Characteristics of Business Organisation

1 Distinct Ownership

2 Lawful Business

3 Separate Status and Management

4 Dealing in Goods and Services

5 Continuity of Business Operations

6 Risk Involvement

CHARACTERISTICS OF AN IDEAL FORM OF ORGANIZATION

1 Ease of Formation

2 Adequacy of Capital

3 Limit of Liability

4 Direct relationship between Ownership, Control and Management

5 Continuity and Stability

6 Flexibility of Operations

7 Distinct Ownership

8 Lawful Business

9 Separate Status and Management

10 Dealing in Goods and Services:

11 Continuity of Business Operations

12 Risk Involvement

The entrepreneur, while selecting a form of organization for his business, should consider the following factors.

Forms of Business Organisations

1 Sole Proprietorship

2 Hindu Undivided Family Business

3 Partnership

4 Company

5 Private Company

6 Public Company

7 One Person Company

8 Statutory Bodies and Corporations

9 Co-Operatives, Societies and Trusts

10 Limited Liability Partnership

11 Association of Persons (AoP)

12 Body of Individuals

13 Joint Ventures

CHARACTERISTICS

1 Single Ownership

2 No sharing of Profit and Loss

3 One-man’s Capital

4 One-man Control

5 Unlimited Liability

6 Less Legal Formalities

SOLE PROPRIETORSHIP'Sole' means single and 'proprietorship'

means ownership.

Advantages of Sole Proprietorship

1 Easy to Form and Wind up

2 Direct Motivation

3 Quick Decision and Prompt Action

4 Better Control

5 Maintenance of Business Secrets

6 Close Personal Relation

7 Flexibility in Operation

8 Encourages Self-employment

Disadvantages of Sole Proprietorship

1 Limited Capital

2 Unlimited Liability

3 Lack of Continuity

4 Limited Size

5 Lack of Managerial Expertise

CHARACTERISTICS

1 Legal Status

2 Membership

3 Profit Sharing

4 Management

5 Liability

6 Fluctuating Share

7 Continuity

Hindu Undivided Family (HUF)

Advantages of HUF

1 Assured Share in Profits

2 Freedom in Managing

3 Sharing of Knowledge and Experience

4 Unlimited Liability of the Karta

5 Continued Existence

Disadvantages of HUF

1 Limited Resources

2 Lack of Motivation

3 Scope for Misuse of Power by the Karta

4 Scope for Conflict

5 Instability

CHARACTERISTICS

1 Number of Partners

2 Contractual Relationship

3 Competence of Partners

4 Sharing of Profit and Loss

5 Unlimited Liability

6 Principal-Agent Relationship

7 Transfer of Interest

8 Legal Status

9 Voluntary Registration

10 Dissolution of Partnership

Partnership

Advantages of Partnership

1 Easy to Form

2 Favorable Credit Standing

3 Large Capital

4 Greater Management Ability

5 Union of Business Ability

6 Profit Incentive

7 Advantages of Secrecy

8 Retention of a Skilled Worker

9 Brake on Hasty Decisions

10 Special Protection to Minor

11 Increase in the Spirit of Co-operation

12 Tax Advantage

13 Ease of Dissolution

Disadvantages of Partnership

1 Unlimited Liability of Partners

2 Limited Life of Firm

3 Frozen Investment

4 Disputes Among the Partners

5 Possibility of Misuse of Resources

6 Loss of Business Opportunities

7 Divided Control

8 Lack of Public Confidence

9 Implied Authority

CHARACTERISTICS

1 Artificial Legal Person

2 Incorporated Body

3 Capital Divisible into Shares

4 Transferability of Shares

5 Perpetual Existence

6 Limited Liability

7 Representative Management

Company

Private Company

A private company has –1. limit on maximum to two hundred members other than present and past employees;2. restrict the right to transfer its shares; and3. prohibits any invitation to the public to subscribe for any securities of the company.A private company (or a private limited company) may have two members normally or single member in case such private company is a one person company (OPC).

Private Company

Public Company

A public company is a company which is not a private company.A public company do not have restriction like private company, but it needs minimum seven members.

One Person Company

One Person Company is a company with only one person as its member. All restrictions applicable to a private company shall apply to one person company as it is essentially a private company.

