Different Types of Companies and Their Legal Structures

This report discusses different types of companies and their legal structures, including micro, small, medium, and large businesses, as well as sole traders, partnerships, limited liability businesses, public limited liability businesses, and cooperatives. It also explores how organizational structure affects business productivity and how external factors, such as political, economic, social, technological, legal, and environmental factors, impact business performance through PESTLE analysis. The report uses Tesco as an example to illustrate these concepts.

Business In Practice

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Section 1: Different types of companies and how they work..........................................................3
Micro business.............................................................................................................................3
Small business.............................................................................................................................3
Medium size business..................................................................................................................4
Large size business......................................................................................................................4
Section 2: Different companies from sole traders to cooperatives and Limited Liability
Partnerships......................................................................................................................................5
Sole trader business.....................................................................................................................5
Partnership...................................................................................................................................5
Limited liability business.............................................................................................................6
Public limited liability business...................................................................................................6
Cooperative..................................................................................................................................7
Section 3: Different business structures and external factors affecting business............................7
Identification of different organizational structures and explaining how does organisational
structure affect business productivity..........................................................................................7
How different external factors affect the performance of a business – PESTLE Analysis.........8
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
The aim of the report is to develop an understanding pertaining to different types of
business which are run in UK. With the help of this report, reader can easily understand the
structure of business. The study is based upon Tesco, one of the top retail firm deals in different
sectors like financial, home décor etc. The report will explain different types of business along
with an example and present different companies legal structure. Also, report will provide
different structures and shows how external factors affect the business in either positive or
negative manner.
MAIN BODY
Section 1: Different types of companies and how they work
Micro business
Also referred to as microbusiness, it denotes the small business in which fewer people are
working normally, less than 10 people. It is commenced with a small capital amount which is
generally borrowed from an organisation or a bank. Most often, these enterprises operate in their
local areas trading their goods and services (Fernández G G, Lahusen and Kousis, 2021). The
aim of these micro enterprises is creation of employment at large – scale in the economy
separately from the formal sector. It shall be noted that out of total enterprises in England, 90%
accounts for the micro businesses out of which employs only 0 – 4 individuals. Characteristics of
these enterprises are as follows:
 Mostly financed by microcredit or micro loans.
 They have very simple business structure.
 Generally owned and controlled by a single owner or firms are run by one of the partners or
directors.
 They have very limited finances and investments.
Examples of such enterprises includes lawn and landscaping companies, street vendors,
carpenters, plumbers, small farmers, independent mechanics, etc.
Small business
Companies or enterprises which employs less than 50 employees can be referred to as
Small business. It includes businesses which involves less investment in the capital, has lesser
number of labour and utilizes lesser number of machines for its operations. Naturally, these types
of businesses are involved in production of goods and services at a small scale. The owner of

such enterprises invests initially on the machinery and plants. Such businesses does not invests
more than one crore. Characteristics of these enterprises are as follows:
 The owner of these businesses is an individual and therefore, are also called as sole
proprietorship.
 All the management is done by the owner.
 These are mostly labour-intensive and utilizes very little technology.
Examples of such businesses in UK includes Broadsword Event House, CafePod Coffee
Co., Davison Canners, Fourex, Imaginera, LovetheSales.com, etc.
Medium size business
An enterprise which employs more than 49 employees but upto 249 employees can be
referred to as Medium – sized business. The turnover of such businesses varies between £25
million and £500 million per year. Characteristics of such businesses are as follows:
 The capital investment requirement of a medium enterprise is less as it does not operate on a
large scale.
 It has a mixture of both capital intensive and labour intensive techniques as it does not
employ very sophisticated machineries.
 Due to the medium scale operations, these operations employs lesser number of employees
when compared to large enterprises.
 Management of such businesses is mostly handled by single owner or a small group of
individuals i.e., directors or partners.
Examples of such medium enterprises in the UK includes Verdant Leisure, Captify,
Smith Brothers (Contracting) Ltd., John Good Shipping, Checkout.com, Glacom, Pharmacy2U,
Sykes Holiday Cottages, Crawford Healthcare, etc.
Large size business
An enterprise which employs 250 or more employees can be referred to as Large
enterprises. It shall be noted that out of the total enterprises, large businesses accounts for the
40% of the total employment (Bach-Mortensen and Montgomery, 2018). A large business has
the opportunity to obtain funds from various sources that other enterprises cannot obtain like
issue of shares to the public i.e., going public. The characteristics of these businesses are as
follows:

