Understanding Different Types of Companies and Their Characteristics

This article explains the different types of companies such as sole traders, partnerships, private and public limited liability businesses with their characteristics and examples. It also covers the main criteria used for classifying different kinds of businesses, micro, small, medium and large businesses. The subject is Business in Practice and the course code is not mentioned. The content is relevant for students studying business management or related courses in any college or university.

Business in Practice

Table of Contents
MAIN BODY...................................................................................................................................3
Part 1: You are to show an understanding of the different types of companies and how
they.........................................................................................................................................3
work.......................................................................................................................................3
Part 2: To explain the different companies from sole traders to cooperatives and limited
................................................................................................................................................6
liability partnerships............................................................................................................6
REFERENCES..............................................................................................................................11

MAIN BODY
Part 1: You are to show an understanding of the different types of companies and how they
work.
(i) Discuss the main criteria used for classifying different kind of businesses.
 Size- It is the most basic feature for dividing the businesses into different parts.
Notwithstanding with the kind of job one have, size of business and for which sector you
are going to be hired will give benefits to your profession. On the basis of size business
can be classified into 3 parts that is small business, mid-market business and large
enterprise. For example-
 Location- It is defining the place where business is physically operating, it could
national, local or globally spread.
 Industry- It is very easy for anyone to recognize the business according to the industry.
Generally, business is classified into three broad categories, firstly it is primary in which
natural resources are used for the production, like mining, agriculture. Other is secondary
industry in this raw material from primary industry will further operate into the
commodities. Lastly, tertiary, it is related to the services like economic, financial,
education in the society (Phillips, and Et. Al., 2019)
 Legal Structure- In this section business is classified into four broad categories- Sole
Proprietorship type of company is usually controlled or handled by only one person. In
Partnership two or more individual as a partner to operate an organisation and divide the
profit & loss of the company according to their share ratio. Limited Liability Company is
the most workable form of business as it is combination of partnership and corporation.
Corporation is different legal entity which is developed and dominated by shareholders.
(ii) Explain micro business with appropriate example.

Micro business consists of very less employees in its managerial activities, it is like any other
small business but it may experience difficulties in order to start business or seeking investors for
the business. Number of workers in this organisation are mostly less than 10 and works by
adopting legal business structure. Operational activities of micro business depend on acquiring
business license and permits, they also work in setting different functions in their activities. In
this type of business, it easy to change the decision or plan of action according to the need of
time, on the other hand the rate of expenses in micro business is also very low. Employees needs
to generate more faith and responsibility among them for the smooth functioning of the
company. Example of micro type of businesses are road side sellers, plumbers, small farmers,
carpenters etc. The main objective of selecting microbusiness is that it has capability to develop
and give employment opportunities to many individuals who do not have jobs by this it helps in
wiping out the problem of unemployment in any country and also it requires very minimum
investment for its working. It also helps in increasing the standard of living of the people in the
society and also works in the proper utilisation of resources which are underutilized, along with
this it also focusses on the equal distribution of income of the country to make it economically
stronger (Greenberg, Farja and Gimmon, 2018).
(iii) Explain small business with appropriate examples.
Small business means functioning activity on a small scale level. This business plays an
important role in the economic and it produces goods and services on the small scale. This
business having a single owner so, it’s also known as sole proprietorship for example- grocery
stores, small- scale industries such as paper, pencil, grocery items and their characteristics have
been given below.
Flexibility- This industry is small in scale so it easy to take decision fatly and owner easily do
sudden changes according their need because they are small in scale so they don't face problem
to take to doing any changes in business they are open and flexible to constant changes, to
compare to big industries (Sweeting, 2022)
Management- There are all the management works are controlled by the owner, mostly there is
the one manger in this business because they are small in size so they don’t, need multiple
manger to manger their work, mostly business is controlled by the owner.

Limited Reach- they have limited area of operations, so they mostly located in one area they
don’t have any other branches in different area or different countries.
Strong relationship between consumer and retailer- This small business are more connected
to consumer because they have regular consumer and they are located in one area, so they built
strong relationship with consumer, they know the taste and need of the consumer because they
are connected with them so they are more aware to their needs and wants.
Labour intensive- Small scale business is not a wide business who are located in many areas or
having multiple business and lots of worker, they are not using advance technology and
machine's because they are small so they mostly dependent on labours and manpower, their
dependency is on technology is very less to compare to big companies.
Categories of Small Business
These businesses are mostly dependent on their capital investment that how much money and
labour they invest of their business; these small business are divided into different categorise
which are listed below:
Small Scale industries- This industry are not investing their money and fixed assets not more
than one core.
Export Oriented Units- This business can be possessing the status which are export- oriented
units but if inn case their export business exceeds fifty percent of its manufactures.
Advantages of small Businesses-
• Helps to take fast diction
• Easy to handle problems
• Less investment
• More connected with consumers
For Examples- A local candy shop which have 5 employees are working.
(iv) Explain medium- size business and its appropriate examples
Medium size business are working their activity in small portion they are not invest hug
money to start their business. There are limited area to expand their business and they fall below

