Types of Business organizations
Sole Proprietorship: A sole proprietorship is a business that is owned and operated by one
Types of Business organizations: A solo entrepreneur is unquestionably the monarch of his business. He is the owner of the property. From the beginning, he is in charge. He supplies the necessary resources and starts the business on his own. He expends all of his efforts on everything. He contributes his abilities, knowledge, and experience. Every action is meticulously planned by him. When more hands are needed, he recruits others. He connects with clients and goes out of his way to make them happy.
There is just ONE owner in a single proprietorship firm. There may be employees or assistants aiding and reporting to the owner, but the show is managed and overseen by just one “head.” It’s a company that’s solely owned, managed, and controlled by one person, who bears full power, responsibility, and risk.
Advantage:
(I) Simplicity: A single proprietorship, such as a store owner, is very simple to set up and dissolve.
(ii) Making snap choices.
(iii) Confidentiality: His business secrets are exclusively known to him.
(iv) Adding a Personal Touch
(v) Flexibility: Total control over one’s actions.
Types of Business organizations
One-Person Business:
The Companies Act of 2013 gave birth to it. There is just one stakeholder in the company. It is set up in the same way as any other private limited business. Because the business is held by one individual, he should appoint someone to take over in the event of his death or incapacity. The nominee must provide written approval, which must be lodged with the Registrar of Companies. Procedures such as holding annual general meetings, general meetings, or extraordinary general meetings are not required for a one-person corporation.
In the event that the business fails, the sole shareholder’s responsibility is restricted, and his or her personal assets are safeguarded. Any corporate decision must be documented in the minute book and notified to the rest of the business. All additional procedures that apply to private firms, such as performing audits, submitting financial statements, and maintaining correct records, must be followed by a one-person corporation.
Advantages:
- Entrepreneurs may start businesses without worry of incurring endless liabilities.
- The owner’s responsibility is limited.
- Outsiders should not be given access to business secrets.
- Decisions may be made quickly.
- Profits are not required to be shared with others.
- Owners may have complete control over their businesses.
- Nominees may readily put themselves in the shoes of owners who pass away unexpectedly.
Family Business in Hinduism:
A Joint Hindu Family Business is a unique form of company found only in India. Even inside India, its presence is limited to a few regions. In this kind of commercial ownership, all members of a Hindu undivided family operate business together under the direction of the ‘Karta,’ or family head. The family members are known as ‘Co-parceners.’ As a result, the Joint Hindu Family enterprise is a business held by Hindu undivided estate co-parceners.
Its primary characteristics are as follows:
It exists as a result of the operation of Hindu law, not as a result of a contract. The general laws of Hindu law establish the rights and duties of co-parceners.
The legality of this kind of company is unaffected by the minority. Its membership is based on a status derived from birth in the family. The membership of this organisation was formerly limited to three generations in the male line (grandfather, father, and son).
Firm of Partnership:
A partnership is a group of two or more people who agree to run a company together and share profits. Partnership is defined as “the connection between individuals who have agreed to share profits of a business carried on by all or any one of them acting for all,” according to Section 4 of the Partnership Act of 1932.
Through a well designed partnership deed, partnership activity is done according to specific agreed-upon terms and circumstances. In the event of a disagreement between partners, the partnership deed serves as a binding agreement.
A Partnership Deed’s Contents:
- The amount of money each partner put in at the start.
- Each partner’s profit or loss share ratio
- The partners are paid a salary or a commission.
- The duration of the company
- Partners’ and firm’s names and addresses
- Each partner’s responsibilities and abilities
- Nature and work environment
- Any additional terms and conditions applicable to the operation of the company
LLP stands for Limited Liability Partnership.
With effect from April 1, 2009, the Limited Liability Partnership Act, 2008 governs the LLP, a legal structure that is used all over the globe. The commendable elements of both a corporation and a partnership enterprise are combined in an LLP. LLPs combine professional knowledge with entrepreneurial initiative to function in a flexible, imaginative, and efficient way, enabling members to organise their internal structure as a partnership while maintaining limited liability.
Advantages:
- It is a more solid business structure than a partnership (resignation or death of partner does not impact its existence).
- The partners’ responsibility is restricted.
- It is a distinct legal entity from its shareholders.
- It is a flexible corporate vehicle that allows for company dynamism without being constrained by a rigid structure.
- LLPs are simple to set up. It is also possible to convert an existing business into an LLP without difficulty.
- It can readily expand its resource base since there is no limit on the number of members.
Joint Stock Corporation (JSC):
A corporation, according to the Companies Act of 1956, is a legal entity that has a distinct legal existence, perpetual succession, and a common seal. As a result, a corporation is a voluntary organisation of persons created to engage in some legal activity. The money raised from shareholders (hence the term “joint stock corporation”) is split into transferable shares with a defined denomination. Members’ responsibility is often restricted. A corporation has its own artificial personality that is distinct from that of its stockholders. It has a common seal and exists indefinitely.
Limited Liability Company (LLC) vs. Public Limited Liability Company (PLC):
A private limited company may be founded by at least two persons with at least Rs. 1 lakh in paid-up capital. A private limited business may have a maximum of 50 members. It cannot collect funds from the general public via open invitations to buy shares or debentures. It is unable to accept deposits from anybody other than its members, directors, and families. The shares in a private limited business are not readily transferable. A private corporation must always use the term ‘private limited’ in its name.
A public limited corporation must have at least seven members to be formed. It must have a paid-up capital of at least Rs. 5 lakhs. The maximum number of members is unrestricted. Members may freely transfer the shares they have been assigned. Public limited corporations may generate cash from the general public by selling shares or taking fixed deposits via an open invitation. These businesses must include the words ‘public limited’ or ‘limited’ after their names. A member of a corporation’s responsibility is limited to the face value of the shares he holds.
He is under no obligation to contribute anything to the company’s creditors after he has paid the full face amount. A company’s shareholders do not have the right to engage in the day-to-day management of the company’s operations. This guarantees that ownership and management are kept separate.
Cooperative Organization (COOPERATIVE ORGANIZATION):
A cooperative organisation is a society whose goals are to promote the interests of its members in line with cooperative principles. It’s a non-profit organisation made up of 10 or more people who live or work in the same area and come together on an equal footing to pursue their economic or commercial goals.
The key trait that distinguishes co-operatives from other kinds of company ownership is that their primary goal is to serve the members rather than to make money. Consumer co-operatives, producer co-operatives, marketing co-operatives, housing co-operatives, credit co-operatives, agricultural co-operatives, and other forms of co-operatives exist. All of these cooperatives have the same goal: to improve the lives of its members.
The following features are included:
It is a voluntary organisation in which a member may quit at any moment and withdraw his capital after providing notice.
The minimum number of members is ten, while the maximum number of members is unlimited. The members must, however, live or work in the same community.
The registration of a co-operative business is required. The Registrar of Co-operative Societies may register a co-operative society.
A co-operative business becomes a body corporate independent of its members, i.e. a distinct legal entity, when it is registered.
It is governed by the Co-operative Societies Act of 1912, also known as the State Co-operative Societies Act. The Registrar of Societies requires it to produce yearly reports and accounts.
Every member’s responsibility is restricted to the amount of his capital contribution.
Shares in a co-operative society cannot be transferred, but they may be returned to the society if a member wishes to leave.