BSc (Hons) Business Management: Types of Companies Analysis (BMP3002)

This report provides a comprehensive overview of various company types, including micro, small, medium, and large businesses, along with detailed explanations of sole traders, partnerships, limited liability businesses, public limited liability businesses, and cooperatives. It delves into the advantages and disadvantages of each structure, highlighting key aspects such as liability, control, and capital requirements. The report also explores different organizational structures like functional, divisional, team-based, flat, matrix, and circular structures, examining how they affect business productivity. Furthermore, it analyzes the impact of external factors on business performance through a PESTLE analysis, covering political, economic, social, technological, legal, and environmental factors. The conclusion summarizes the suitability of different business structures based on operational size and features.

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

Introduction 3
Section 1: Different types of companies and how they work
3
Section 2: Different companies from sole traders to cooperatives
and Limited Liability Partnerships 4
Section 3: Different businesses structures and internal factors
affecting business 8
Conclusion 10
Reference List 10
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Introduction
The aim of this report to examine different types of companies (businesses) and their
functions. There are many types of companies having its own legal structure and rules. Every
type have its own advantages and disadvantages. Also working of every company is differ
from each other. Mainly these companies are classified on the basis of size, liability of
members, control etc. Different environments have a significant effect on the business. Every
company uses different organization structures. This report contains deep information about
various kinds and their functions and also about different structures in detail (Talebi Anzab
and et. al., 2021).
Section 1: Different types of companies and how they work
Micro business:
A micro business is a small scale business having less than 10 employees and the
annual turnover is under 2 million euros. It requires less capital to start and operate. It is a
great option for sole proprietors and freelancers who want to operate on a single location.
Some examples of micro business are street vendors, plumber, woodworker, shoe makers,
small farmers etc.
Small business:
A small business is an organization having annual turnover more than 2 million euros
but less than 10 million euros. In this type of business, there must be 10 to 50 employees. It
require relatively less capital and less workforce. It is ideally suitable to operate on small
scale to serve a local community. Some examples of this business are grocery stores,
photographers, medical stores, food stalls etc.
Medium size business:
A medium size business is an organization with average business size, having annual
turnover more than 10 million euros but less than 50 million euros. This type of business
contains less than 250 employees. It is suitable for the entrepreneurs who want to set their
business at local level. Local restaurants, garages, online retailers, consultants are some
examples of this business.
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Large size business:
A large size business is an organization operates on above average size, having annual
turnover of more than 1.5 billion euros and also having more than 250 employees. These
businesses target national or international markets. These types of businesses requires a high
amount of capital. HSBC, British American Tobacco, Rio Tinto falls under this category.
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
A sole trader is a single owner of the business. It is the simplest business structure. All
the powers are in the hands of the sole owner from decision making to managing. However, a
sole trader can have employees.
Advantages
 Easy to set up – Sole trader businesses are easy to set up as there is no need to register
business and also it can be started with low investment (capital).
 Full control – Sole owners have full control over the business as they are free to make
their own decisions and run business at their will.
Disadvantages
 Unlimited liability – It means sole owner is personally liable for all the debts an losses
of the business. Simply, personal assets will be used in case of any deficiency.
 Sole responsibility – Sole traders, having full control of the business finds it difficult
to manage all the work themselves. It creates a barrier in efficiency of the business.
This type of business structure is suitable for the businesses where personal skills are
involved and where decision making needs to be quick. Some of the examples of this
business structures are grocery stores, plumbers, hairdressers, photographers etc.
Partnership:
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When two or more persons comes together to operate a business with motive of profit
earning, it is known as partnership. Every partner act as an owner as well as agent on behalf
of the firm.
Advantages
 Sharing of burden – In partnership, the burden of work is divided among the partners
which helps in the smooth flow of business and better management.
 Better decision – While making decision every partner will have their own
perspective and thoughts, which helps in making the better decision for the benefit of
business.
Disadvantages
 Slow decision – As to make decisions in the partnership firm, every partners consult
is very important which results in making the process slow.
 Chances of conflicts – Every partners has their own thoughts and perspective. That is
why there are high chances of contradiction of point of view which might result in the
conflicts between partners.
This type of business structure is suitable for businesses which requires medium capital and
different expertise are required in business. Wholesale trade, law firms, real estate business,
are some examples where partnership structure is of great use to perform business.
Limited liability business:
Limited liability business is a hybrid type of entity which combines the characteristics
of a company as well as partnership. In this type of structure liabilities of a member is limited
up to the extent of their unpaid share. In other words, personal property of a member is not
liable for any losses of the organization.
Advantages
 Limited Liability – The biggest benefit of a limited liability business is that the
liability of a person is limited up to their unpaid share in the company. Any debt or
losses are the responsibility of the company.
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 Perpetual Succession – It means the continuation of the organization for the as long as
it is legally in existence. Death or insanity or bankruptcy of the members does not
affect the organization.
Disadvantages
 Public records – As company have to register their company records to the companies
house and then published and can be accessed by general public.
 Complex set–up – The setting up process of a limited liability business is very
complicated as it is mandatory to register the company with Companies House. There
is also a fee on setting up .
This type of business structure is suitable for the businesses having operations on national as
well as international level. Anheuser-Busch, Blockbuster and Westinghouse are some
examples of this type of business.