Advantages of Company

1 Greater Permanency

2 Limited Liability

3 Easy to Transfer Ownership

4 Attraction of Huge Capital

5 Management Functions

6 Recognized Legal Entity

7 Higher Profits

8 Benefits of Large Scale Production

9 Bold Management

10 Spread of Risk

11 Democratic Organization

12 Full Legal Cover

13 Social Benefits

Disadvantages of Company

1 Formation of a Company Complicated

2 Double Taxation

3 Exploitation of Shareholders

4 Separation of Ownership from Control

5 Promotion of Frauds

6 Stock Exchange Speculation

7 Lack of Secrecy

8 Impersonal Relationship

9 Favoritism and Nepotism

10 Grouping for Power

11 Evils from the Social Point of View

CHARACTERISTICS

1 Corporate Body

2 Legal Entity

3 Government Ownership

4 Financial Independence

5 Accounting System

6 Management and Personnel

7 Service Motive

Statutory Bodies and Corporations

Advantages of Statutory Corporation

1 Operational Autonomy

2 Flexibility Operations

3 Continuity

4 Special Privilege

5 Availability of Managerial Talent

Disadvantages of Statutory Corporation

1 Difficult Formation

2 Inflexibility

3 Excessive Accountability

4 Clash of Divergent Interests

Objectives

1 rendering service rather than earning profit

2 mutual help instead of competition

3 self help in place of dependence

CO-OPERATIVES, SOCIETIES AND TRUSTS

Types

1 Consumers’ Co-operative Society

2 Producers’ Co-operative Society

3 Co-operative Marketing Society

4 Co-operative Credit Society

5 Co-operative Farming Society

6 Housing Co-operative Society

CHARACTERISTICS

1 Voluntary Association

2 Separate Legal Entity

3 Democratic Management

4 Service Motive

5 Utilization of Surplus

6 Cash Trading

7 Fixed Rate of Return

8 Government Control

9 Capital

CO-OPERATIVES, SOCIETIES AND TRUSTS

Advantages of Co-operatives

1 Easy Formation

2 Open Membership

3 Democratic Management

4 Limited Liability

5 Stability and Continuity

6 Low Prices

7 Mutual Help

8 Social Advantage

9 Mobilization of Savings

10 Remove Defects of Capitalism

11 Cash Trading

12 Government Support

Disadvantages of Co-operatives

1 Lack of Capital

2 Lack of Efficient Management

3 Lack of Unity among Members

4 Lack of Motivation

5 Cash Trading

6 Political Interference

7 Difficult to Maintain Business Secrecy

8 Unwanted Interference by the Departmental Personnel

CHARACTERISTICS

1 a body corporate and a legal entity having perpetual succession

2 Agreement between partners

3 Separate Legal Entity

4 Every Partner Equal

5 Limited Liability

LIMITED LIABILITY PARTNERSHIP (LLP)

Process to Start LLP

Acquire DPIN; Acquire DSC

Register DPIN, DSC with LLP.GOV.IN

Check Name Availability

LLP ready to Function

Receive Certificate After

Download LLP Forms

File Electronically

Track Status

Advantages of LLP

1 Separate legal entity

2 Easy to establish

3 Flexibility

4 Perpetual existence

5 Internationally renowned form of business

6 No requirement of minimum capital contribution

7 No restrictions as to maximum number of partners

8 Distinct Legal Entity

9 Limited Liability

10 Personal assets of the partners are not exposed

11 Easy to dissolve or wind-up

12 No requirement to maintain statutory records except Books of Accounts

13 Less Cost of formation

Disadvantages of LLP

1 cannot raise funds from Public

2 Any act of the partner without the other may bind the LLP

3 Under some cases, liability may extend to personal assets of partners

4 No separation of Management from owners

Associations Of Persons

Body of Individuals

Self Help Groups

Advantages of AOP/BOI

1 Suitable for short term business plan

2 No formality relating to formation required

3 Only an intention to earn income

4 Easy to wind – up its business

5 Suitable for Special Purpose Vehicle (SPV)

Disadvantages of AOP/ BOI

1 No formal setup of organisation

2 Income not the business is important

3 Not a purpose of wealty creation