Different Forms of Business Organization

As is well known, business organisations are the places where businesses are done. 

What most people don’t realise is that there are ten different types of business formats! In this discussion, the most common six to seven types of corporate organisations will be prioritised.

 Knowing the fundamentals of business organisation is essential for a business aspirant student because it is the foundation upon which he or she may opt to establish his or her own company. 

So, let us go deeper into the topic and learn about the many types of business organisations.

Introduction

A business organisation is a legal company founded for the purpose of conducting commercial transactions such as selling and buying. 

These businesses are built on legal frameworks that control contracting and trade, as well as property rights and incorporation. 

The management and planning of various activities is the focus of the Business Organization system. 

The business organisation works to manage and control all of these aspects of production by accumulating and coordinating resources such as workers, materials, money, and machines to generate goods and services.

Affecting Business Factors

Different sorts of business organisations exist, depending on aspects such as their nature, scope of operation, ownership, laws, terms, financial structure, obligations, and so on. 

A company’s structure is likely to have long-term consequences.

 As a result, members of an organisation must make informed decisions about which type of business is best for them. The qualities of a corporate organisation are the most important factor in determining its form. 

• The ease of formation, 
• Capital or financial requirements,
•  The nature of liability 
• Control and Stability Continuity, 
• Operational Flexibility 
• Legal Aspects, 
• Secrecy.

Different kinds of business organization

There are seven different types of business organisations that can be formed based on the elements described above. The following are the details:

• Sole Proprietorship
• Hindu Undivided Family
• Company
• Partnership
• Corporations or Statutory Bodies
• Co-operative Societies
• LLP (Limited Liability Partnerships

However, if we look at the three most common types of business entities, we have sole proprietorships, corporations, and partnerships.

The One Who Goes Solo – Sole Proprietorship 

It’s is a business that is owned and operated by one person. This is the most straightforward and widespread sort of business ownership. 

A sole proprietorship is a business owned and operated by a single person for his or her personal profit. The single owner is responsible for the business’s existence, as well as its success and profitability.

 The enterprise comes to an end when the proprietor becomes incapacitated or dies. All of the firm’s assets and liabilities are solely the responsibility of the owner. 

Even the money is a personal investment for them. The profit made by the owner, as well as any losses, are accounted for in the owner’s account.

Statutory Bodies or Corporations

Any non-constitutional authority or institution is referred to as a statutory body. The parliament has established such bodies, which have the authority to make decisions on behalf of the entire nation. 

The following are some significant examples of statutory bodies in India:

• National Green Tribunal
• National Commission for Women
• National Human Rights Commission
• National Commission for Backward Classes
• National Law Commission
• Armed Forces Tribunal

Corporations, on the other hand, are business entities with a large number of stockholders. 

A corporation is legally capable of acting as a single entity. It normally has a board of directors, which is chaired by a president and is chosen by all shareholders. 

Management decisions must be made by the board of directors. Setting up this legal company entity necessitates adequate documentation and legal procedures.

Partnership

General Partnership and Limited Partnership are the two forms of partnership. In most cases, both owners put their money, property, and labour into this firm. They are both responsible for the company’s debts.

 In addition, forming a partnership does not necessitate a formal agreement. The commercial agreement between the two partners might be expressed verbally or impliedly. 

While a Limited Liability Partnership, or LLP, requires the partners to sign a legal agreement. They are also required to register with the state.

Hindu undivided family business

This is a unique type of business entity that is only available in India. The Hindu law that governs the country governs these types of commercial entities.

 A Hindu Undivided Family’s business can be co-owned by any member of the family. In the company, these individuals will be referred to as coparceners. In India, the ‘Karta’ is the leader of a joint family business. He usually has complete authority over the company’s operations and finances.

Companies 

“Com “refers to a group of people working together, while “Panies” refers to bread. Different sorts of corporations are defined as different types of commercial organisations under the Indian Companies Act of 2013. A firm does not have to be international or operate in multiple locations.

It could be a modest business or perhaps a whole new venture. A business can be either private or public, according to the Indian Companies Act. The minimum paid-up share capital requirement for private corporations is Rs.1 lakh.

 Public corporations, on the other hand, are separate legal entities that must have a minimum paid-up share capital of Rs.5 lakh. Members of the public can own shares in these corporations.

Cooperative society

A cooperative society is a corporate model that combines joint ownership and shared leadership. Such corporate structures are popular in industries such as healthcare, banking, food, and agriculture, among others. Cooperative societies and trusts work to benefit a certain group of people.

Limited Liability Partnerships

This type of company structure is used by companies who are dealing with several liabilities in their operations. Limited Liability Partnerships, or LLPs, allow company partners to have distinct duties. 

In this case, the partners continue to split profits in the same way as they would in a traditional partnership. In contrast to ordinary corporations, LLP partners can set their own profit-sharing ratio.

 A minimum of two partners is required in this type of business structure.

Conclusion

What most people don’t realise is that there are ten different types of business formats! In this discussion, the most common six to seven types of corporate organisations will be prioritised.

These businesses are built on legal frameworks that control contracting and trade, as well as property rights and incorporation. 

 Knowing the fundamentals of business organisation is essential for a business aspirant student because it is the foundation upon which he or she may opt to establish his or her own company.