Business organization and management
This domain moves inside the firm: how it is legally constituted, how work is divided and coordinated, and what managers actually do. Questions usually present a small company - family bakery, tech start-up, cooperative - and ask you to recommend a legal form or an organisational structure with reasons.
Legal forms
- Empresario individual (sole trader): no minimum capital, unlimited personal liability, taxed through personal income tax.
- Sociedad Limitada (SL): minimum capital of €1 since 2022; liability limited to contributions; shares not freely transferable; the standard vehicle for small firms.
- Sociedad Anónima (SA): minimum capital €60,000, at least 25% paid up at incorporation; shares freely transferable; suited to large capital-raising projects.
- Cooperatives and sociedades laborales: social-economy forms with democratic governance; in a sociedad laboral most of the capital belongs to the workers.
Management and structure
- Management functions (Fayol): plan, organise, lead/direct, control. Control closes the loop by comparing results with standards and correcting deviations.
- Functional structure: grouping by department - efficient and clear, but slow to adapt. Divisional: grouping by product, market or geography - responsive, but duplicates resources. Matrix: two bosses (function and project) - flexible, but generates conflicts of authority.
- Span of control, centralisation versus decentralisation and formalisation all shape the organisational chart.
Worked example
Five graduates want to run a delivery app. They need €250,000 from outside investors, expect losses for two years and want to limit personal risk. An SL is cheap to create (€1) but its shares are not freely transferable, which complicates bringing in investors. An SA needs €60,000, of which €15,000 is paid at constitution, allows free share transfer and is the conventional vehicle for raising external equity. Recommendation: SA, arguing that the higher incorporation cost is outweighed by access to capital and limited liability.
Traps that cost marks
- Quoting the pre-2022 SL minimum capital (€3,000) as current.
- Mixing up SA and SL capital figures, or forgetting the 25% payment rule.
- Confusing the four Fayol functions with functional areas such as production, finance and marketing.
- Claiming a matrix structure "avoids conflict" - it creates dual authority.
- Recommending a legal form without linking it to liability, capital needs and taxation.