Describe in detail the structure, function and internal relationships of a company or organisation

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9.1 (a) Describe in detail the structure, function and internal relationships of a company or organisation      

                                           

        There are four main types of company in the UK. They are distinguished by their owners or members' legal liability to any debts that the company bring upon themselves:

  • Private company limited by shares - The members liability to any debts incurred by the company is limited to the amount unpaid on shares held by them.
  • Private company limited by guarantee - The members' liability to any debts incurred by the company is limited to the amount they have undertaken to contribute to the company's assets if it is wound up.
  • Public limited company - The members' liability is limited to the amount unpaid on shares held by them, and which must have an authorised share capital of at least £50,000 at the time of incorporation.
  • Private unlimited company - There is no limit to the members' liability for the debts that the company incurs. Such companies are organised as either sole traders or partnerships. (Alderfer 1972)

        In the UK there are approximately half a million companies in existence. However, there are more private limited companies (Ltd) than public limited companies (plc).

Private Limited Companies (LTD)

        
These are companies whose shares cannot be sold to the general public. The name of the company always ends with "limited" or "ltd".

The majority of Companies are those limited by shares, with members or shareholders who hold one or more shares issued to them by the company in return for payment. Although most shares are fully paid and the shareholder has no liability for the company's debts, a shareholder's liability to the company's creditors is normally limited to the amount of any shares that have been issued to them and which they have not fully paid for. (Eyre 1993)

Examples of private limited companies,

  • Joe Rigatonie’s (Restaurant)
  • York fitness

        

Public Limited Companies (PLC)

This type of company has
shares which are listed and sold to, the general public via the stock exchange. The name of the company must end with "plc".

Those whose shareholders promise to pay a specified sum of money if the company is wound up are known as public limited companies by guarantee. These companies are usually non-profit-making, for example, charities.

Prior to the 1985 Companies Act, the only way that a company could offer its shares to the public to raise capital was by admission to one of the official stock markets.

Examples of public limited companies,

  • Showcase cinemas
  • McDonald’s (Restaurant)
  • JJB (Sports retail)
  • Chicago rock (Bar/café)

The difference between private and public limited companies

Private Limited Companies

         A private limited company is the most common type of limited company and is usually the most suitable for small to medium size businesses. The main advantages of private  are:

  • There is only a minimum funds requirement. Only one share has to be issued, and this does not have to be paid up
  • It does not need a Trading Certificate from Companies House to commence business
  • It does not need a qualified company secretary, and only needs one director
  • It can deliver modified accounts, or less detailed accounts than a public company
  • The main disadvantage of private limited company formation is that it cannot offer shares for sale to the public.

Public Limited Companies

        The main advantage of public  is that it has access to the capital markets and can offer, and advertise its shares for sale to the public, but it also can have more restrictions than a private company:

  • There must be at least two directors, and a qualified company secretary
  • It cannot commence business until it has a Trading Certificate from Companies House showing that the minimum share capital £50,000 has been issued, and the required amount paid up
  • It cannot take advantage of many of the provisions available to private limited companies, such as the ability to be exempt from audit, and has less time to file its accounts which cannot be abbreviated (Alderfer 1972)

Limited Company Formation

Reasons for forming a limited company

        The main reason for limited company formation is to take advantage of the limited liability status it provides. This means that the company is a legal unit in its own right, and only the assets of the company are available to creditors and not the assets of individuals running the company. You would only be liable for the money you have paid, or agreed to pay for shares in the company.

        It also means that another limited company cannot be formed with the same name, or one that is deemed too similar.

You may also find that a  makes it easier to attract business, as a lot of companies seem to be more willing to deal with a contractor that is a limited company. Obtaining finance for your business may also be helped by this. It would also maintain continuity of a business in the event of selling the business, the death of, or changes to directors.

        However this may have some disadvantages you will have to file accounts and annual returns every year at Companies House, and may accumulate fines, and possibly striking if this is not done. All of this information will be available on public record, which means that your accounts will be available for anyone to see.

Organisational structures

        “An organisation structure maybe tall or flat. This indicates the numbers of levels found in the firms hierarchy”(Pettinger 1994).

        Tall structures are associated with,

  • Long chains of command
  • Narrow span’s of control
  • Specialised staff
  • Slower decision making
  • Formal communication systems

As a result of this, many firms have tried to flatten their structures to speed up communications and cut out unneeded delays.

The aims of many companies are for the shareholders/directors to make a profit e.g. LTD’s. A structure of these companies can be seen in fig1.

Fig1 – A structure of a private limited profit making organisation of a manufacturing company

adopted from (Andrews 2002)

        Fig1 shows a general manager in overall charge of the operation with section heads who hold individual responsibility for the area of expertise. In the diagram it can be seen that the production of the product is only part of the organisation. Support departments such as, human resources, finance, sales and marketing, etc, are important members of the overall team.

Fig2 – A Structure of a public limited non-profit making organisation.

        Fig2 is a diagram of the structural chain of command in a public limited company in Middlesbrough, known as ‘Safe in tees valley’. As you can see it is very similar to the structure of fig1. However in this organisation there is a board of directors instead of a general manager in fig1. This organisation is funded in various different ways, e.g. government funding, social funding, council tax.

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Communication

        To communicate efficiently through a business several elements must function effectively.

The key elements are,

  • The transmitter (Sender of message)
  • The recipient (Receiver of message)
  • The message itself
  • The medium by which the message is being sent.

Good communication is influenced by various factors,

  • The attitudes of the sender and the receiver, e.g. inappropriate behaviour may cause the message to be changed and altered or perhaps not even sent at all.  
  • Their knowledge of the subjects matter being communicated, e.g. poor knowledge may lead to inaccurate ...

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