NEW ENTERPRISE CREATION: TYPES of ORGANISATION AND FORMATION

TYPES OF ORGANISATION SOLE PROPRIETORSHIP PARTNERSHIP FIRM PRIVATE LIMITED COMPANY PUBLIC LIMITED COMPANY CO-OPERATIVES One person Company JOINT HINDU FAMILY BUSINESS LIMITED LIABILITY PARTNERSHIP (LLP) NON PROFIT ORGANISATION VIZ. TRUST

SOLE PROPRIETORSHIP FEATURES OLDEST AND THE MOST COMMON FORM OF BUSINESS. IT IS A ONE MAN ORGANISATION WHERE A SINGLE INDIVIDUAL OWNS, MANAGES AND CONTROLS THE BUSINESS EASE OF FORMATION SMALL FINANCIAL RESOURCES/CAPITAL REQUIREMENT IS SMALL RISK IS NOT HEAVY/MODERATE RISK CAPITAL SUPPLIED BY THE OWNER COMPLETE CONTROL OF BUSINESS.

SOLE PROPRIETORSHIP FEATURES OWNER ALONE ENJOYS BENEFITS OR PROFIT OF THE BUSINESS AND HE ALONE BEARS THE LOSSES NO LEGAL EXISTENCE SEPARATE FROM ITS OWNER LACK OF CONTINUITY UNLIMITED LIABILITY. Owner Liable For The Liabilities Of The Firm Viz. Creditors Can Recover Their Loans From The Personal Property Of The Individual owner. ACCOUNTS FOR THE LARGEST NUMBER OF BUSINESS CONCERNS IN INDIA/unorganized sector IDLE BUSINESS – AUTOMOBILE, REPAIR, SHOPS, SMALL BAKERY SHOPS, TAILORING

Owners Of A Partnership Business Are Individually Known As The “Partners” And Collectively As A “Firm” Relation Between Two Or More Partners Agree To Share The Profits Or Loss Of A Business A Partnership Is Formed By An Agreement Which May Be Either Written Or Oral. When The Written Agreement Is Duly Stamped And Registered It Is Known As Partnership Deed Rights, Duties And Liabilities Of Partners Are Laid Down In The Deed Registrar Of Firms Is Responsible For Registering Partnership Firms

Firm Has No Separate Legal Existence Of Its Own If Rights And Obligations Are Not Specified , Provisions Of The Indian Partnership Act 1932 Will Apply. Registration Is Also Not Essential But If Not Registered Deprived Of Certain Legal Benefits. Minimum Number Of Partners Must Be Two While Maximum Number Can Be 10 In Case Of Banking Business And 20 In All Other Types Of Business. Firm Has No Separate Legal Existence Of Its Own

Liability Of The Partners Unlimited Liability Of The Partners Unlimited. Partners Jointly And Severally Liable For The Liabilities Of The Firm Viz. Creditors Can Recover Their Loans From The Personal Property Of The Individual Partners. Limited Span Of Life Viz. Firm Must Be Dissolved On The Retirement, Bankruptcy Or Death Of Partner/S. Partners Cannot Transfer His Interest In The Firm To Any Person (Except To The Existing Partners) without The Unanimous Consent Of All Other Partners. examples: Wholesale And Retail Trade; Small Service Concerns Like Transport Agencies, Real Estate Brokers; Professional Firms Like Charted Accountants, Doctors' Clinic, Attorney Or Law Firms Etc.

PRIVATE LIMITED COMPANY FEATURES A private limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. Governed By The Indian Companies Act 1956. Must be registered with Registrar Of Companies Independent Legal Existence Voluntary Association Of Not Less Than Two And Not More Than Fifty Members

PRIVATE LIMITED COMPANY FEATURES contd. Liability Is Limited, Shares Limited To Its Members (owners are legally responsible for its debts only to the extent of the amount of capital they invested) General Public Not Allowed To Subscribe To Its Shares And Debentures It Enjoys Continuity Of Existence i.e. It Continues To Exist Even If All Its Members Die Or Desert It. Minimum Authorized Share Capital Of Rs. 1.00 Lacs. Minimum 2 Subscribers And Minimum Of 2 Directors

PRIVATE LIMITED COMPANY FEATURES It Is Relatively Less Cumbersome To Organise And Operate It as It Has Been Exempted from many regulations and restrictions to which a Public Limited Company Is Subjected To. Some Of Them Are :- It Need Not Obtain The Certificate For Commencement Of Business. It Need Not Hold The Statutory General Meeting Nor Need It File The Statutory Report. Restrictions Placed On The Directors Of The Public Limited Company Do Not Apply To Its Directors.

