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Starting a Business
August 10, 2011
Types of BusinessTYPETYPE OWNERSHIP
STRUCTUREOWNERSHIP STRUCTURE DECISIONSDECISIONS
Sole Proprietorship Owner or Single Entity
All by Owner or Single Entity
Joint Family (HUF)
Group of Family Members led by
Karta or manager
High-end by Family Members
Managerial by Karta
PartnershipTwo or more
membersMembers
LIABILITYLIABILITY
Unlimited by Owner or Single
Entity
Limited to the undivided share in HUF (Coparcener)
Depending upon the nature of partnership
(active / sleeping)
Types of Business (Contd…)TYPETYPE OWNERSHIP
STRUCTUREOWNERSHIP STRUCTURE DECISIONSDECISIONS
Public Limited Company
Shareholders (public)
Managerial decisions Board of Directors
Operational by managing directors
Private Limited Company
Shareholders (private) or guarantee
Depends on the size of the company
Public Sector Units (PSUs)
Listed company with major state ownership
Unlisted company
Members
LIABILITYLIABILITY
Limited to value of investment
Limited to value of investment
Limited
Types of Business (Contd…)TYPETYPE OWNERSHIP
STRUCTUREOWNERSHIP STRUCTURE DECISIONSDECISIONS
CooperativeGroup of members directly benefitted from association
Managerial decisions Board of Directors
Operational by managing directors
LIABILITYLIABILITY
Limited to value of investment
Khadi, Village Handloom Businesses
Non-profit Private Cooperative
Members or Owners
Limited
Example of Sole Proprietor
1. A watchmaker who repairs and sells watches owns his business. He obtains profits and bears his own losses and does not have partners
2. A freelance journalist not committed to a particular news company for a long term. Payment is on project-basis
Example of Joint Family Business
Two partners (who were also kartas) Govindram and Gangaprasad entered into a partnership and set a sugar mill. The two kartas represented their respective joint families. Govindram dies and the other continued the sugar business. The family of Govindram receives maintenance from the sugar business but property is not divided and the HUF continues. Govindram’s wife can claim share if there is a partition of business but is not a coparcener. Govindram’s son can be a coparcener who has the right to enforce partition. A firm cannot partner into a HUF.
Example of Partnership
Haria is a Chartered Accountant (CA) and Maria is a Lawyer. Both Haria and Maria set up a partnership firm. The profits are shared between Haria and Maria because most of their clients are small and medium businesses requiring consultancy in both, accounting and legal matters. Haria and Maria also have their individual clients with specific requirements. The profits out of the individual clients are accounted separately for Haria and Maria. The day-to-day operations of the firm are carried out by both through a manager.
Example of Public Limited Company
Asian paints is a public limited company with 14 Board of Directors managing operational, legal and financial aspects of the company. The company is listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) – ‘NSE: ASIANPAINT’. Investors in this company are either company or individual shareholders and debenture-holders. The investors receive share certificates, corpoate benefits like bonus, can call or direct Annual General Meetings (AGMs), participate and vote in general meetings, etc
Example of Private Limited Company
Knox Capital Advisors is a boutique investment bank exclusively focused on working with privately held, mid-sized companies in India, for helping them access financing from private equity investors across the globe. This company is privately held with a company size of 1 to 10 employees. Key management of the company includes Vishal Malik who is the managing partner and Meera Murdeshwar who is a partner with the firm
Example of Public Sector Unit
• Steel Authority of India (SAIL)
• Indian Oil Corporation Ltd (IOC)
• Cotton Corporation of India
• Engineers India Ltd
• Hindustan Machine Tools (HMT)
• Hindustan Aeronautics
• Mahanagar Telephone Nigam Ltd
• National Insurance Company
• Rashtriya Chemicals & Fertilizers
Listed
Listed
Listed
Listed
Listed
Not listed
Not listed
Not listed
Not listed
