Different Types of Companies and Their Legal Entities

This report discusses different types of companies and their legal entities, including micro, small, medium, and large businesses, sole traders, partnerships, limited liability businesses, and cooperatives. It also covers the impact of external factors on business operations through PESTLE analysis. The report further explains the importance of organizational structure in improving business productivity. The subject is Business in Practice, and the course code is BMP3002 for BSc (Hons) Business Management with Foundation at an unspecified college or university.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
Submitted by:
Name:
ID:
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Table of Contents
Introduction...................................................................................................................2
Section 1: Different types of companies and how they work .......................................2
Section 2: Different companies from sole traders to cooperatives and Limited Liability
Partnerships ................................................................................................................4
Section 3: Different business structures and external factors affecting business........5
Conclusion....................................................................................................................7
References ...................................................................................................................8
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Introduction
The name business do not separate the owner from the business entity which tells that
owners are responsible and liable for all the debts incurred in business. The business term
also defines to the company where money is generated by producing and selling the products.
It is a activity of making one's living. The company is the separate legal entity having limited
liability and corporate taxes. In the economy various companies are run to maximize the
profit and some are for society welfare (Barr, T.L. and et. al., 201). The organisation is the
entity which contains one or more person having particular purpose. The business in the
economy helps in gaining the market share and growth with the help of innovation. In the
report the discussion is based on the different types of companies and various legal entities
with their characteristics such as sole trader to cooperatives. Furthermore, it discuses
organisation structure and how it affects productivity with this PESTEL analysis that
influence the business operations in business environment.
Section 1: Different types of companies and how they work
The company is created by law which is form of business organisation. The business
activities are performed by associations of persons which has separate legal existence,
perpetual succession and common seal.
Micro business: This is referred as small business where the number of employee is
fewer than 10 people and with the small amount of capital the business is started advanced
from bank or other organisation. In the local area the goods and services are provided. The
financing is done through micro credit where the person do not have collateral, employment
history. This enterprises adds the value in the economy and improves the quality of life for
people in the developing countries (Carrillo Vera, J.A. and Aguado Terrón, J.M., 2019).
Characteristics- The revenue of the business is lower which leads to lower
profitability. The requirement of investment and employment level is low. It has small team
of employees operated by single individual. The owner is responsible for all the profits and
losses and decision regrading the business is taken by the owner. Example- spaza shops.
Small business: The functioning of the business is on small scale level which
includes the less capital investment, labour, and few machines to run the business operations.
For the economic development of country it has an important role. The investment done by
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the business is not more than 1 crore where goods and services are produced on small scale.
The number of employees is 10-49 with the annual turnover up to 10 million.
Characteristics- The owner is single which is known as sole proprietorship. The
owner controls all the management work and have restricted area of operation. It is labour
intensive as dependent on more manpower and labour and little on technology. It provides the
flexibility to make the sudden changes. Example- Architectural firms.
Medium size business: This business have average number of employees of 250 with
the annual turnover of 50 million. The organisation starts saving some capital for the future
development. It creates the employment opportunities and global economic development. It
makes the contribution in GDP. The business relies on internal funds and less likely to take
bank loans. The success of the small business helps these enterprises in slow and steady
growth. It creates a bridge among small and large corporations (Chen, Y. and Lin, Z., 2021).
Characteristics- It has limited resources with informal management style where the
owner is responsible to handle everything. To adopt the changes it provides flexibility due to
its informal structure an size. The owner is liable to manage and operate the firms where the
decision is taken by himself and determines growth. The focus is on small number of
products and services which helps in establishing strong relationship. Example- construction
company.
Large size business: The number of employees is 250-1000 with the annual turnover
of more than 1 billion. The business is served to the several locations domestically and
internationally. The growth of the firm increases with the rapid pace and working of
employee is voluntary membership. In the multinational company the investment and
employment level is high with takes the funding from banks and financial institutions. The
management hierarchy is complex which has daily number of business operations.
Characteristics- It is a capital intensive industries as require more capital to run the
business operations. The white collar workers makes the large share in the total workforce.