PUBLIC LIMITED COMPANY FEATURES A public limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. Its formation, working and its winding up, in fact, all its activities are strictly governed by laws, rules and regulations The Companies Act 2013. The Indian Companies Act, 1956 contains the provisions regarding the legal formalities for setting up of a public limited company. Registered with Registrar of Companies. Separate Legal Entity And Existence

PUBLIC LIMITED COMPANY FEATURES contd. The liability of a member of a company is limited to the face value of the shares he owns. Minimum Authorized Share Capital Rs. 5.00 Lacs Minimum 7 Subscribers And Minimum Number Of 3 Directors Minimum Seven Members. No Limit To Maximum Number Shares Of The Company Are Freely Transferable And Tradable If Listed On Stock Exchange

PUBLIC LIMITED COMPANY FEATURES Shareholders Of The Company Do Have Right To Participate In The Day To Day Management Of The Business Of A Company Board Of Directors Vested With Policy And Decision Making Existence Is Not Affected By The Death, Retirement Or Insolvency Of Any Of Its Shareholders

CO-OPERATIVES The aim of all such co-operatives is to promote the welfare of their members. It is a voluntary organisation as a member is free to leave the society and withdraw his capital at any time, after giving a notice. The minimum number of members is 10, but there is no limit to the maximum number of members. However, the members must be residing or working in the same locality. It is subject to the provisions of the Co-operative Societies Act, 1912 or State Co-operative Societies Acts. It has to submit annual reports and accounts to the Registrar of Societies. Registration of a co-operative enterprise is compulsory. A co-operative society may be registered with the Registrar of Co-operatives Societies.

CO-OPERATIVES The shares of co-operative society cannot be transferred but can be returned to the society in case a member wants to withdraw his membership. Being a separate legal entity a co-operative enjoys continuity of existence which is not affected by death, insolvency, retirement, etc. of the members. After registration a co-operative enterprise becomes a body corporate independent of its members i.e. a separate legal entity. The liability of every member is limited to the extent of his capital contribution.

LIMITED LIABILITY Partnership LLP is governed by the provisions of the Limited Liability Partnership Act 2008 Limited Liability Partnership (LLP) Is An Incorporated Business Organisation. Hybrid Form Of Organization – Partnership and a Company Under Companies Act 1956. It Is a Body Corporate Having The Features Of A Partnership Firm And A Limited Company. Minimum Two Persons Are Required To Register A LLP And There Is No Restriction Regarding Maximum Number Of Members.

Liability Of Partners Limited LIMITED LIABILITY Partnership contd. Liability Of Partners Limited Individual Or Body Corporate May Become A Partner In LLP A Body Corporate May Nominate An Individual As A Designated Partner

HINDU UNDIVIDED FAMILY FEATURES Hindu Undivided Family Is A Distinct Type Of Organisation Which Is Unique In India All Members Of A Hindu Undivided Family Do Business Jointly Under The Control Of The Head Of The Family Known As Karta Comes Into Existence By The Operation Of Hindu Law And Not Out Of Contract Rights And Liabilities Of the members Are Determined By The General Rules Of Hindu Law Membership Arises From The Birth In The Family Registration Is Unnecessary Karta Has Unquestioned Authority In The Conduct Of Family Business

TRUST Something (as property) held by one party (the trustee) for the benefit of another (the beneficiary). Say non-profit organisation PRE-REQUISITE FOR FORMATION OF TRUST: OBJECT/PURPOSE – Purpose for which the trust is created should be specified BENEFICIARY – Who are the beneficiaries of the trust should be clear. TRUST PROPERTY – On which basis the Trust is created

TRUST PUBLIC TRUST public charitable trust : any trust made to promote any activities for relief of poor to provide education etc. public religious trust : any trust made for the advancement support or propagation of a religion is called religious trust PRIVATE TRUST private specific trust: where the beneficiaries and their share both are determined private discretionary trust private discretionary trust - where the beneficiaries’ shares are not determined PUBLIC CUM PRIVATE TRUST where the income of the trust is incurred for public purpose and partly for a private person