest difference
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between other types of businesses and cooperatives is that they operate in order to
benefit their members only whether they produce commodities then that is also for
their members. There is no such restriction for the size of these businesses as some
are formed by local communities and clubs as well. All members have purpose to
reduce the manufacturing cost so that they can get product at lower price.
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: According to this framework, an organisation is
organised in various departments that are different from each one on the basis of
their area of interest and expertise. They serve as functional units under the
guidance of departmental heads or managers. In this structure, employees follows a
top to bottom hierarchical approach as team of top management or seniors oversees
business at large along with employees as a part of specific department. Workforce
is recruited for their expertise in specific skill and always perform tasks according to
that (Park and Lee, 2018).
Divisional structure: In this structure numerous departments are formed
according to the different products, region and territory. Each department has a
divisional manager who has authority for better performance and control over whole
division. Then after each division is categorized in functional departments such as
finance, production and sales. It helps heads to enhance many skills in respect of
product that facilitates managerial development. Fixation of accountability or
responsibility is easy because heads are responsible for success of their divisions. In
this structure, decisions are taken with more flexibility and superiors also invite
initiatives from their subordinates. It facilitates growth in organisation as new division
is added to business without any interruption with existing departments.
3.2 How different external factors affect the performance of a
business – PESTLE Analysis
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PESTLE analysis is a strategic framework and tool used by analyst to analyse
market and monitor the macro-environmental elements that have strong impact on
organisation externally. It examines the political, economic, social, technological,
legal and environmental frameworks in the market. IT is mainly used for identifying
strengths, weaknesses, opportunities and threats of business.
Political factors: These are the elements that driven by government policies
or actions. It include political stability and instability in nation or overseas market,
foreign trade policies that affect business who have operations internationally and
restriction that put by government such as dispute from another country that limits
business from running business activities in that particular country (Pedersen and
Ritter, 2022).
Economic factors: These components have very significant affect on whole
functioning of an organisation and profitability as well. It consists of factors such as
growth rate of economy, currency exchange rates, inflation and deflation in the
nation, disposable income of customers and purchasing power of population within a
particular country.
Social factors: These are also defined as socio-cultural components that
involves beliefs and attitude of people as it impact on the way companies understand
consumer behaviour and things that shifts their behaviour. It includes population
growth rate, consciousness of people towards their health, age and society
distribution.
Technological factors: In current era, technological landscape are so fast
changing and have very significant impact on market as companies are in pace of
adapting regular enhancements in technology field that leads to improvement in
quality of products at lower cost. It includes new methodology of manufacturing
products or services, enhance techniques of distributing the units that helps in
channelizing better communication with targeted customers.
Environmental factors: There are the foremost components that impact
external market of business as scarcity of resources and pollution increasing
regularly. It become necessary of business to perform activities in sustainable and
ethical manner. Customers are also demanding commodities that are eco friendly ad
are produced ethically with sustainable sources (Opdam, McWilliam and Primdahl,
2019).
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Legal factors: It includes equal opportunities to all communities, safety or
health of workforce and consumers, standards for advertisements, consumer laws
and rights, proper and ethical labelling of product. This is crucial that businesses
should trade legally without harming anyone. For companies who have trade
practices globally to implement laws and regulations of each nation because rules
differ from country to country.
Conclusion
From the above report, conclusion can be drawn that companies can operate
their functions in various structures possessing pros and cons of each framework.
Although, if these structures are not managed properly then will be suffered from
numerous issues, some of the organisational models are are equipped better for
specific business environment and tasks. Shift in external environment often needs
change in business operations. It is essential for enterprises to remain ethical and
fair while performing activities such as production, distribution and with employees
as well. To survive in the market it become necessary to adapt advancement and
new market trends that meet the requirements of consumers.
Reference List
Chell, E., Hedberg-Jalonen, N. and Miettinen, A., 2019. Are types of business
owner-managers universal? A cross country study of the UK, New Zealand
and Finland. In Entrepreneurship and SME research: on its way to the next
millennium (pp. 3-18). Routledge.
Gupta, R., Mejia, C. and Kajikawa, Y., 2019. Business, innovation and digital
ecosystems landscape survey and knowledge cross sharing. Technological
Forecasting and Social Change, 147, pp.100-109.
Kolk, A., Rivera-Santos, M. and Rufín, C., 2018. Multinationals, international
business, and poverty: A cross-disciplinary research overview and
conceptual framework. Journal of International Business Policy, 1(1), pp.92-
115.
Kravchenko, S., Hroznyi, I. and Kovalenko, O., 2019. Formation of the
entrepreneurship model of e-business in the context of the introduction of
information and communication technologies. Journal of Entrepreneurship
Education, 22, pp.1-7.
Leiponen, A. and Delcamp, H., 2019. The anatomy of a troll? Patent licensing
business models in the light of patent reassignment data. Research
Policy, 48(1), pp.298-311.
Rajahonka, M., Wendelin, R. and Westerlund, M., 2020. Industrial internet of things
business models in the machine-to-machine context. Industrial Marketing
Management, 84, pp.298-311.
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Mishra, S. and Tripathi, A.R., 2020. Platform business model on state-of-the-art
business learning use case. International Journal of Financial
Engineering, 7(02), p.2050015.
Park, C. and Lee, H., 2018. Early stage value co-creation network–business
relationships connecting high-tech B2B actors and resources: Taiwan
semiconductor business network case. Journal of Business & Industrial
Marketing.
Pedersen, C.L. and Ritter, T., 2022. 4 Types of Business Transformation. Harvard
Business Review Digital Articles.
Opdam, P., McWilliam, W. and Primdahl, J., 2019. Connecting business with the
agricultural landscape: Business strategies for sustainable rural
development. Business Strategy and the Environment, 28(7), pp.1357-1369.
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