the certain revenue. Those company are less than 500 employees so it will be considering as a
medium- Small Business for examples – Retail Trade, construction, Health and social assistant.
Qualities of Medium business
Help to contribute in economics- Medium Business help in economics for examples – Medium
business help to increase the 99.9 per cent U.S business in 2020.
Help to drive innovation- Due to medium size business, help to easily apply a new technology
and develop the systems to improve the business technology and efficiency (Al-Awlaqi, and Et.
Al., 2021)
Financial Incentives- It plays an important role of SMEs in the economy which often to take the
financial incentives such a tax, favourable loan terms, of the government.
(v) Explain large size business with appropriate examples
Large business defines that where they 50 above peoples are working in their business and which
perform their work for compensation during the given week. Large business such as partnership,
corporation, which have limited liability, it involves the large scale which is controlled by the
corporate business, along with they include huge investment and translations for the doing big
things for examples- Any business who is having more than 250 employees or above 10$ million
gross revenues which are considered in large business. Large companies having a certain
advantage which are listed below:
Resources- Large companies are offer the huge benefits because they having more resources
they provide higher salaries and bonus to their employees (Hernández-Perlines, Moreno-García
and Yáñez-Araque, 2019)
Advance technology- Large business are having more advance technology to compare to small
business and they are more updated in market that what the consumer need.
Opportunities- This business help to provide more opportunities to their workers they are more
focus to their employees they provide proper training to their workers to gaining more output

Part 2: To explain the different companies from sole traders to cooperatives and limited
liability partnerships
(i) Definition of sole trader business with appropriate examples. Brief explanation
of three characteristics of sole trader business
Sole trader business refers to the enterprise which is run and owned by an individual. In other
words, it is unincorporated business which have single owner who is entitled for paying all the
personal income tax that is on profits generated from business. Barbershop, Sweet Shop,
Hairdressers, electricians, freelance Writers and so on are sole of sole trader businesses. For
example, TH Electricals, MA Bakers, Dust & Dance, etc. are sole trader businesses in UK. Three
characteristics of sole trader business are briefly explained below:
 Formation and closure: Sole trader business are formed by individual owner
themselves. There are no legal conventions obliged for starting sole trader business (Cott,
 2021). In some cases, legal formalities are required or the owner needs to have specific
certificate or licence for running the company. This kind of business can be closed as per
discretion of the owner.
 Liability: Within sole trader business, unlimited liability is with individual owner.
Herein, the owner themselves is liable for making payments of all the liabilities. For
instance, when loan is taken by Dust & Dance, the owner of business is liable for all the
debts.
 Control: All the rights along with responsibilities of the sole trader organisation lies with
the owner, the sole trader controls all activities of the establishment. For example, to
make modification in plans for TH Electricals, the owner can only carry out the changes.
(ii) Definition of partnership with appropriate examples. Brief explanation of main
features of partnership business
Partnership is termed as a formal arrangement by two or more entrepreneurs or parties for
starting, managing and operating business addition to share profits. In partnership, all partners
are entitled for sharing profits and liabilities equally. It is kind of business that come into
existence because of shortcoming of sole trader business. John Lewis & Partners,

NotOnTheHighStreet.com, Pret A Manger and so on are examples of partnership businesses.
Three main characteristics of partnership are as explained:
 Agreement: The formation of partnership business is based on partnership deed or
agreement among partners that are competent for entering into the contracts. For
establishment of John Lewis & Partners, there us existence of an agreement among all for
carrying out business practices together as well as sharing profits or losses among all.
The agreement can be written or oral. It ensures that all partners are clear on their status
as partners of an establishments (Graesch, Hensel-Börner and Henseler, 2020)
 Profit sharing: Partnership agreement need to specify manners of sharing losses addition
to profits among partners. However, for business, such as Pret A Manger, merely profit
sharing is not conclusive evidence of partnership, herein, creditors or employees that
share profit are not caller partners unless described in agreement.
 Agency relationship: Each partner is seen as agent of enterprise. In John Lewis &
Partners, NotOnTheHighStreet.com and so on, all partners have agency relationship
among themselves. These businesses can be carried out collectively by one nominated
partners on behalf of all.
(iii) Define private limited liability business with appropriate examples. Briefly explaining
three main characteristics of a private limited liability business.
The modern business environment has made it very easy for companies to indulge in
proper trading activities and scale their businesses accordingly but at the same time, the amount
of disruptions which have been found as a result are also numerous. This has made business
adopt various different structures all over the past few decades in order to ensure their continued
survival (Mancuso, 2021). One of the major ways in which such types of companies have
changed or adapted new forms can be seen in private limited liability business which according
to the company’s act 2013, refers to business institutions which have their ability to allow the
prescribing of their shares to the public restricted due to the amendments written in their articles
of association. This feature is extremely distinct and helps identify and differentiate between a
private limited liability business and other forms of companies which are in UK and some major
examples of such companies which hold trading operations in UK include Virgin Atlantic and