 These enterprises usually operate internationally but can also be based in one country and
have business around such country. Also, these businesses may have multiple branches in
multiple locations.
 These organisations are usually organised as corporations in which the tax burden is on the
company which is separate from the owners.
Examples of such large scale enterprises operating in the UK includes Unilever, HSBC
Holdings, AstraZeneca, Tesco, Morrisons, Barclays, BP, Prudential, Aviva, Lloyds Banking
Group, etc.
Section 2: Different companies from sole traders to cooperatives and Limited
Liability Partnerships
Sole trader business
An enterprise which is owned exclusively by a single individual person is called as Sole
trader business. There will not be any differentiation between the identity of the business and the
owner i.e., he is not a legally distinct person from the business. Following are the characteristics
of a sole trader business:
 There is a sole owner of the business.
 The sole owner has the unlimited liability in the business.
 There is separate legal entity of the business.
 The owner is the sole decision maker of the business.
Sole traders involve individuals like plumbers, gardeners, electricians, freelancers like
graphic designers, web designers, photographers, artists, independent contractors like tutors,
couriers, drivers for food delivery, etc.
Partnership
When an organisation is co – owned by two or more persons along with sharing of the
profits and losses, it is called partnership. Every individual member of such partnership business
is referred to as a partner (Romero-Silva, Santos and Hurtado, 2018). In such type of business,
every partner is responsible for contribution to the welfare and operations of the firm. This
contribution may be in the form of ideas, money, properties or a combination of all.
Characteristics of a partnership are listed as follows:
 All the risks and rewards are shared by the individual partners.

 Every partner has the right to share in the profits which may not be compulsorily on equal
basis.
 All the partners are obligated towards the debts and liabilities jointly and severally without
any limits.
 All the partners have the right to decision making in the partnership that will be affecting the
business or its assets.
Examples includes professionals like dentists, solicitors and doctors who may work
alongside each other sharing each other’s expertise.
Limited liability business
When the liability of an individual is reduced so as to limit the exposure to the financial
risk it is called limited liability (Funminiyi, 2018). In case of failure of the business or if business
is sued, the liability of each individual is limited as per the structure of business. One of the such
forms of company includes private limited company who features are listed as follows:
 It is distinct legal identity from others in the organisation.
 The maximum liability of a person in case of any liquidation or litigation is up to the face
value of his share in the company.
 All the limited liability companies shall be registered at Companies House.
Examples of such business includes Virgin Atlantic, Greenergy, B&M Retail, River
Island, etc.
Public limited liability business
As per the company law of UK, a public limited business shall have a PLC designation
after the name of company and shall possess share capital of at least £50,000. These offers
various types of shares like ordinary equity shares or preference shares. Following are the
features of such businesses:
 It is a separate legal entity offering protection from debts and liabilities.
 The shares can be issued to the general public unlike private companies.
 Administration regarding tax and making available its financial reports to the public.
Examples of such companies includes AstraZeneca Plc, Barclays Plc, J Sainsbury Plc,
etc.

Cooperative
A business which jointly owned and managed democratically by the members is called as
a co-operative. These enterprises are engaged in generation of profits through trading of goods
and services and these profits are utilized and shared as per the decision of members.
Characteristics:
 Profits are shared by the members among themselves.
 Values like self-help, democracy and equality are the basis of operations here.
Baywind Energy Co-operative, Co-operative Press, New Internationalist, etc. are some of
the cooperatives existing in the UK.
Section 3: Different business structures and external factors affecting business
Identification of different organizational structures and explaining how does organisational
structure affect business productivity
Divisional Structure:
Structure of a company in which the organisation is operated based on division or
branches dependent upon the market, service, location or products. Resources like human
resource, production, accounting and sales are allotted to each division and such individual
division is headed by a general manager who then reports to the top management (Nene and
Pillay, 2019). This type of structure is most suitable for the large companies which are also
operating internationally or which has diverse product categories.
Functional Structure:
When a company is grouped on the basis of the functions it is said to be following the
functional structure. Such departments or functions are responsible for performing their own
roles and responsibilities along with their own goals and objectives (Gaspary, Moura and
Wegner, 2020). These functions may include marketing, human resources, research &
development, operations, sales communications and production. Each department will have its
own leaders namely, president, vice-president, managers, directors, etc. Thus, these leaders will
be reporting to the top management executives.
Effects of Organisational Structure on Productivity:
Improvement of Overall Operations – Properly defined structures ensures appropriate
assignment of the necessary tasks in the organisation following the chain of command already
set. Problems and issues can be addressed effectively through meetings.

