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Classification of Firms by System of Organisation

Manufacturing organizations can be operated under any of the following organizational structures: 1) Proprietorship: is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits (subject to taxation) and has unlimited responsibility for all losses and debts. very asset of the business is owned by the proprietor and all debts of the business are the proprietor!s. 2) Partnership: is defined as the relation between two or more persons who have agreed to share the profits according to their ratio of business run by all or any one of them acting for all. ach partner is personally and e"ually liable for debts of the partnership. #ormal terms of the partnership are usually contained in a written partnership agreement. 3) Co-operative: is an autonomous association of persons who voluntarily cooperate for their mutual$ social$ economic$ and cultural benefit. %t is owned and managed by the people who wor& in it. %n such organizations$ every wor&er'owner participates in decision ma&ing in a democratic fashion$ or$ they may elect managers and administration from among themselves for decision ma&ing. xamples: (mul ((nand Mil& )nion *imited)$ +hri Mahila ,riha )dyog *ijjat -apad$ etc. 4) Private imite!: ( private limited company is a voluntary association of not less than two and not more than fifty members$ whose liability is limited$ the transfer of whose shares is limited to its members and who is not allowed to invite the general public to subscribe to its shares or debentures. The profits of the organisation are shared amongst its shareholders. .*imited by shares. means that the liability of the shareholders to creditors of the company is limited to the capital originally invested. xamples: M/0 captives in specific countries (e.g. %1M %ndia -vt. *td.) ") P#blic imite!: %t is a limited liability company whose shares are freely sold and traded to the public$ unli&e that of -rivate *imited firms. xamples: *isted firms on stoc& exchanges $) %epartmental organisation: %t is considered as a suitable form of organisation of ,ovt. nterprises. The departmental form of ,ovt. sector operates under the control and guidance of the concerned ministry.

xamples are the railways$ broadcasting$ post and telegraphs$ telephone services$ etc. &) Corporation: (n incorporated entity is a separate legal entity that has been incorporated through a legislative or registration process established through legislation. %ncorporated entities have legal rights and liabilities that are distinct from their shareholders$ and may conduct business for either profit'see&ing business or not for profit purposes. arly incorporated entities were established by charter (i.e. by an ad hoc act granted by a monarch or passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration. %n addition to legal personality$ registered companies tend to have limited liability$ be owned by shareholders who can transfer their shares to others$ and controlled by a board of directors whom the shareholders appoint. xamples: Most #ortune 233 companies ') imite! iability Partnership ( P): is a partnership in which some or all partners (depending on the jurisdiction) have limited liability. %t therefore exhibits elements of partnerships and corporations. %n an **-$ one partner is not responsible or liable for another partner!s misconduct or negligence. This is an important difference from that of an unlimited partnership. %n an **-$ some partners have a form of limited liability similar to that of the shareholders of a corporation.