TYPES OF BUSINESS BY LEGAL STRUCTURE

JUNE 2015

A Sole proprietorship is a Form of Business or

oganisation in which :

An individual introduces his own Capital

Uses his own Skill & Intelligence in the

Management of its affairs

Is entitled to receive all the Profit & assume all

Risks of Ownership

Ownership & control

Legal status
Capital
Management
Stability
Risk
Profit sharing

ADVANTAGES AND DISADVANTAGES

OF SOLE PROPRIETORSHIP

1)Ease of Formation
2)Individual Motivation
3)Flexibility
4)Secrecy
5)Quick decision
making
6)Direct contact
7)Freedom Of action
8)Minimum Government
Regulation

Advantages

1)Limited Capital
2)Limited Ability
3)Unlimited Liability
4)Uncertainty in
Stability

Disadvantages

When two or more persons set up a business with

the objective of earning profit with common
ownership & management under an agreemen,it is
called partnership.
As per partnership act of 1932,section 4 of the act
defines the relation between persons who have
agreed to share profit of a business carried by all
or any of them acting for all
Features
1)Ownership,2)Legal status, 3)Capital,
4)Management,5)No.of members,6)Durability,
7)Risk, 8)Profit sharing

A properly drawn up Partnership Deed contains

following clauses:

1)Name of the firm

2)Nature & objectives of business
3)Name & address of the partners
4)Supply of capital
5)Interest on capital
6)Distribution of profit
7)Management8)Partners salary
9)Drawing by partners
10)Maintenance of A/cs & audit
11)Transaction with the bank
12)Method of settlement in case of retirement or death
13)Expulsion or admission of partner
14)Settlement of A/c in case of dissolution
15) A clear cut Exit Strategy

Not compulsory rather it is voluntary.

An agreement in writing is neccesary for registration.
Registration of partnership business is registration
of partnership deed
It can be registered at any time by filling up a form
accompanied by prescribed fee with the registrar of
firm containing following particulars:i)Name of the firm
ii)Nature & principal place of business
iii)Name of other places where the firm is carrying on
business
iv)Date on which each partner joined the firm
v)Name & complete address of all the partners
vi)Duration of the firm

A non registered firm cannot sue a third party for a

claim exceeding Rs.100.
A partner of non registered firm cannot accuse
against other partners before the court.
A non registered firm cannot present its counter
claim to the plaintiff.
A non registered firm cannot file a suit against any
partner or firm itself.

Ease of formation
Large amount of capital
Division of risk
Efficiency in
management
Caution for unlimited
liability
Better public relation
Easy dissolution

Advantages

Limited resources
Unlimited liability
Inefficiency in
management
Uncertainty in staybility
Restriction on transfer
of interest
Liability for dishonest
work of others
Lack of secrecy
Possibility of
misunderstanding

Disadvantages/
Drawbacks