Public limited liability business:
A public limited liability company is a business structure whose shares are offered to
general public and the owners of the organization have limited liability which means they
(owners) are responsible for the company's losses up to the extent of their shares.
Advantages
 Public issue of shares – In this type of organization, there is no prohibition on issuing
shares to general public. Company can raise much larger capital than a private
company.
 Transferability of shares – There is no restriction on transfer of shares and also it is
much more easier to transfer.
Disadvantages
 More regulatory requirements – There are much more legal and regulatory
requirements in a public limited liability company than a private limited company.
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 Ownership and control issues – In this type of business, it is harder to control who is a
share holder of the company and who the directors are accountable to. Therefore,
there is possibility of disputes and issues related to managing.
This type of business structure is best when a organization needs huge capital to make a
significant move in the market and also to operate. Barclays Plc, Tesco Plc, easyJet Plc are
some well known public limited companies in UK.
Cooperative:
A cooperative is a business structure in which organization is controlled and owned
by its members to meet their needs. The owners of this type of business is generally close to
it like workers, suppliers, members etc.
Advantages
 Lower costs – One of the main advantage is that this business structure is able to split
the costs like Accounting and IT which is very helpful for the small businesses who
do not want services on larger scale.
 Easy to form – It is easy to set up a cooperative business as it does not need to be
incorporated. However, some paperwork is needed while setting up.
Disadvantages
 Less control – Individually members have less control on making decision to control
the business. Members have to take decisions collectively.
 Limited Capital – As this type of business cannot raise large capital because its
members are limited.
Cooperative business is suitable on medium scale as the capital and members are limited. It
will also difficult to expand business. The most common cooperative business present in the
society are retail cooperatives, grocery cooperatives, housing cooperatives etc (Smerek, and
Vetráková, 2020).
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Section 3: Different business structures and external
factors affecting business
3.1 Identification of different organizational structures and
explaining how does organizational structure affect
business productivity
 Functional structure
It is the most common organizational structure in which operations are divided in different
departments like sales, marketing etc. It is of great use for the small firms.
Pros
1. More efficient.
2. Helps employees to focus on their goal.
Cons
1. It can create silos within an organization.
2. No free communication.
 Divisional structure
It is suitable for the companies with multiple products. In this leadership teams are divided to
operate for different products (Rachinger and et. al., 2019).
Pros
1. Helps in flexibility of large companies.
2. Helps in quicker response to changes in the industry.
Cons
1. It creates barrier between headquarters and its division.
2. It can lead to company competing with itself.
 Team based structure
In this small team of employees are made to serve a particular project or goal.
 Flat or Horizontal structure
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There is less levels between upper management and staff. Many startups uses this structure in
starting to give employees more responsibility(Mrňová and Roudna, 2020)
 Matrix structure
In matrix structure cross functional teams are formed to serve for special project. Members of
this team can work in more than one department.
 Circular structure
Higher level employees and managers are placed in a circular ring expanding outwards with
low level employees and staff. It is good for open communication between upper and lower
level employees.
3.2 How different external factors affect the performance of a
business – PESTLE Analysis
Political Environment. - Government's interference in business can lead to big changes in the
businesses and have a lot of importance. Increase and decrease in taxes is best example of
this environment.
Economic Environment – Factors like tax rates wages etc. can have a great impact on the
business. Entrepreneurs will think twice before taking loans with bank due to high interests
(HORÁK and PAVLOVÁ, 2022) (Jiaojiao and Zenglong, 2021)
..
Social Environment – These factors are also considered while developing and marketing a
product. A best example for this is women's involvement in big projects.
Technological Environment – As the technology is changing day by day, this change can
become a threat as well as opportunity for businesses. Introduction of GPS in cars is perfect
example of that.
Legal Environment - Legal rules and laws can make a huge impact on the businesses. For
example import export policies will have a great impact on the prices of goods.
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Environmental - Factors like climate, weather etc. affects business in many possible
outcomes. For example customer's willingness to buy an heater will increase in winter season
(Chung, Jo and Lee, 2021) .
Conclusion
It can be concluded from the above report there are different business structures
available for the entrepreneurs according to their needs on different operating sizes and
features. There are different businesses based on their sizes such as micro, small, medium and
large. Every organization uses their own business structure having different features and
communication processes. Every communication processes have their advantages as well as
disadvantages. Also there are different environments or factors that influence or affects the
business in various forms. Business is affected due to political, economic, environmental and
so on environments.
Reference List
Chung, W.Y., Jo, Y. and Lee, D., 2021. Where should ICT startup companies be
established? Efficiency comparison between cluster types. Telematics and
Informatics, 56, p.101482.
HORÁK, J. and PAVLOVÁ, Š., 2022. CAPITAL STRUCTURE OF COMPANIES
APPLYING PRINCIPLES OF CIRCULAR ECONOMY. Ad Alta: Journal of
Interdisciplinary Research, 12(1).
Jiaojiao, L. and Zenglong, Q., 2021. Investor Types and Company Performance through
Private Placements Basing on State-Owned and-Controlled Listed
Companies. International Journal of Business and Management, 14(11), pp.250-250.
Mrňová, Z. and Roudná, V., 2020. FORMS OF FACILITY MANAGEMENT PROVISION
IN DIFFERENT TYPES OF COMPANIES. International Multidisciplinary Scientific
GeoConference: SGEM, 20(6.2), pp.193-200.
Rachinger and et. al., 2019. The Influence of Technological Disruptions in Business
Ecosystems on Elements of Companies’ Business Models.
Smerek, L. and Vetráková, M., 2020. Difference in human resources development in
various types of companies. Polish Journal of Management Studies, 21.
Talebi Anzab and et. al., 2021. The effect of personality, social and motivation psychology
types on reporting of social responsibility of accepted companies in Tehran Stock
Exchange using the pattern of structural equations. International Journal of Nonlinear
Analysis and Applications, 12(Special Issue), pp.2413-2427.
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