BUS0005NFBNM: The Structure of Business and Finance Report

This report provides a comprehensive analysis of business structures, exploring various legal statuses such as PLC, LTD, and registered charities, along with their respective strengths and weaknesses. It delves into the UK economy, identifying and differentiating between primary, secondary, and tertiary sectors, and assesses their contributions. The report also evaluates three key sources of finance available to business start-ups, including bank loans, personal investment, and funding from friends and family, weighing their advantages and disadvantages. Furthermore, it examines essential HR policies, such as health and safety, and equality and diversity, highlighting their importance in the modern workplace. The report concludes with a synthesis of the findings and provides relevant references.

BUS0005NFBNM
The Structure of Business
1

Table of Contents
Introductions:...................................................................................................................................3
Question One:..................................................................................................................................4
Construct a table to show the various legal statuses of businesses (such as PLC,
LTD, Registered Charity etc.) that your business may adopt. Identify the relative strengths and
weaknesses of these legal statuses...............................................................................................4
Considering your business idea, identify and evaluate the strengths and weaknesses of THREE
sources of finance available to your business start-up.................................................................7
Question Two:.................................................................................................................................9
Identify three sectors within the UK economy in which a business can operate. What are
the differences between the three sectors? Comment on their value to the UK economy..........9
Question Three...............................................................................................................................13
Identify at least two HR policies and comment on their importance to the modern
workplace (for example Health & Safety policies and equality and Diversity policies)...........13
Conclusion.....................................................................................................................................15
References......................................................................................................................................16
2

Introductions:
UK government is huge concerned about the economy of the country because COVID 19
pandemic destroyed many sectors of the country. The country’s economy mainly depends on the
service sectors which were closed during the pandemic. There are also two sectors which
includes primary sectors and manufacturing sectors. United Kingdom government want to help
the business man who wants to start a business and the businessman can take loan from the
government limit £500 to £25000. Taking this money a businessman man can generate a
company which can operate its business in any sectors like primary, secondary and tertiary
industry. To open up a business a company has to establish a structure. In this report the structure
of the business, the strength and weakness of different source of finances, different economic
sectors where business can operate and different HR polices will be discussed.
3

Question One:
Construct a table to show the various legal statuses of businesses (such as
PLC, LTD, Registered Charity etc.) that your business may adopt. Identify
the relative strengths and weaknesses of these legal statuses
There are many legal statuses of business one can choose to start a business such as sole trader,
limited company, partnership, limited liability, registered charity and private limited company
etc. people choose a business status by evaluating its strength and weakness. Every business
status has some strength and weakness from all the businesses which has the most strength
basically people generally choose that business the most but there is also exceptional case like
some doing business for charity purposes in that case weakness and strength does not count
(Cooke, 2016).
Company
Name
Legal Status Strength Weakness
Private
Limited
Company
(LTD).
A private limited company or
LTD is a business entity which
limits the liability of owner to
share. Private companies are
limited by the share (Hunt &
Bishop 2018). There are many
things one will need to form a
private company such as
 Company must have
name and address
 Must have one
shareholder and director.
 Company should have
memorandum
 Those who have more
 Owner’s finance is
separated from
company’s finance
(Armstrong &
Michael 2017).
 It has a
constitution which
guides
shareholders and
board of directors.
 Private company
ltd has tax
benefits.
 It does not have
any specific life
time (Cooke,
 Registration
process is
time
consuming
 There is
complexity in
division of
ownership
 The
compliance
formalities of
private
limited
company is
hectic.
4