To foster international relations it provides sustainability to environment. The level of
employment is high which makes the investment in technologies and staff hiring. Example-
Dyson (Christ, K.L. and Burritt, R.L., 2019).
Section 2: Different companies from sole traders to cooperatives and
Limited Liability Partnerships
Sole trader business: It is also known as sole proprietorship which is a legal setup
unincorporated company that is owned and controlled by the single person. The owner is
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liable for all the business aspects involving finance, profits and losses. The owner has less
amount of financial and legal protection. It do not create the separate identity for business.
Characteristics- It is owned by the single person which makes the contribution of
capital and quick decision is taken by himself. The owner has unlimited liability to pay the
business debts from his personal property. No legal formalities are requited in the formation
and management of the business it is free from government regulations. Example- Computer
repairing service.
Partnership: The business enterprise is formed by two or more parties where the
partnership deed is formed that defines the scope and structure of partnership. The deed
specify the responsibilities of the partners and their sharing ratio of profit and losses which is
signed by all the partners. It has unlimited liability where the partners are personally liable for
the business debts (Endres, H. and et. al., 2019).
Characteristics- To from the partnership deed there is a existence of the agreement
between two or more partners. The profit is shared in the equal proportions in the absence of
agreement. There is non-transferability of interest as no partner without the consent of all
partners can transfer their partnership to any other person. Example- McDonald and Twitter
Limited liability business: This companies are incorporated which has separate legal
entities and own legal status. It forms the constitution that helps in regulating the relationship
of the directors and shareholders. The company can be limited by the shares or guarantees. It
has flexible tax structure.
Characteristics- It is a separate legal entity where the owners are not responsible for
the obligations. The liability of the employees, managers are limited. It is simple to carry the
documentation and operations of company. Example- Blockbuster
Public limited liability business: This companies sell and trade the shares freely on
the stock exchange. The public shares are issued which helps the owners to raise the capital
and risk is shared. Through the transferability of the shares the growth and expansion
opportunities are provided to the company.
Characteristics- The degree of transparency level is high. It has separate legal
existence in the performance and business decision. The shares are freely transferable and the
capital is collected with the sale of shares. Example- Roll-Royce Holdings (Keränen, J. and
Liozu, S., 2020).
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Cooperative: It is unincorporated association formed as a legal body where the
persons works voluntarily to meet the common goals through joint owned enterprises. The
services are provided to the user which is run in the aim of profit maximisation. It is owned
by the members having one vote. The business earns limited return on equity.
Characteristics- The management is democratic where the human value is developed
and protection of the consumers. There is a common interest between the members rules of
society is abided by comprising voluntarily memberships. The members liability is limited
and unlimited. Example- Islands co-operative society.
Section 3: Different business structures and external factors affecting
business
3.1 Identifying different organizational structures and how its affects business
productivity
The organisation structure defines in what way certain activities are delegated towards
organisation to achieve the goals. Various roles and responsibilities is outlined within the
company. It determines the flow of information among levels within the company. The types
of organisation structure are-
Functional structure- In this structure the organisation is divided with specific roles
and duties into specialized groups. It is also considered as bureaucratic structure which is
found in small and medium sized business. The organisation is divided into various
departments and having managers. Independently each separate department is managed. It
encourages specialization and allows employees to focus on the role. The effective
communication and decision is made (Lüdeke-Freund, F. and et. al., 2019).
Divisional structure- In this structure various teams work together with each other
for the common goal. The each division has own manager which manages the branch
operations, controls budgets and resources are allocated. It has centralized leadership. The
company in this structure have control over their own resources. The division is made
according to market, product and geographic. To stay flexible it helps large companies. It is
suitable for the large multinational companies.
The organisation structure in the company facilitates quick decision making by
communicating effectively with the various teams and better flow of information. The
organisation structure divides the companies into branches which delegates the
responsibilities and task to those divisions and employees get to know regarding their
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working which performs efficiently and ultimately the efficiency of the company is improved
(Nolan, J. and Rowley, C., 2020).
3.2 PESTLE Analysis
The external forces are identified with the help of this tool which impacts the
organisation functioning and decision in gaining long term sustainability and success in
market. The analysis is done on Dyson company of UK which deals in manufacturing of
household appliances.
