Forms of Business

Sole Proprietorship

Partnership

Company

Co-operative Society
 Sole Proprietorship

It is a business owned and usually carried on by a single

person known as proprietor.

When the ownership and management of business are

in control of one individual, it is known as sole
proprietorship.
Advantages:

Ease of formation
Better Control
Prompt Decision Making
Retention of Business Secrets
Personal Attention to Consumer Needs

Disadvantages:

Limited life
Unlimited liability
Limited Financial Resources
Limited Capacity of Individual
 Partnership
A partnership is a relationship between the
persons who have agreed to share the profits. It is
a business owned and carried on by a group of
people.
Each member of such a group is individually
known as partner and collectively the members
are known as a partnership firm.
These firms are governed by the Indian
Partnership Act, 1932. Registration of partnership
is not compulsory. But since registration entitles
the firm to several benefits, it is considered
desirable
Advantages:

Ease of formation
Less regulations
Sharing of Risk
No corporate income tax

Disadvantages:

Unlimited liability
Difficult to raise capital
Lack of Harmony
 Limited Liability Partnership

Limited Liability Partnership (LLP) can be

formed by any two or more person,
associated for carrying on a lawful
business with a view to profit, may by
subscribing their names to an
incorporation document and filing the
same with Registrar.
Limited Liability Partnership (LLP) is a separate
legal entity.

Liability of the partners is limited to their agreed

contribution in the LLP.

A firm, private company and unlisted public

company is allowed to be converted into LLP in
accordance with Provisions of the LLP Act 2008.

The Indian Partnership Act 1932 is not

applicable to LLPs.
 Company

Unlimited Limited

Private Public

Unlisted Listed
 Company / Corporation

Company form of business organisation is a

voluntary association of persons to carry on
business. Normally, it is given a legal status and
is subject to certain legal regulations. It is an
association of persons who generally contribute
money for some common purpose. The money
so contributed is the capital of the company.
The persons who contribute capital are its
members. The proportion of capital to which
each member is entitled is called his share,
therefore members of a joint stock company
are known as shareholders and the capital of
the company is known as share capital.
The companies are governed by the Indian
Companies Act, 1956. The Act defines a
company as an artificial person created by law,
having separate entity, with perpetual
succession and a common seal.
Advantages:
Unlimited life
Professional Management
Limited liability
Ease of raising capital
High possibility of wealth
maximization

Disadvantages:
Dividend Tax burden
High cost of set-up and report filing
More regulation
 Co-operative Society
Any ten persons can form a co-operative society.
It functions under the Co-operative Societies Act,
1912 and other State Co-operative Societies
Acts. A co-operative society is entirely different
from all other forms of organisation discussed
above in terms of its objective. The co-
operatives are formed primarily to render
services to its members.
Every member has a right to take part in the
management of the society. Each member has
one vote. Generally the members elect a
committee known as the Executive Committee
to look after the day to day administration and
the said committee is responsible to the
general body of members.
The liability of the members is limited to the
extent of capital contributed by them.

Registration of a society under the Co-

operative Societies Act is a must. Once it is
registered, it becomes a body corporate and
enjoys certain privileges just like a joint stock
company.
Some of the privileges are:
The society enjoys perpetual succession.

It has its own common seal.

It can own property in its name.

It can enter into contract with others.

It can sue others in court of law.

Generally it also provides some service to the
society. The main objectives of co-operative
society are:

(a) rendering service rather than earning

profit,

(b) mutual help instead of competition, and

(c) self help in place of dependence.

On the basis of objectives, various types of co-
operatives are formed :

Consumer co-operatives
Producers co-operatives
Producers co-operatives
Marketing co-operatives
Housing Co-operatives
Credit Co-operatives
Forming Co-operatives
Advantages :
• Democratic management
• Assistance from the government
• Elimination of middlemen’s profit
• Fairly stable life
Disadvantages :
• Limited capital
• Lack of managerial talent
• Lack of motivation
• Lack of secrecy
• Dependence on the government