Basic forms of ownershipi

Forms of business ownership vary by jurisdiction, but several common forms exist:

 Sole proprietorship: A sole proprietorship is owned by one person and operates for profit.
The owner may operate the business alone or employ other people. A sole proprietor has
unlimited liability for all obligations incurred by the business, whether from operating costs
or judgements against the business. All assets of the business belong to a sole proprietor,
including, for example, computer infrastructure, any inventory, manufacturing equipment
and/or retail fixtures, as well as any real property owned by the business. The main
advantages that differentiate the sole proprietorship from the other legal forms are (1) the
ease with which it can be started, (2) the owner's freedom to make decisions, and (3) the
distribution of profits (owner takes all).

 Partnership: A partnership is a business owned by two or more people. In most forms of

partnerships, each partner has unlimited liability for the debts incurred by the business. The
three most prevalent types of for-profit partnerships are general partnerships, limited
partnerships, and limited liability partnerships.

The main advantages of the partnership form are that the business can (1) draw on the skills
and abilities of each partner, (2) offer employees the opportunity to become partners, and (3)
utilize the partners' combined financial resources.

 Corporation: The owners of a corporation have limited liability and the business has a
separate legal personality from its owners. Corporations can be either government-owned or
owned by individuals. They can organize either for profit or as not-for-profit organizations. A
non-government for-profit corporation is owned by its shareholders, who elect a board of
directors to direct the corporation and hire its managerial staff. A privately owned, for-profit
corporation can be either privately held by a small group of individuals, or publicly held, with
publicly traded shares listed on a stock exchange.

As a result, the corporation offers some unique advantages. These include (1) limited liability:
owners are not personally responsible for the debts of the business, (2) the ability to raise
capital by selling shares of stock, and (3) easy transfer of ownership from one individual to
another. Plus, unlike the sole proprietorship and partnership, the corporation has "unlimited
life" and thus the potential to outlive its original owners.

 Cooperative: Often referred to as a "co-op", a cooperative is a limited liability business that

can organize for-profit or not-for-profit. A cooperative differs from a corporation in that it has
members, not shareholders, and they share decision-making authority. Cooperatives are
typically classified as either consumer cooperatives or worker cooperatives. Cooperatives are
fundamental to the ideology of economic democracy.

Sole Proprietorship

A business owned by one person, who is entitled to all of its profits and responsible for all of its debts,
is considered a sole proprietorship. This legal form is the simplest, providing maximum control and
minimum government interference. Currently used by more than 75 percent of all businesses, it is
often the suggested way for a new business that does not carry great personal liability threats. The
owner simply needs to secure the necessary licenses, tax identification numbers, and certifications in
his or her name and you are now in business!

Partnership

A business owned by two or more people, who agree to share in its profits, is considered a partnership.
Like the sole proprietorship, it is easy to start and the red tape involved is usually minimal. The tax
structure is the same as proprietorship except in the profits and losses of the partnership are divided
by an agreed percentage by the partners.

Corporation

A corporation differs from the other legal forms of business in that the law regards it as an artificial
having possessing the same rights and responsibilities as a person. This means that, unlike sole
proprietorships or partnerships, it has an existence separate from its owners. It has all the legal rights
of an individual in regards to conducting commercial activity -- it can sue, be sued, own property, sell
property, and sell the rights of ownership in the form of exchanging stock for money.

There are four kinds of partnership ii

1. General partnership:

In a general partnership, the liability of each partner is unlimited. It means that the firm's creditors
can realise their dues in full from any of the partners by attaching their personal property if the firm's
assets are found to be inadequate to pay off its debts.

An exception is made in the case of a minor partner whose liability is limited to the amount of his
share in the capital and profits of the firm. In India all partnership firms are general partnerships.

Each partner of a general partnership is entitled to take active part in the management of the firm,
unless otherwise decided by the other partners.

2. Limited partnership:

A limited partnership is a partnership consisting of some partners whose liability is limited to the
amount of capital contributed by each. The personal property of a limited partner is not liable for the
firm's debts.

He cannot take part in the management of the firm. His retirement, insolvency, lunacy or death does
not cause dissolution of the firm. There is at least one partner having unlimited liability. A limited
partnership must be registered.

