Engineering Management
1- Organisation and Financing of Companies
Business Types:
1) Sole Trader (painters, hairdressers, shop-keepers)
- Provides goods or service for some form of reward
Advantages:
• Simple to set up (trade under any name chosen)
• No legal limit on number of employees
• Easy administration:
-no need to register with Companies House
(register with HMRC)
-can keep simple accounts (no accountant)
Disadvantages:
Companies House: • Personal liability for losses or damages to third
• Sits under department of trade and party (employees cannot be sued due to any
industry (DTI) mishaps in the business)
• It is a monitoring agency of the
government that look after the 2) Partnerships (2 or more people own a business together)
payment of taxes by different - No more than 20 partners (except in a professional
companies partnership e.g. accountants, lawyers) Partnership deeds are
drawn up.
Advantages:
• Management and financial risks are shared
• Flexibility in the structure and operation- deeds (deeds give terms and conditions (T&C)
that each partner will sign so they can go to court of law for arbitration, which arrives
when there is a disagreement
• No need to register with companies house (register with HMRC)
• Partners can have different skills
Disadvantages:
• Every partner is personally liable for losses and damages to third parties
• One partner can act negligibly, but all are liable
3) Limited Liability Partnerships (more complex operation, cross between a partnership and
company)
- new form of business entity- approved in 2000. An LLP has its own legal identity and is registered at
Companies House. Will have to pay taxes
Advantages:
• Liability of partners is limited
• Organisational flexibility and taxation- same as partnership
, Disadvantages:
• Annual accounts need to be filed at Companies House
• Some set-up costs and more administration
• Not as easy to raise money as an LLP as it is for a company
4) The Limited Company
- The company has a separate legal entity to that of the people who own the company
(shareholders). The liability of the company is defined by its constitution (defines if the liability is
limited by shares or guarantee. Generally, the liability limit is the amount invested in the company.
The more investors a company has, the greater the share price. If shareholders get worried about
the company, share/stock prices fall as they are mainly based on perception. The amount of
investment made by each shareholder is protected.
2 types:
➢ Private Limited Company (Ltd): cannot publicly trade their shares (but employees can be
shareholders, who can maximise value of shares by working hard to improve the value of the
company, which hence encourages employees and improves motivation)
➢ Public Limited Company (Plc): can sell shares to the public on a stock exchange (if someone
buys 51% of the shares, they are the new owner. This takeover can be prevented by selling a
limited number of shares)
Advantages:
• Liability of the owners is the cost of their shares (if share is limited)
• Easier to raise money and sell part of the business (simply need to sell a number of
shares)
• Employees can own a share of the business
• Suppliers and customers often perceive that limited companies have more credibility
Disadvantages:
• Set-up costs
• Administration- mass of legislation relation to companies
• A company must file accounts at Companies House complying to recognised standards.
High turnover- audited accounts required by Companies house so correct tax is paid
• A company must pay NI contributions (employee also pays)
Company Law:
Companies Act 2006 (England and Wales)
To form a company, the following documents need to be drawn up to form the company
constitution:
Dividends: The amount of money the
1) Memorandum of Association:
company must pay shareholders
• Defines the name and objectives of the company depending on their percentage of
• Statement of capital and initial share holdings shares. Dividend is only paid if the
company makes profit (except
preferential shareholders)
, • States the Directors of the company Bankruptcy: company cannot pay
2) Articles of Association debt as it is not making enough profit
• Regulates internal affairs
• Describes the issuing of shares, shareholder voting rights, rules of board meetings
UK Company Legislation:
The Companies Act 2006
The Insolvency Act 1986
Why do Companies exist?
1) to be profitable
2) to pursue interests of their owners
3) to maximise market value and long term profit
4) you become a shareholder if the rate of interest you get from a company is greater than that of a
bank
SOME MONEY MORE MONEY
This will also
produce waste
Money
Brexit
BP Oil Spill
Maximising Value:
To maximise the value of the company, only profit maximisation is not enough therefore other
factors also need to be improved.