Improvement of Communication among various Departments – It helps in promotion of
proper communication among the departments like sales, marketing, accounting, etc. Proper
system of hierarchy is made and followed for achieving harmony.
Reduction in Defects and Complaints – The defects, complaints and returns are reduced by
following of a systematic and structured organisational structure.
How different external factors affect the performance of a business – PESTLE Analysis
TESCO is one of the significant company whose functioning get affected from the
several aspects. It is important for the company to pay attention on identifying the factors which
has the influence on the processing of the organization. PESTLE analysis is one of the crucial
technique which is helpful in gaining the competitive edge is deriving reliable understanding
about the factors affecting its performance (PESTLE Analysis for Tesco discusses its Business
Environment, 2022).
Political factors There are distinct form of the factors which influence the
functioning that includes acts of legislation, tax rate, etc. which
negatively influence its processing that is required focus to
make changes.
Economic factors The economic aspects which are interest, GDP, disposal
income, etc. tend to be focus by the firm. The main reason
behind concentrating is that it tends to ensure that form
targeted audience disposal income is favourably impacting its
sales revenue or not.
Social factors There are distinct aspects which include such as changing
taste & preferences, significant attitude, belief, culture, etc.
play important role in deciding that company's products are
suitable for customers or not. The firm pay attention on having
effective compliance with prevailing trend which benefit the
functioning of the company.
Technological factor Emergence of digital platform and proper upgrading of
procedure is effectively done by firm which benefit the

company in effective manner.
Legal factors The legal aspects like prevailing industrial rules and
regulation, employment, consumer protection act, etc. are
properly adhered by firm which has positive influence on the
processing of company.
Environmental factor Lower carbon footprint, less pollution and limited access &
utilization of resources is permitting firm to get precise
functioning in the market which shows its effective success in
retail industry.
CONCLUSION
By summing up above report it has been concluded that there are mainly three types in
which the company is divided that include micro, small and large. Also, the legal structure which
has followed by the business include sole trader, partnership, limited liability. This in turn shows
that company need to select the structure which is more suitable in order to run business. Also,
Tesco follows tall structure that helps to divide the roles and responsibilities to each team
member. Further, in order to understand the factors that affect the company’s performance Pestle
analysis has been performed that determine company need to use the model to make strategic
decision effectively.

REFERENCES
Books and Journals
Bach-Mortensen, A. M. and Montgomery, P., 2018. What are the barriers and facilitators for
third sector organisations (non-profits) to evaluate their services? A systematic
review. Systematic reviews. 7(1). pp.1-15.
Fernández G G, E., Lahusen, C. and Kousis, M., 2021. Does organisation matter? Solidarity
approaches among organisations and sectors in Europe. Sociological Research
Online. 26(3). pp.649-671.
Funminiyi, A. K., 2018. Impact of organisational structure on employee engagement: Evidence
from North Central Nigeria. International Journal of Advanced Engineering,
Management and Science. 4(8). p.264311.
Gaspary, E., Moura, G. L. D. and Wegner, D., 2020. How does the organisational structure
influence a work environment for innovation? International Journal of Entrepreneurship
and Innovation Management. 24(2-3). pp.132-153.
Nene, S. W. and Pillay, A. S., 2019. An investigation of the impact of organisational structure on
organisational performance. Financial Risk and Management Reviews. 5(1). pp.10-24.
Romero-Silva, R., Santos, J. and Hurtado, M., 2018. A note on defining organisational systems
for contingency theory in OM. Production Planning & Control. 29(16). pp.1343-1348.
Online
PESTLE Analysis for Tesco discusses its Business Environment. 2022. [Online]. Available
through: < https://pestleanalysis.com/pestle-analysis-tesco/ >
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