Types of Companies - Business in Practice

This report discusses different types of companies, including micro, small, medium, and large-scale businesses. It also covers different business structures, such as functional and divisional structures, and external factors affecting business, including political, economic, social, technological, environmental, and legal factors.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
Submitted by:
Name:
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Contents
1

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 business sector of the society is categorized into many segments in accordance to
diverse aspects that are present within the business or the set of regulations that are
particularly followed by a specific business. His report in particular provides information
regarding the different types of businesses in the first section, the businesses are micro
business, small business, medium- sized businesses and the large- sized businesses in
particular. In the next section the report types of businesses on the basis of ownership, the
categories it majorly defines are, sole trader, partnership, limited liability and public liability
business. Lastly the report states the impact of organizational structures and PESTLE
analysis.
Section 1: Different types of companies and how they work
Micro business:
A micro business is particularly the smallest business in accordance to the size of the
business in particular. It is the most basic kind of business too. Micro business in particular a
type of business in which less than ten people are employed for performing activities and
tasks of the business in particular (Gherhes. and et.al., 2016). Such a business also requires
small amount of capital to be invested and it can easily be started too. The capital is generally
advanced either from other organizations or from the banks in particular. The business
operates at low risk as less amount of capital has been invested in the business. As the
business category has less number of employees there is less chaos and the process of
decision- making becomes easier and effective. But due to this the level of proficiency within
the business is limited.
Small business:
A small business which can also be stated as a small enterprise can be a sole
proprietorship, partnerships or corporations in which the number of employees is fewer as
compared to medium and large- sized businesses (Hillary., 2017). This category generally
includes all the businesses that have an employee strength of up to 50. Also, the small
businesses in particular earn a lesser amount of revenues or profits. This is because the size of
the business and the areas that the business is expanded in is less than that of the areas
medium- sized as well as the large- sized businesses or enterprises. The production or the
manufacturing of the goods or providing of services is done on a small scale in this industry
in particular. The establishment of such businesses is also easy and due to this there is higher
competition too. But the management and the proficiency and the efficient working is present
in such businesses.
Medium size business:
The medium- sized businesses are the businesses that usually have up to 250
employees that are working within these businesses in particular. The businesses that have
earned an average turnover of almost 13 million Sterling over the years is considered to be a
medium- sized business in particular. These businesses may be family owned businesses or
businesses that are managed by the families in particular. As they are bigger as compared to
the micro businesses and the small businesses, the aspects of management and ownership are
generally separate from each other. These businesses are usually considered to be well-
established and also have a track record that is observable that facilitates the financing
decisions by the investors or the lenders in particular. Financial structure of these businesses
in particular is managed by the professionals that are in- house. The medium- sized
businesses in particular diversified finances that are usually provided by banks or other
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organizations.
Large size business:
A large- sized business in particular is referred to as a business with a size that is
considered t be above average size in particular (Di Giovanni. Levchenko. and Mejean.,
2017). The business also has operations that are large and also the economies of scale in such
a business are most probably high. The number of labour that is hired by the businesses is
also high and a lot and the amount of revenue that is generated by the businesses in particular
is also high. A business which has around more than 250 employees in particular and such
businesses are also more capital intensive as compared to other types of the businesses. Large
amounts of capital is required for enhanced competitiveness as well as for supporting
expansion in particular. These businesses are considered to have lower default risk and higher
capacity of borrowing which supports in lowering their cost of funds in particular.
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
A sole trader or a sole proprietor by the name itself is understood that the business is
owned by a sole or a single owner (Dungan., 2017). This is a kind of business or enterprise
that is particularly owned by a single owner and also run by that one individual itself. In this
business the owner and the business are not considered to be separate, which makes the
owner of the business fully liable or makes their liability unlimited. Also, the profits that are
generated by the business are all owned by the owner. Starting this business is also easy as
there are no legal necessities to be followed.
Partnership:
Partnership is referred to a business in which two or more than two people formally
agree upon being co- owners of a business and sharing the profits as well as the losses of the
business equally or according to the ratio that is mutually decided by all the partners
(McCarthy., 2016). The liability of the partners is unlimited as the business is not considered
to be a separate legal entity. There is no compulsion to fulfil legal requirements, it is optional.
The agreement can either be verbal or can be in written form as well.
Limited liability business:
A limited liability business is a business in which the losses that are incurred by the
firm or the business are not considered to be fully incurred by the owners of the enterprise.
The liability of the owners or the shareholders is considered to be limited in this case. The
liability is in accordance to the amount that is invested by the shareholders or the owners
within the business in particular, and it does not exceed the limits of the personal assets of the
owners or the shareholders. In this case the agreement should be legal and the ratio should be
decided according to the amount f capital investment done.
Public limited liability business:
Public limited liability or Public Limited Company (PLC) is one of the most common
type of business structure in which company issue share to general public, the issuer issue
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slot of stock share to buyer who have limited liability in the company. Limited liability is
term used in business world which simply means buyer will remain free from any kind of
losses occurred in business operation, they can not be held responsible for any losses for the
amount they have paid for the share. Common type of PLC are those listed companies who
dealing in both domestic and international market. For example; Tesco PLC is public limited
company allowing shares to general public to raise funds and continue there business
operation (Ismail, 2017). A PLC may contain director who lead business operation and take
critical decision and shareholder who hold the stock of the company allowing them to enjoy
interest over profit.