Limited partnership is now allowed in India under the Limited Liability Partnership Act. In England
limited partnership can be formed under the Limited Partnership Act, 1907 and in the USA under the
Partnership Act, 1890

The chief characteristics of a limited partnership are as follows:

1. There must be at least one partner with unlimited liability. The liability of the remaining partners is
limited to their capitals in the firm. Thus, a limited partnership consists of two types of partners,
general partner and limited partner.

2. The limited partner cannot take part in the management of the firm. He has no implied authority to
represent and bind the firm. However, he is allowed to inspect the books of accounts of the firm.

3. The limited or special partner cannot assign his share to an outsider without the consent of the
general partner.

4. The limited partner cannot withdraw any part of his capital.

5. A limited partnership must be registered.

 Disadvantages
Advantages

Limited partnership offers the following benefits:

i. It enables people to invest in a business without

assuming unlimited risk and without devoting Limited partnership suffers from the following
much time and attention in management of drawbacks:
business.
(i) The limited partners are deprived of the right to
ii. It permits the mobilisation of larger financial manage. They remain at the mercy of the general
resources from cautious and conservative partner.
investors.
(ii) The general partner may misuse his power to
iii. It provides an opportunity to able and exploit the limited partners.
experienced persons to manage the business
without any interference from other partners.
Complete control and personal supervision help to (iii) A limited partnership enjoys little credit
ensure prompt decisions and uniform actions. standing as the liability of some partners is
limited. It has to be registered.
iv. It is more stable than general partnership
because it is not dissolved by the insolvency,
retirement, incapacity or death of limited partner.

3. Partnership at will:

It is a partnership formed for an indefinite period. The time period or the purpose of the firm is not
mentioned at the time of its formation. It can continue for any length of time depending upon the will
of the partners. It can be dissolved by any partner by giving a notice to the other partners of his desire
to quit the firm.

4. Particular partnership:

It is a partnership formed for a specific time period or to achieve a specified objective. It is

automatically dissolved on the expiry of the specified period or on the completion of the specific
purpose for which it was formed.

Rights of Partners

1. Every partner has a right to take part in the conduct and management of the firm's business.

2. Every partner has a right to be consulted and express his opinion on any matter related to the firm.
In case of difference of opinion, the decision has ordinarily to be taken by a majority.

But vital issues like admission of a new partner, change in the firm's business, alteration of profit-
sharing ratio, etc., must be decided by unanimous consent of all the partners.

3. Every partner has a right to have access to, inspect and copy any books of accounts and records of
the firm.

4. Every partner has the right to an equal share in the profits of the firm, unless otherwise agreed by
the partners.
5. Every partner has the right to receive interest on loans and advances made by him to the firm. The
rate of interest should be 6 per cent unless otherwise agreed by the partners.

6. Every partner has the right to be indemnified for the expenses incurred and losses sustained by him
in the ordinary conduct of the firm's business.

7. Every partner has a right to continue in the firm unless expelled in accordance with the terms of the
partnership agreement.

8. Every partner has a right to retire in accordance with the terms of the partnership agreement or
with the consent of other partners.

Articles of partnershipiii is a voluntary contract between two or among more than two persons to
place their capital, labor, and skills, and corporation in business with the understanding that there will
be a sharing of the profits and losses between/among partners. Outside of North America, it is
normally referred to simply as a partnership agreement.[1]

A partnership agreement is the written and legal agreement between business partners. It is not
essential for partners to have such an agreement but it is always recommended

Common components

There are also multiple sections which are often included as well in articles of partnership, based on
the circumstance. These are:

 Host agreement – includes the granting of one partner the rights to manage and administer
the business or a specific department.

 Majority management – includes the authorization of a majority of partners to manage the

affairs of the entire partnership. This is particularly common where there are numerous
partners.

 Annual account – includes provisions to account for, annually, the property and debts of the
business.

 Consistent interest – includes the forbidding of any partner to carry out business unrelated to
the partnership. This is usually implied in articles of partnership.

 Misconduct expulsion – includes the allowance of expelling partners who commit gross
misconduct or becomes insolvent, bankrupt, etc. This is particularly common where there are
numerous partners.

 Resolution of dispute – includes the submission of arguments to arbitration.

 Causes income losses - includes the decline of income if companies loses profit.

References:
i
http://en.wikipedia.org/wiki/Business
ii
http://www.preservearticles.com/2012022323658/kinds-of-partnership-and-its-advantages-and-
disadvantages.html
iii
http://en.wikipedia.org/wiki/Articles_of_partnership