John Lewis partnership. These types of companies also have various different and distinct
characteristics which separate them from rest of the pack which are listed herein.
 These types of companies are subject to perpetual succession which means that even in
case of insolvency and death of one its founding members, the company continues to
exist in the eyes of the law
 It is necessary and made compulsory by the law of UK for such companies to put the
words ‘private ltd’ after their official company names for easy regulation and
identification of their structure and business type
 A minimum of 2 members and a maximum of 200 members are allowed for such types of
businesses as per the provisions given in company’s act, 2013.
(iv) Define public limited liability business with appropriate examples. Briefly explaining
three main characteristics of a public limited liability business.
There are many different kinds so business organizations in the world which has been
owed to the major demand which the modern businesses have to fulfil in order to make sense of
the external environment which has become increasingly destructive. US has been ahead of the
curve in this regard as the sheer variety of business structures which have been reported in the
country and one of the largest and most extensive ones are publicly traded companies which are
often ending with the extension known as ‘inc’ at the end signalling their structure and trade
status to the public and to the shareholders (Christensen, Newberry and Potter, 2019). When it
comes to the public limited liability businesses also known as PLC for short, it is the United
Kingdom’s equivalent of the US publicly traded companies and in order to reflect their status,
they have to add the words, ‘PLC’s’ at the end of their company name such as Tesco PLC which
is the UK’s leading grocery and retail sector leader and a highly established supermarket
company which can also be traded publicly. The 3 main characteristics of these types of
companies have been listed herein.

 The companies which fall under this type of business and company structure have to offer
a part of their stock valuation to the general public which is essential for funding their
operations due to their huge size
 The vision, mission, values and goals of the businesses are aligned across all the major
aspects and departments of the firm and is centred around servicing all stakeholders.
 PLC companies are separate legal entities and transferable capabilities of the entire
business operation is very high and flexible
(v) Define cooperative with appropriate examples. Briefly explain three main
characteristics of a cooperative.
Although the main motive of any business is to earn lots of money and get hold of as
much profit as possible, not all of the business structures and types of business which exist in UK
and all over the world for that matter exist for this sole purpose which is why there are many
unorthodox business structures at play where there are other reasons for the formation of the
business. One such type of business is known as cooperative and it refers to the business
organization whose formation and reason for existence is bound to the members which have
come together to form it out of a need to achieve a common objective (Lee, Kim and Cho, 2019).
Cooperative are business ventures which are wholly owned by the members of the company who
were a part of its initial establishment and even those who join much later and when it comes to
UK, there has been massive pro-cooperative movement with many companies emerging at the
forefront in the food department such as Clydebank and Coningston Some of the major features
of cooperative forms of business which distinguishes it from the other types of businesses which
are found all over UK are given herein.
 The main aim of the cooperative form of business is to provide services which aid the
profitability and suitability of their members and helps them in the long run rather than
earning profits
 Cooperative business is a voluntary form of organization which is formed when a group
of people come together to share their common business interests in the form of a
collective venture

 This form of business is also known for its democratic management as the major
decisions are taken by the committee members which are elected by the members on a
fair voting basis

REFERENCES
Books and Journals
Al-Awlaqi, M. A. and Et. Al., 2021. The interaction between leadership styles and their
followers' human capital: a correspondence analysis approach applied to micro-sized
businesses. Journal of Management Development.
Christensen, M., Newberry, S. and Potter, B. N., 2019. Enabling global accounting change:
Epistemic communities and the creation of a ‘more business-like’public sector. Critical
Perspectives on Accounting, 58, pp.53-76.
Cott, P., 2021. Legal matters: What is the best business structure for you?. Electrical Connection,
pp.36-37.
Graesch, J. P., Hensel-Börner, S. and Henseler, J., 2020. Information technology and marketing:
an important partnership for decades. Industrial Management & Data Systems.
Greenberg, Z., Farja, Y. and Gimmon, E., 2018. Embeddedness and growth of small businesses
in rural regions. Journal of Rural Studies. 62. pp.174-182.
Hernández-Perlines, F., Moreno-García, J. and Yáñez-Araque, B., 2019. The influence of
socioemotional wealth in the entrepreneurial orientation of family
businesses. International Entrepreneurship and Management Journal. 15(2). pp.523-544.
Lee, W., Kim, M. and Cho, D. H., 2019. Deep cooperative sensing: Cooperative spectrum
sensing based on convolutional neural networks. IEEE Transactions on Vehicular
Technology. 68(3). pp.3005-3009.
Mancuso, A., 2021. Nolo's Quick LLC: All You Need to Know about Limited Liability
Companies. Nolo.
Phillips, P.P. and Et. Al., 2019. Value for Money: How to Show the Value for Money for All
Types of Projects and Programs in Governments, Non-Governmental Organizations,
Nonprofits, and Businesses. John Wiley & Sons.
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.