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Introduction - Comparing Common UK Business Structures: Sole Trader, LTD, LLP, PLC
Scenario 1: Deciding on a business structure
In today’s world some common structure business structures are visible in UK. Five Main types of business structures can be principally seen. These include Sole Trader, LTD (Private Limited Company), LLP (Limited Liability Partnership), PLC (Public Limited Company), Limited Partnership, Non-Profit (Guarantee Company).
In case Sole Trader business structure, the requirements are quite minimal and are quite ideal for new businesses. Here registration at the house of the companies is not needed, though HMRC needs to be notified. Next a private limited company can be defined as a legal identity whose individual right is different from the ones who in laws eyes (Lee, 2017). This is a significant. This can be observed as a significant benefit in operating as an LTD as the shareholders liability is limited to their investment as well as unpaid shares owned. Next, a LLP is operated in a similar way as that of traditional partnership. The objectives of this type partnership are normally profit driven and specifically used in case of professions like accountancy and law. Contrary to this in case of Public Limited Company the organization has its own rights In addition; the involved member’s liability is limited to their value within the shares as well as their investment. Compared to LTD, the operating cost to run a PLC is higher. Next the LP is a legally registered partnership within the house of companies. It involves two or multiple partners which can either be corporate entities or individuals. Lastly, Guarantee Company refers to companies that are not for profit. If any profit is generated through the operations of the company then they are further invested for conducting the company’s operations (Chamberlain & Anseeuw, 2017).
For the purpose of designing, marketing, manufacturing, as well as selling of the electronic device, a suitable structure is needed. As discussed previously, there are many business structures that are currently operational in UK. Among these Sole Trader business structure will be most appropriate for the present business.
The business is essentially a startup or a new business and so the sole trader business structure will be most suitable. As compared to other business structure, through the sole trader business structure the owner is specifically provided with the benefits of reduced requirements of filling as well as fewer regulation.
Scenario 2: Raising Finance
An initial capital and working capital is a major priority within a startup business. Suitable initial and working capital helps in carrying out daily operations, allow growth of business improve the working capital etc. In this context fixed asset is defined as the assets which are bought for a long term purpose and it is not likely that the assets will be readily converted into buildings, land cash or equipments. Next, stock is defined as the capital rose by a corporation or company through subscription and issue of shares. The business’s working capital is defined as the costs incurred to carry out everyday operations and it is calculated as current assets subtracted by current liabilities.
It can be seen that service business specifically requires a reduced amount of working capital. Contrary to this the capital requirements in a manufacturing business is comparatively high (Cerutti, et al., 2017). This is due to the fact that less raw material charge or other relevant charges need to be incurred in service business as compared to manufacturing business.
A list of possible sources of finances for the business under discussion has been outlined in the following:
Bank Lending
Retained earnings
Leasing
Franchising
Venture capital
Government assistance
Borrowing from friends and family
Firstly, bank lending is an important source of finance which involves the principles of liquidity, diversity, safety, stability. Retained earnings is important for any organization as it helps in providing funds for expansion and growth paying external loans, meeting demands for working and fixed capital, withstanding economic down turn etc. Thirdly, leasing refers to providing finance to a company through buying of assets by the user for a particular period of time. After this Franchising is defined as a particular arrangement where the franchiser liscences or grants some authorities and rights to the franchisee. It is a very important financing process that helps in business expansion (AREAS, 2018). Fifthly venture capital is defined as the capital spent on a typically expanding or new business that involves a high risk factor. Sometimes if the the owner of the new startup business has a relatively low income and needs help to start the business, then the government assistance can help him with the initial capital. Lastly, Borrowing from family and friends is a common approach to raise initial capital.
In this context the concept of gearing is vital that refers to the debt amount in equity capital proportion that company uses to specifically fund its operations. It can be concluded that a company with a high gearing ratio represents a soaring debt to equity ratio. This further elecates the risk of financial failure within the business.
The concept of matching in context of raising money for a business can be discussed as an accounting concept in which the firm recognizes revenues as well as relevant expenses within the same accounting period. The company reports revenues together with expenses and the purpose of this concept is to avoid misinterpretation of earning within a period.
There are several grants that the new electronics business startup can potentially apply for. These have been outlined in the following:
Relevant Governments grants
Small Business Administration Grants
Small Buisiness Innovation Research grants specifically under the education department, energy department and national science foundation
Community and connect grants
NIST Grants
Corporate business grants such as FedEx small business grants etc.
The new product is an electric pressure cooker. Hence the business will be specifically provided with tax incentives in relation to tax given over pressure cookers running on gas. This is a major incentive behind producing these products.