than 25% of shares have
the right to give votes.
2016).
 It is beneficial for
profit and
nonprofit entity
 Personal
liability is not
limited
(Cooke,
2016).
Public
Limited
company
Public limited company is a
public company which liability
is limited and the company’s
share is freely traded and sold to
public (Repenning, 2017). in
order to set up public limited
company the company must
have the followings things
 Company’s name,
address
 Minimum share capital
would be £50,000
 Company should have
memorandum of
association and articles
of association
 Company can raise
more capital
become public
limited company.
 Public Limited
Company give
opportunity to
allow shareholders
liquidity.
 It helps targeting
companies by
offering different
share and help the
company to raise
capitals.
 Public easily
invest to the
company.
 Since many
people invest
to PLC so the
accountability
will be huge.
 The process
of scrutiny
and regulation
is lengthy.
 The future
value of the
company
cannot be
determined
because of the
volatility of
the market
Registered
Charity
This is also a type of business
which is formed for charitable
purposes. It dedicates all its
resources for charitable
activities. Registered Charitable
company structure is different
than the PLC and LTD. The
 The registered
charity company
gets huge amount
of tax benefits.
 It gains the trust
and respect of the
people easy. In
 These types of
company also
have boards
of directors
they will often
unpaid.
 Since the
5

company is formed in four legal
structure
 Registered Charitable
limited company can be
formed by guarantee.
 The company can be
formed by the trust
(Rossiter, 2015).
 The organization will run
without any prescribed
manners.
 The company will
regulated by the charity
commission.
general the
company will have
good reputation in
the market
(Rossiter, 2015).
 The company has
good reputation so
the company will
not tense about the
source of funding.
People want to
invest to these type
company.
main purpose
of this
company to
do charity so
the
profitability
of these types
of company is
very less
actually
sometimes
these
organization
operates its
business in
loss (Rossiter,
2015).
Sole
trader
It is a business entity where the
owner is one. So the all
operation decision or anything
has decided by the owner. The
general rules for the sole trader
business is
 The turnover rate in year
€50,000 max
 The company should
have name and the name
must be registered (Baker
& Wurgler, 2019).
 The formulation of
the company is
simple
 The company is
inexpensive in
setting up
(Repenning,
2017).
 There is not much
paper work to start
this business.
 Owner is oblige to
disclose the profit
 The company
has less
opportunity to
expansion.
 The liability
of the owner
is unlimited.
 It has get tax
benefits but it
has less
opportunity to
get rid from
tax rules
6

 The company will have
the cash flow statement it
is not necessary to show
the public but has to
show authorities
(Repenning, 2017).
to public (Baker &
Wurgler, 2019)
 This company get
tax benefits from
the UK
government.
(Repenning,
2017).
Considering your business idea, identify and evaluate the strengths and
weaknesses of THREE sources of finance available to your business start-up.
To open a small medium size restaurant Business in United Kingdom Company needs
investment. United Kingdom is a multi-cultural country people from all over the world live here
and every year many tourist visited UK (Cooke, 2016). People and tourist both love to eat in a
restaurant. Restaurant business will also get many benefits from the United Kingdom
Government. The tax rate for the restaurant business in UK is less than the others business
sectors such as RMG, Manufacturing industry etc. there are many sources for financing if any
people want to open a restaurant business among them three will be discussed below:
Bank Loan: Bank is a financial institution which main work is to deposit of money and
providing loans to people, company , government, etc. the difference between deposit interest
and loan interest is the earning of the bank. Bank helps many organization to open a business
especially to the restaurant (Hunt & Bishop 2018). This is one of the finest source to open a
business. Bank loans have some strength and weakness those are:
Strength:
Flexibility: The restaurant business can easily7 apply for the loan to the bank for that bank will
ask some documents and some other stuff but it is quite flexible than the other sources of taking
loans (Hunt & Bishop 2018).
Not need to share profit: while returning loan to back company will not need to share its profit.
Company just need to pay the interest rate which the company was promised pay (Armstrong &
Michael 2017).
7

Not required to pay fee for life time: while taking loan company has to pay a fee at the
beginning but this fee has not pay again over the life span of the loan (Armstrong & Michael
2017).
8

