What are the forms of business organisations in India?

Based on ownership and structure, we have different forms of business organisation like a proprietary concern, a partnership firm, or a corporate. Here are some common forms of business organizations:

Partnership:

A partnership business is a business structure where a formal agreement between two or more people who agree to be the co-owners and distribute responsibilities are made. The business owners are called partners, and the business’s name is the firm name. The business itself is not a separate legal entity from the partners. The partners are personally liable for the business’s debts and losses.  To know more details read: LEGAL ASPECTS OF PARTNERSHIP BUSINESS

The advantages of a partnership business include:

Stronger financial position:

Partners can pool resources to access new investors,

Borrow more money and save on business expenses.

There are two different types of partnerships, including:

(a) General partnership (GP)

General Partnership is the most common type of partnership, where all partners are equally responsible for managing the business and have unlimited liability for the business’s debts.

(b) Limited Liability Partnership (LLP)

Unlike a “traditional partnership firm”, wherein every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner, under the LLP structure, the liability of the partner is limited to his agreed contribution. Further, in LLP, no partner is liable on account of the independent or unauthorized acts of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful acts or misconduct. In other words, the LLP is a separate legal entity and is liable to the full extent of its assets but the liability of the partners is limited to their agreed contribution to the LLP. To know more read: WHAT IS A LIMITED LIABILITY PARTNERSHIP?

Sole proprietorship:

A sole proprietorship is an unincorporated business with a single owner who pays personal income tax on business profits. The owner makes all the decisions and keeps all the profits, but is also personally liable for the business’s debts. The business assets and liabilities are not separate from the owner’s assets and liabilities. The business can be sued or sued in the owner’s name. They are also the simplest entrepreneurial structure and don’t require any formalities to be formed.

Many local businesses such as grocery stores, parlours, boutiques, retail stores, etc., can be established as sole proprietorship firms. Even small traders and manufacturers can establish a sole proprietorship firm.

Limited Liability Companies:

Similar to LLP business LLCs or Limited Liability Companies are businesses where the owners are protected against business debts or financial losses as the business is treated as a separate entity from the owners. A Limited Liability Partnership (LLP) and a Limited Liability Company (LLC) are different, but they have some similarities, including:

Liability Protection: Both offer strong liability protection, meaning the personal assets of the owners are separate from the business’s assets and debts.

Tax treatment: Tax rulers are similar for both LLPs and LLCs but India has a Minimum Alternative Tax Rate from 19% to 20% for foreign-owned companies. LLCs must file an annual income tax return whether they made a profit or showed a loss.

To know more about the distinction between Partnership and limited liability companies read:

DISTINCTION BETWEEN PARTNERSHIP AND LIMITED LIABILITY COMPANY

Small Company:

The Companies Act, 2013 (‘Act’) introduced the concept of small companies to provide advantages for small businesses operating as private limited companies. Small companies do not have any separate procedure to obtain registration under the Act. Akin to any other private limited company, a small company is registered as a private limited company. However, the Act differentiates a private company from a small company based on its lower investment and turnover.

WHAT IS SMALL COMPANY?

Corporation

Companies are classified into different types based on the structure of the company such as sole proprietorships, partnerships, and corporations. The ownership of a company may belong to the government, private individuals, or foreign entities. The Companies Act 2013 provides several classifications of companies to suit different business needs. The primary types of companies can be classified   on the following factors of incorporation:

• Chartered Companies
• Statutory Companies
• Registered Companies
• Listed Companies
• Based on Liability:
• Companies Limited by Shares:
• Companies Limited by Guarantee
• Unlimited Liability Companies:
• Based on the Number of Members:
• Private Limited Company:
• Public Limited Company
• Based on Control:
• Holding Company:
• Subsidiary Company:
•  Based on Ownership:
• Government Company:
• Non-Government Company
• Foreign Company:
• One-Person Company (OPC

To know more about all of them read: DIFFERENT TYPES OF COMPANIES AND THEIR STRUCTURES EXPLAINED