What you have to do to get what you want:
What you want:
1) relations with staff, suppliers, customers (good relations
with staff increases employee motivation and discounts 1) growth of business
help improve customer relations)
2) sustainability of
2) securing a reliable market enterprise (includes
3)security through diversity (introdcuing new products in ethics and waste
the market) management)
4) effective and active R&D (need to develop new products) 3) profits
5) marketing and advertising (so business is noticed by 4) share value
potential customers and investors)
1- Organisation and Financing of Companies
Business Types:
1) Sole Trader (painters, hairdressers, shop-keepers)
- Provides goods or service for some form of reward
Advantages:
• Simple to set up (trade under any name chosen)
• No legal limit on number of employees
• Easy administration:
-no need to register with Companies House
(register with HMRC)
-can keep simple accounts (no accountant)
Disadvantages:
Companies House: • Personal liability for losses or damages to third
• Sits under department of trade and party (employees cannot be sued due to any
industry (DTI) mishaps in the business)
• It is a monitoring agency of the
government that look after the 2) Partnerships (2 or more people own a business together)
payment of taxes by different - No more than 20 partners (except in a professional
companies partnership e.g. accountants, lawyers) Partnership deeds are
drawn up.
Advantages:
• Management and financial risks are shared
• Flexibility in the structure and operation- deeds (deeds give terms and conditions (T&C)
that each partner will sign so they can go to court of law for arbitration, which arrives
when there is a disagreement
• No need to register with companies house (register with HMRC)
• Partners can have different skills
Disadvantages:
• Every partner is personally liable for losses and damages to third parties
• One partner can act negligibly, but all are liable
3) Limited Liability Partnerships (more complex operation, cross between a partnership and
company)
- new form of business entity- approved in 2000. An LLP has its own legal identity and is registered at
Companies House. Will have to pay taxes
Advantages:
• Liability of partners is limited
• Organisational flexibility and taxation- same as partnership
, Disadvantages:
• Annual accounts need to be filed at Companies House
• Some set-up costs and more administration
• Not as easy to raise money as an LLP as it is for a company
4) The Limited Company
- The company has a separate legal entity to that of the people who own the company
(shareholders). The liability of the company is defined by its constitution (defines if the liability is
limited by shares or guarantee. Generally, the liability limit is the amount invested in the company.
The more investors a company has, the greater the share price. If shareholders get worried about
the company, share/stock prices fall as they are mainly based on perception. The amount of
investment made by each shareholder is protected.
2 types:
➢ Private Limited Company (Ltd): cannot publicly trade their shares (but employees can be
shareholders, who can maximise value of shares by working hard to improve the value of the
company, which hence encourages employees and improves motivation)
➢ Public Limited Company (Plc): can sell shares to the public on a stock exchange (if someone
buys 51% of the shares, they are the new owner. This takeover can be prevented by selling a
limited number of shares)
Advantages:
• Liability of the owners is the cost of their shares (if share is limited)
• Easier to raise money and sell part of the business (simply need to sell a number of
shares)
• Employees can own a share of the business
• Suppliers and customers often perceive that limited companies have more credibility
Disadvantages:
• Set-up costs
• Administration- mass of legislation relation to companies
• A company must file accounts at Companies House complying to recognised standards.
High turnover- audited accounts required by Companies house so correct tax is paid
• A company must pay NI contributions (employee also pays)
Company Law:
Companies Act 2006 (England and Wales)
To form a company, the following documents need to be drawn up to form the company
constitution:
Dividends: The amount of money the
1) Memorandum of Association:
company must pay shareholders
• Defines the name and objectives of the company depending on their percentage of
• Statement of capital and initial share holdings shares. Dividend is only paid if the
company makes profit (except
preferential shareholders)
, • States the Directors of the company Bankruptcy: company cannot pay
2) Articles of Association debt as it is not making enough profit
• Regulates internal affairs
• Describes the issuing of shares, shareholder voting rights, rules of board meetings
UK Company Legislation:
The Companies Act 2006
The Insolvency Act 1986
Why do Companies exist?
1) to be profitable
2) to pursue interests of their owners
3) to maximise market value and long term profit
4) you become a shareholder if the rate of interest you get from a company is greater than that of a
bank
SOME MONEY MORE MONEY
This will also
produce waste
Money
Brexit
BP Oil Spill
Maximising Value:
To maximise the value of the company, only profit maximisation is not enough therefore other
factors also need to be improved.
What you have to do to get what you want:
What you want:
1) relations with staff, suppliers, customers (good relations
with staff increases employee motivation and discounts 1) growth of business
help improve customer relations)
2) sustainability of
2) securing a reliable market enterprise (includes
3)security through diversity (introdcuing new products in ethics and waste
the market) management)
4) effective and active R&D (need to develop new products) 3) profits
5) marketing and advertising (so business is noticed by 4) share value
potential customers and investors)