Scenario 3: Product and price
The term minimum sell price refers to the minimum acceptable price of selling to the organization. Normally the price is based on sales price data and present market value. Secondly margin is defined as the amount borrowed from a particular broker to specifically purchase an investment creates huge difference between investment value and loan amount. Next, Overheads refers to the operating cost of a business excluding direct cost in relation to creating a service or product. Lastly, indirect labor refers to the cost of any labor involved in the process of production. However they are not directly present in converting materials into completed products.
The cost associated with assembling the electronic product includes the following
Details
Price
Final product assembly
$ 0.50 per unit
Testing
$ 0.50 per unit
Retail box rigid
$ 15 per unit
Retail Box folding
$ 4 per unit
Shipping Box
$ 7 per unit
Thermoformed
$ 5 per unit
From the above table it is evident that overhead costs that is cost incurred on aspects other than the direct material is rather high for the mentioned product. Apart from final assembly and testing an overhead cost of $31 is needed for each unit.
The overhead costs of the chosen business can be determined through categorizing overhead expenses within a specific period of time. This can be done through breaking the costs down in regards of each month. Although, all indirect costs can be classified as overheads, the owner must be careful during categorizing these costs.
Fixed costs refers to the unchanged expenses incurred by the company throughout the lifetime of running the business. Contrary to this variable costs refers to the costs, directly related to production and so can change during the course of the business. Fixed costs are seen to remain unchanged with decrease or increase in production units volume whereas variable costs are seen to fluctuate in this context. A similar relationship can be observed between fixed cost and unit production cost; variable cost and unit production cost.
Scenario 4: Environmental issue
The Environmental legislations of ISO 14001, RoHS and WEEE are vital in relation to conducting an electronic business. Firstly, ISO 14001 depicts the criteria for a system of environmental management and also helps in its certification (Kuhre, 2018). The legislation maps out an outline that an organization or company can use for the purpose of setting up a suitable environment management system. Secondly, RoHS is the short for Restriction of Hazard Substance. This impacts several electronic products and in turns the entire electronic industry. The main aim of RoHS is the prevention of various risks posed to environment and human health in relation to managing electrical and electronic waste (Plumeyer & Würl, 2019). Lastly, the main aim of WEEE is to contribute to sustainable consumption and production. These legislation specifically addresses various related environment related issues caused due to increasing number of discarded electrical and electronic products.
In modern times there are a number of green regulations. These involve WEEE, RoHS and ISO 1400. The RoHS legislation specifically requires electronic businesses to eliminate certain halogens and heavy metals from several electronic components. This legislation can affect the business of an electronic company significantly as they will have to manufacture their products without using heavy metals and halogens. This is true for the mentioned electronic business also. The WEEE regulation further motivates the designers to create products with recycling in mind. The product they produce must be recyclable and this can have some specific effects on the manufacture of the electronic product (Song, 2017). As the mentioned product is electric cooker, the product is already recyclable and so the effects of this legislation on the manufacture of this product are minimum.
An Environmental management plan in compliance with the above mentioned legislation has been outlined in the following. Firstly, it should be mentioned that the EMS goals of the company are to manfacture electric products without using heavy metals and halogens; and to produce products that are recyclable in nature. Next an EMS implementation team will be built. Next, a preliminary review will be conducted and schedule and budget will be prepared. After this proper assistance and resources will be assigned. Lastly, it should also be mentioned that team meetings will be arranged in regular intervals for the purpose of monitoring as well as communicating progress.
Scenario 5: Product and reliability
Reliability in context of product design and manufacture is defined as the product’s reliability of functioning satisfactorily within a given period of time under the conditions in which it has been used. In this regard the term probability is important which a mathematical concept. Here a number between 0 – 1 is obtained (1 indicating 100%) which resembles the chances of occurrence (Zhou & Lu, 2018). Not performing in a satisfactory manner implies that one or multiple components within the product have failed to perform properly. In the design and manufacture of each product there is a reliability measure known as “failure rate”. This is defined as the number of malfunctions occurring for each unit of time for a propduct that is being continuously operated. It can be also be defined as the number of malfunctions occurring for a number of off and on products.
The success of a brand new product depends largely on the engineering decision that is reliability of the product. A higher level of reliability results in higher sales price as well as higher cost of manufacturing. Consumer willingly pay higher price for a particular product when they are completely sure about its reliability (Dai, et al., 2021). In this context, product warranty is important. Longer warranty period signals better reliability to the customers. Secondly it cannot be ignored that a product may be best in the market but it can never be successful without providing superior customer experience. To ensure that the customers have an overall positive experience, the company needs to make sure that the services and products are reliable. However, reliability alone cannot create ideal experience. A combination of accuracy, reliability and speed work together to provide the customer with ideal experience.