Weakness:
Formalities: to take loan from bank sometime hassle because company will go through from
many formalities such as filling up different documents, giving the bank lots of paper etc.
(Gratton, 2015).
Penalty: if the company will not pay the loan in timely then company will have to face penalty it
would be giving extra money for paying late or sometime will have to face legal activity.
Personal investment: personal investment refers owners invest money in the business other than
taking to loans from other sources Restaurant owner can invest his/her money into the business.
Personal loan is very convenient for the startup business. The strength and weakness of personal
loan are (Gratton, 2015).
Strength:
Easily arrange: personal is the easiest source of financing. Company will not have to go here
there to arrange money owner himself/herself will arrange the money because he/she invest in
the business (Cooke, 2016).
No formalities: Unlike bank personal loan will not have any formalities. Owner will invest in to
the business so he/she will not go from any kinds of formulates like submitting the documents
etc.
Not Time consuming: in case of startup a business by owner investment so there will no time
consuming in investment because while taking loans from other sources will be time consuming
(Baker & Wurgler, 2019).
Weakness:
Liability is huge: since all the amount of money will be paid by the owner so the liability of the
owner will be huge (Cooke, 2016).
High risk: if the company will not perform well then all the loss will be faced by the owner
himself/herself (Gratton, 2015).
Friends and family: friends and family would be a great source of financing. Basically small
medium organization will start its business by personal investment or taking loans from friends
and family (Gratton, 2015).
9

10

Strength:
No Interest rate: in most cases when small company will take loans from friends and family the
company will not have to pay interest amount. All they have to pay the principals. As a result
restaurant will not have to pay extra (Repenning, 2017).
Convenient in paying: Most of the financial institution will give time period to pay the loans
and also specify the instrument of paying the loans. But taking loan from friends and family
company will not have to pay a certain style or instrument (Repenning, 2017).
Easy to collect: like personal investment this source is also easy to collect and operate. Because
take loan from friends and family restaurant will not have to a legal procedure so it is flexible
and easy (Repenning, 2017).
Weakness:
Cannot manage a good amount of money: it is also true that it will be very difficult for the
company to take a huge amount of loans from friends and family. Bank will give a restaurant a
good mount of loans but in case of friends and family it will very difficult to arrange such big
amount (Armstrong & Michael 2017).
Relationship hampered: if the loans will not clear properly then the relationship with friends
and family will be hampered. They might not go to legal procedure but the relation definitely
will get hampered (Antoniou & Paudyal, 2006).
Question Two:
Identify three sectors within the UK economy in which a business can operate.
What are the differences between the three sectors? Comment on their value
to the UK economy.
One Country’s economy depends on the three sectors one is primary sector, second is
manufacturing industry and last is tertiary sector. Developed countries basically earn money
from manufacturing sectors and service sectors but service sectors are the main source of their
economy. United Kingdom is one of the most developed countries in the world and the country’s
economy also depends on that three sectors. In the below three sectors difference, its contribution
11

to economy and which sectors business will take place will be discussed (Armstrong & Michael
2017).
Primary sectors: primary sectors refers to the industries which are engaging in production of
raw materials and extraction of natural resources. Primary sectors includes fishing, mining,
mineral extraction, agriculture and forestry. Primary sectors play a vital role to the economy for
the undeveloped country but this case different for some countries. Because of the
industrialization many industry are switching from the primary sectors to manufacturing
industries. Primary sectors have less profit compare to other sectors. But still primary sectors
have significant influence over United Kingdom. In the UK’s economy different primary sectors
contribute differently like 3% of labor are related in agricultural production so they are
contributing huge in GDP (Armstrong & Michael 2017). Agriculture itself contributes 20% of
UK’s total GDP. Then there are mining and minerals industry which contributes 12% of total
GDP of UK. 10% people of whole population in United Kingdom is associated to the primary
sectors as a result many unemployed people became employed by join in this sector.
Government provides special subsidizes to this sector and providing opportunity to take loans
from the government fund at minimum amount of interest rate. Last year 2020 UK earned €130
million pounds by exporting agricultural raw material to all over the world (Richard &
Partington 2020). Restaurant business can also enter to this sector because government has huge
support to this industry.
Figure: Primary Sectors
Source: (Richard & Partington 2020)
12