Political factor- The unstable conditions of government affects the Dyson sales and
supply chain as well as cost incurred in production. With the high interest rate the raising of
funds in always difficult for the large corporation in UK. The Dyson company needed a huge
fund for the research and development. The other factors like high exchange rate, unstable
government, trade rules and import restrictions by the government affects the international
business (Nußholz, J.L., 2018).
Economic factor- This includes the factors such as exchange rate, growth rate,
interest rate which affects the business of Dyson in different market. The high growth rate
leads to increase in the sales of Dyson in market. The high inflation rate affects the Dyson as
purchasing power is reduced of the customer which leads to decline in sales.
Social factor- In the current time the customers are aware of their requirements which
is important for the company to fulfil the demand in regards to product quality and customer
services. To cater the needs of the customers the Dyson is consistent in providing innovative
technologies (Reinhold, S and et.al., 2019).
Technological factor- The use of innovative technology in the company leads to
more sales and growth which helps in providing the solutions to the customers. The Dyson
keeps the technology trends updated to gain the competitive advantage with the competitors.
The investment in R&D will build the brand reputation with the growth and development in
the technology.
Environmental factor- The customers are more concerned with the environment, the
Dyson provides products including cleaning. The factors which affects the company involves
climatic conditions, environmental standards, etc. the ecological investments increases the
sale and saves the environment (Tolkamp, J.C.C.M. and et. al., 2018).
Legal factor- The working of the Dyson is internationally which requires to comply
with the rules and regulations of the countries so that products can be sold legally in the
market. The laws involves trademark registration, employment laws, safety laws and patent
requirements. The sales and brand image is increases (Weaver, M.W. and et. al., 2018).
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Conclusion
The conclusion has been made from above report that the business is the essential
aspect in the company. It gives the understanding on different types of companies with their
legal entities. The impact of external factors is analysed by taking the real example of
company. The productivity of the business is improved with the help of organisation structure
and leads to growth.
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References
Books and Journals
Barr, T.L. and et. al., 2018. Development of indigenous enterprise in a contemporary business
environment–the Ngāi Tahu Ahikā approach. Journal of Enterprising Communities:
People and Places in the Global Economy.
Carrillo Vera, J.A. and Aguado Terrón, J.M., 2019. The eSports ecosystem: Stakeholders and
trends in a new show business. Catalan Journal of Communication & Cultural
Studies. 11(1). pp.3-22.
Chen, Y. and Lin, Z., 2021. Business intelligence capabilities and firm performance: A study
in China. International Journal of Information Management. 57. p.102232.
Christ, K.L. and Burritt, R.L., 2019. Implementation of sustainable development goals: The
role for business academics. Australian Journal of Management. 44(4). pp.571-593.
Endres, H. and et. al., 2019. Industrial internet of things (IIoT) business model classification.
In 40th International Conference on Information Systems, ICIS 2019 (p. 2988).
Association for Information Systems. AIS Electronic Library (AISeL).
Keränen, J. and Liozu, S., 2020. Value champions in business markets: Four role
configurations. Industrial Marketing Management. 85. pp.84-96.
Lüdeke-Freund, F. and et. al., 2019. Research on sustainable business model patterns: status
quo, methodological issues, and a research agenda. In Sustainable Business
Models (pp. 25-60). Palgrave Macmillan, Cham.
Nolan, J. and Rowley, C., 2020. Whither guanxi and social networks in China? A review of
theory and practice. Asia Pacific business review. 26(2). pp.113-123.
Nußholz, J.L., 2018. A circular business model mapping tool for creating value from
prolonged product lifetime and closed material loops. Journal of Cleaner
Production. 197. pp.185-194.
Reinhold, S and et.al., 2019. Business models in tourism–state of the art. Tourism review.
Tolkamp, J.C.C.M. and et. al., 2018. User-centred sustainable business model design: The
case of energy efficiency services in the Netherlands. Journal of Cleaner
Production. 182. pp.755-764.
Weaver, M.W. and et. al., 2018. A systems approach to understanding the perspectives in the
changing landscape of responsible business in Scotland. European Journal of
Operational Research. 268(3). pp.1149-1167.
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