Sie sind auf Seite 1von 20

Forms of Business

Ownership
UNIT 5

A business is always owned by someone. This can


just be one person, or thousands. So a business
can have a number of different types of
ownership depending on the aims and objectives
of the owners.

Most businesses aim to make profit for their


owners. Profits may not be the major objective,
but in order to survive a business will need make
a profit in the long term.

Some organisations however will be not-forprofit, such as charities or government-run


corporations

Evaluation Criteria
Start-up

and future capital


requirement
Control
Managerial ability
Business goals
Management succession
plans
Hence in India, there are
various forms of businesses:

1. Sole Proprietorship

A business owned and managed by


one individual; the business and
the owner are one and the same in
the eyes of the law
No registration is required
No corporate taxes applicable.

Sole Proprietorship

Advantages

Simple to create
Single ownership
Least costly form
Less legal
formalities
No sharing of
profit /loss
Total decisionmaking
Easy to discontinue

Sole Proprietorship
Disadvantages
Unlimited personal
liability
Limited skills and
abilities
Feelings of isolation
Limited access to
capital
Lack of continuity of
business

2. Partnership
An association of two or more
people who co-own a business
for the purpose of making a
profit.
It is always better to insist in
written agreement ,to avoid
future litigation.

Partnership
Advantages
Easy to establish
Complementary skills
Division of profits
Larger pool of capital
Ability to attract limited
partners
Sharing if risks
Flexibility
Better decisions

Partnership
Disadvantages

At times,
unlimited liability
of at least one
Instability
Non transferability
of shares
Possibility of
conflicts

Formation of Partnership

Minimum two members are required to


form a partnership.
Maximum no.is 10 in Banking case, 20 in
case of all other types of business.
The agreement in writing is known as
Partnership Deed
The firm should get registered with the
registrar of firms of the concerned state.

Agreement Deed

Name and address of the firm


Nature of business
Name & address of partners
Duration of partnership, if decided
Amount of capital to be contributed by each
P/L Sharing ratio
Duties, powers & obligations of partners
Salaries and withdrawals of the partners
Preparation of accounts and their auditing
Procedure for dissolution of firm
Procedure for dispute settlement

3. Joint Stock Company

A company is a voluntary association of


many individuals for profit having limited
liability and contribute money.
It is an extension of partnership.
Stockholders have same privileges and
responsibilities.
Invisible, intangible & existence only in the
eyes of law.
Elected board of directors
Ex: IOC, SBI, TATA MOTORS, RIL etc.

Characteristics of Joint stock


company

Association of persons
Independent legal entity
Limited liability
Common seal
Transferability of shares
High degree of managerial skills
Publication of accounts

Merits

Accumulation of large resources


Limited Liability
Continuity in existence
Efficient Management
Transferability of shares
Diffused risk

Demerits

Expensive and risky


Fraudulent Management
Lack of secrecy
Delay in decision making

On the basis of
Transferability of shares

PRIVATE
PUBLIC

Private Company

Atleast two members but maximum


number cannot exceed fifty.
It is restricted by:
i) the right of members to transfer its
shares
ii) prohibits any invitation to public to
subscribe to its shares
Not required to file a prospectus

Public Comapny

It means public at a large is


interested in compny.
Minimum of seven members nad
maximum is unlimited
Required to issue a prospectus for
inviting public to purchase their
shares
Shareholders are free to sell their
shares in the market.

Co-operative Organisation

A cooperative is an autonomous
association of people who voluntarily
cooperate for their mutual social,
economic and cultural benefits.
A jointly owned enterprise engaging
in the production or distribution of
goods, or the supplying of services,
operated by its members for their
mutual benefit.
It promotes honesty, openness, social
responsibility & caring for others.

Housing cooperatives
Retail cooperatives
Consumer cooperatives
Business and employment
cooperatives
Agricultural cooperatives
Cooperative Banking