Different Types of Companies and Their Characteristics

This report covers the definition and characteristics of different types of companies, including micro, small, medium, and large businesses. It also explains the features of sole trader, partnership, limited liability business, public limited liability business, and cooperative. The report concludes that businesses have a positive impact on the economy and society by providing employment and improving living standards.

Business in Practice
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Contents
Introduction 3
Section 1: Different types of companies and how they work 3-5
Section 2: Different companies from sole traders to cooperatives and
Limited Liability Partnerships 5-8
Conclusion 9
Reference List 10
Introduction
A business refers to the entity which undertake various activities which are related to
the sell and purchase of goods and services in order to gain profit. Earning profit is the major
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objective of business which also leads to the development of economy by applying
innovative ideas related to the products and services. But, some of business perform
operations not for earning profit but for the purpose of development of society by providing
goods and services. It also results in the development of economy as it also provide
employment to the people so that they can improve their living standard. There are various
factors which effect the business organisation. It may include internal and external factor.
This report covers the definition and characteristics of different types of companies,
explanation of sole trader, partnership, limited liability business, public limited liability
business, public limited liability business and cooperative.
Section 1: Different types of companies and how they work
In an economy, there are various types of businesses. Hence, on the basis of scope and
size of business, they are divided in three types which include profit earning, financial
institute and charitable companies (Ryan 2017). On the basis of the size of business
operations, the business has been classified in the following types:
Micro business:
Different economy present different definition of micro business. But, as per the
Small Business Administration (SBA), micro business refers to the economic activity which
is done on a very small scale by involving less than 10 employees. Identification of micro
businesses has been done on the basis of number of employees involved and annual turnover.
The turnover of these businesses have been found to be less than £2 million. Thiese business
ventures play an important role in the development of country along with the economy. It is
found that the respective form of business venture result in the development of living
standard of people (Ramadani and et. al., 2017). Hence, the government of United Kingdom
is supporting the micro businesses as it also result in the development of low income areas.
Several examples of Micro business are Plumber, Shoemaker, carpenters and many more.
Characteristics Ownership: Mostly, the micro businesses are run by a single individual.
 Limited Reach: This business performs their business operations in a very limited
areas
Small business:
Small Business Administration (SBA) developed a table which shows the number of
employees and annual turnover of organisations of different industry. Generally, the small
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business involves more than 10 employees but less than 50 and their annual turnover is
always less than £10 million. Small business includes sole proprietorship, partnership and
privately owned company (Petrů, N and et. al.,2018). These business operates in small area
but this area is much wider than the area of micro business. As the involvement of employees
in this business is high, it leads to providing higher employment opportunity to the society. It
also results in the improvement in living standard of people along with the development of
economy.
Characteristics Less revenue and profitability: The revenue of small business is not so high which
result in the less profitability of organisation.
 Small market area: Generally, these businesses serve to the single community
including convenience store in a rural township. It implies that they are operating
business in a small area.
Medium size business:
This business can be taken as the developed form of small business. It performs the
business operations on high level as compared to the small and micro businesses. The number
of employees included in this business are more than 50 but less than 250 (Oumlil 2017).
Annual turnover of medium sized business shall not be more than £25.9 million. Medium
sized business operates functions on various locations as they have different branches where
they operate. The balance sheet of medium business is always less than £13 million.
Characteristics Limited Investment: Small amount of capital is required to start a medium size
business as it operates business functions on small level.
 Labour Intensive: Medium sized businesses are mainly dependent on the labour as
they can't afford the involvement of technology in their business because of
availability of less capital. It become necessary to use more techniques of labour
intensive.
Large size business:
Large Size business is defined as the business which perform the business operations
on huge level. Majorly, the large size business work globally with the involvement of more
than 500 employees and annual turnover of more than £1.5 billion euros. Example of this
business include the manufacturing and mining industry (Neubaum 2018). In order to
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performing the business operations in more effective and efficient manner, they are required
to invest in technology. Advancement of technology help the organisation in saving money
and time.