Cooperative:
Cooperative is one of the most common but important type of business structure in the
UK, this is type of business which is owned and controlled by member. Major purpose of
cooperative not to generate profit for their own but to generate profit for betterment of soceity
or community. Each community build their own form of cooperative which allow them to
deal in business area to generate wealth for their community which means these are
controlled and managed by group of one particular community and trade within democratic
boundary. Cooperative society is common term in business world which work for societal
development and focus on delivering core value to the society (Bretos and Marcuello, 2017).
Cooperative business do not mainly focus on self consumption of wealth generated with the
help of trade but this distributes income and wealth around society, generate job opportunity
for society member, cooperative may work completely different from other business type.
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
Organizational structure is backbone of every business unit, structure need to be
included in business operation providing support to firm (Ahmady, Mehrpour and
Nikooravesh 2016). This simply means every business unit run on particular type of structure
according to the business area they are dealing in, a social enterprise may have different
organizational structure as compared to private organization, but they both are dealing in
trade area which means structure is important to run a business. There are certain type of
business organizational structure and each structure affect productivity of business, these are:
Functional organizational structure: This is one of the most common type of business
structure, functional structure simply means division of business unit into different group or
department, each department is responsible for certain type of business operation lead by
departmental manager or head. For example; Human resource department run by HR
manager dealing hiring and employee management operation whereas financial department
oversea financial performance of company and calculate profit and loss accordingly. There
are certain characteristics, these are:
 Top to down hierarchical structure in which senior management remain at top and
each department remain under oversea of senior management.
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 Department head: Department head fall after senior management which means
reporting will be done to senior management about progress.
 Employee remain at bottom carry no right to take decision but are important pillar of
functional business structure.
Divisional organizational structure: This is another common type of business structure in
which company do not divide business unit into department, but they divide employee and
group according to the business requirement, each group of employee carry skills and
experience in particular area allowing firm to cover market in larger terms (Král and Králová,
2016). These independent group of employee work divisionally to cover wide range of
market. There are certain characteristics, these are:
 Parallel divisional in which each product and service is divided according to the
market condition and demand.
 Each employee group focus on particular customer segment allowing company to
cover wide market range.
 Different geographical location allowing firm to deal in international market with
divisional workforce.
3.2 How different external factors affect the performance of a
business – PESTLE Analysis 300
Political factor: Political factor impact firm's performance in the market, government take
certain decision which affect firm stability (Perera, 2017). For example; Brexit impact trade
between both nation, many multinational and even small scale business unit were impacted
because there was certain type of trade barrier. Same way, COVID-19 policy introduced by
government impacted every business.
Economical factor: Economical factor is one of the most important, after COVID-19, there
was instability in UK's economy which means price hike can be seen. Due to high inflation,
survival of small business unit become challenging, there was shortage of labour and supply
of raw material impacting business operation and production process.
Social factor: Social factor simply means consumer factor, after COVID-19, spending
capacity of consumer was impacted which means company have to bring price reduction to
survive in the market. Social factor keep changing according to current trend and critical
situation, consumer behaviour impact company's performance in the market.
Technological factor: Technological factor is one of the most common factor impact
business performance, after COVID-19, there was change in technological area of every
industry. Due to rapid transformation in technology, businesses have to update their
workplace and organisational structure to survive in the market, technology is cost drive
factor may impact financial performance of company.
Environmental factor: This simply means nature and measurement to prevent harm to
nature, company need to follow CSR allowing them to be responsible towards nature. After
COVID-19, UK government have taken sustainability measure to reduce business impact
over nature which means there will ban on plastic consumption for packaging and certain
other restriction impacting firm's financial performance.
Legal factor: This is one of the most important factor in which company need to be legally
stable, they need to follow every rules and legislation to maintain legal factor (Christodoulou
and Cullinane, 2019). However, every business in UK have to register themselves with
government and majestic allowing them to trade freely and fairly in the market.
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Conclusion
This report has discussed business and its importance in the economic and nation
development process. Later this report has discussed different type of companies including
micro, small, medium and large scale business enterprise. Later this report has discussed
different companies including sole trader, partnership, limited liability, public limited liability
and cooperative business form dealing in market. Later this report has discussed different
business structure including functional and divisional structure. At last, this report has
discussed PESTLE analysis to examine external factor and its impact over the company.
Reference List
Ahmady, G.A., Mehrpour, M. and Nikooravesh, A., 2016. Organizational
structure. Procedia-Social and Behavioral Sciences, 230, pp.455-462.
Bretos, I. and Marcuello, C., 2017. Revisiting globalization challenges and opportunities in
the development of cooperatives. Annals of Public and Cooperative
Economics, 88(1), pp.47-73.
Christodoulou, A. and Cullinane, K., 2019. Identifying the main opportunities and challenges
from the implementation of a port energy management system: A SWOT/PESTLE
analysis. Sustainability, 11(21), p.6046.
Di Giovanni, J., Levchenko, A.A. and Mejean, I., 2017. Large firms and international
business cycle comovement. American Economic Review. 107(5). pp.598-602.
Dungan, A., 2017. Sole proprietorship returns, tax year 2015. Statistics of Income. SOI
Bulletin. 37(2). pp.2-28.
Gherhes, C. and et.al., 2016. Distinguishing micro-businesses from SMEs: A systematic
review of growth constraints. Journal of Small Business and Enterprise Development.
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Ismail, I.N., 2017. The Roles of Corporate Governance and its Influences on Risk and
Performance: Tesco Plc.
Král, P. and Králová, V., 2016. Approaches to changing organizational structure: The effect
of drivers and communication. Journal of Business Research, 69(11), pp.5169-5174.
McCarthy, J., 2016. Partnership, collaborative planning and urban regeneration. Routledge.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
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