The lifetime of a products population is often defined by Reliability specialists through a graphical presentation called the bathtub curve. The curve specifically involves three periods that is the period of infant mortality along with the rate of decreasing failure. After this comes the period of normal life along with relatively low constant failure rate (Alvarez-Alvarado & Jayaweera, 2018). Lastly comes the period of wearing out where the failure rate of the product is comparatively high. This curve is applicable for all the aspects of product manufacture, design and warranties provision of the product. At the beginning, when a new product is introduced, the chances of failure of the design, manufacture and provisional warranties slowly decreases transitioning into a stable period after which the curve again rises indicating that a new product has been introduced in the market and these aspects of the product slowly wears out.
FMEA of the electronic product (electric pressure cooker)
IDENT No.
FUNCTIONAL/ ITEM ICENT.
FAILURE MODE
FAILURE CAUSE
FAILURE EFFECT
TSw
Thermostat Switch
Closed
Defective
Constant heating with no immediate effect
Open
Defective
Lack in heat production
SV
Safety valve
Closed
Faulty Manufacture; corrosion
Compromised overpressure protection
Open
Broken Spring
Steam burns
Leaks
Faulty Manufacture; corrosion
Steam burns
CLMP
Lid clamps
Fracture strip
Defective
Explosive pressure release
PG
Pressure Gauge
Fake low reading
Defective
Overcooked dinner
Fake high reading
Defective
Undercooked dinner
Scenario 6: Design for test
Testing is done in a volume production environment to identify and make suitaible changes within the application and deploy it for production without verifying it via the QA team. These help in keeping the live as well as running.
ICT enables using innovative educational resources as well as renewing of learning methods, establishing high collaboration between students along with technological knowledge acquisition. Secondly the MDA tool is technioques of circuit test to identify manufacturing defects within the printed board of circuit. Lastly, the basic usability of functional testing wether the user can freely navigate through screens without any difficulty.
Test fixtures are used for facilitating automated test. A test fixture is often described by the vocabulary of Bare brad test meaning printed boards of circuits that are tested before any particular mounted components, In-circuit electrical test which is specifically conducted top check that all circuits are present and functional test to check the entire printed circuit board.
The specific requirements in standards of the bus system test include some critical specifications such as temperature circuits, short circuit test, di-electric strength etc. Secondly the requirements in the measurement application include identification of the measurement standards, obtaining the suitable measuring instrument, obtaining material for reference. In addition to these, some other items are also necessary involving auxiliary apparatus or a mixture of different necessary that helps in effectively realizing the entire process of measurement.
Reference
Alvarez-Alvarado, M. S., & Jayaweera, D. (2018). Bathtub curve as a Markovian process to describe the reliability of repairable components. IET Generation, Transmission & Distribution, 12(21), 5683-5689.
AREAS, B. (2018). Financial analysis. growth, 30, 10.
Cerutti, E., Dagher, J., & Dell'Ariccia, G. (2017). Housing finance and real-estate booms: A cross-country perspective. Journal of Housing Economics, 38, 1-13.
Chamberlain, W. O., & Anseeuw, W. (2017). Contract farming as part of a multi-instrument inclusive business structure: a theoretical analysis. Agrekon, 56(2), 158-172.
Dai, B., Nu, Y., Xie, X., & Li, J. (2021). Interactions of traceability and reliability optimization in a competitive supply chain with product recall. European Journal of Operational Research, 290(1), 116-131.
Kuhre, W. L. (2018). ISO 14001 Certification: Environmental Management System. Prentice Hall.
Lee, C. Y. (2017). Product diversification, business structure, and firm performance in Taiwanese property and liability insurance sector. The Journal of Risk Finance.
Plumeyer, M., & Würl, H. (2019). Siemens' WEEE management strategy. In Waste Electrical and Electronic Equipment (WEEE) Handbook (pp. 619-646). Woodhead Publishing.
Song, X., Wang, J., Yang, J., & Lu, B. (2017). An updated review and conceptual model for optimizing WEEE management in China from a life cycle perspective. Frontiers of Environmental Science & Engineering, 11(5), 1-12.
Zhou, X., & Lu, B. (2018). Preventive maintenance scheduling for serial multi-station manufacturing systems with interaction between station reliability and product quality. Computers & Industrial Engineering, 122, 283-291.