Characteristics Higher Employment Opportunities: As the large size business is performing business
functions on a large level, they are require a huge amount of human capital. They are
require to hire people so that they can achieve the organisational goals. Hence, these
businesses lead to the generation of employment opportunity for the local people.
 Higher use of technology: Such businesses have to perform business operations on
huge level. In order to bringing effectiveness and efficiency in their work
performance, they are required to do investment in advance technology as it will make
the work easy for work force and they can easily achieve the organisational goals and
objectives.
Section 2: Different companies from sole traders to cooperatives
and Limited Liability Partnerships
Sole trader business:
Sole proprietorship is a type of business which is owned and managed by a single
individual. The owner is the only person who is responsible for making any decision along
with performing all operations (Lima and et. al., 2021). Liability of owner of sole
proprietorship is found as unlimited as the owner is the complete profit taker.
Characteristics One Man Control: Sole Proprietorship business is managed and controlled by the
business owner. That person is the only person who take decisions regarding the
business operations. Hence, it can be said that all the business functions is in the hand
of a single person.
 Personal organisation or common identity: This business do not have any separate
legal entity. Hence it is found that the business organisation and it's owner both have a
common identity.
Partnership:
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When two or more than two people comes in the contract for doing economic activity
and decide to share profit and losses in a specified ratio, known as partnership. This contract
which include all the terms and condition of partnership along with the profit and loss sharing
ratio is known as partnership deed (Kirchmer 2017). This business bring perfection at work
place as it combine the skill and capital. As a result improvement in the productivity and
profitability of organisation can be seen. On the other hand, partnership deed also presents
some obligations for the partners in many situations. For instance, paying the share of any
decreasing partner.
Characteristics Agreement: It is necessary for the partners to make an agreement among them so that
they can remove the conflicts which may arise in future. There are various forms of
making this agreement such as written, oral or implied.
 Registration: For the purpose of taking any strict action in the court of law against
any other party for the settlement of claims, it is necessary to register the firm under
specific act. Partnership Act 1890, is an act of the Parliament of United Kingdom
which describes the rights and duties of the partners (Khan 2020).
Limited liability business:
This business includes the features of corporation with the sole trader business or
partnership business. The owner of this business are responsible for the debt of their business
organisation up to their share or value of share they have introduced in the business. The
owner of these businesses are not personally liable to pay the debts of organisation.
Characteristics Limited Liability: The liability of members or owners of this business is limited to
their share. In case of any debt and losses, they are liable to pay the amount as per the
value of their share.
 Flexibility in taxation: It allows a lot of flexibility in tax treatment to the owner of
business organisation.
Public limited liability business:
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It refers to those business organisation which are registered under the London Stock
Exchange. A large amount of capital is required in this business (Herman, 2017). For the
purpose of arranging capital, the management issue shares to the general public which also
leads to the brand awareness. It is necessary for public limited companies to decide minimum
share capital of £50000.
Characteristics Separate Legal Entity: Public Limited liability Company have a separate legal
identity which make the organisation different from their owners. Company itself
have right to own any property and perform any deal.
 Easy Transferability: It also provide right to the shareholders to transfer their shares
to the public.
Cooperative:
For the purpose of completing the economic, social and cultural need of people, an
association has been developed which is owned and controlled by the people. Worker
cooperative, consumer cooperative, platform cooperative are some types of cooperatives.
Characteristics Voluntary Organisation: Cooperative is a voluntary association of people
who work for a common objective (Frishammar and et. al., 2019). They can
join or leave the organisation without any intimidation.
 Service Motive: It's main objective is to provide service to its members. They
do not work for earning profit.
Conclusion
From the above report, it is concluded that the business organisations implies positive
effect on the economy of any country as they leads to the development of society and
providing employment as well. It has been found that there are several types of businesses
which are explained in this report. Every organisation is restricted to follow any specific
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organisational structure. It present the way of communication and command in order to
complete the task in an effective and efficient manner.
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Online
Tesco, 2021 [online] Available Through <https://www.tesco.com/>
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