Business organization

A business organization is an entity aim to carry on commercial enterprise by providing goods

or service, to meet needs of customers. All business organization. Have a common feature such
as formal structure, aimed to achieve objective, use of resources, requirement or direction and
legal regulation controlling them. That different form of Business organization is sole
Proprietorships, general Partnership, limited Partnership, Corporation., “S” Corporation and
limited liability company.

Functions
1. Organizing function: One of the main function of business is organizing function. Man,
machine, materials and money are essential factor for any business. Organizing function
collects and coordinates all necessary factor of business. Proper organizing function is
helpful in smooth running of a business. And help to achieve its objectives.
2. Financing function: Finance is a lifeblood and backbone of a business. The availability of
factor or production depends upon the availability of finance. So every business need to
finance for his success. Therefore, under this function of business require capital is
estimated, accumulated and properly utilizing a proper capital structure point to size
and nature of our business is essential for the success of a business. For some
3. Production Function: the production function is another important function of a
business, converting raw material into finished goods to satisfy human wants by
creating utilities known as production. Under this function, raw material and semi-
finished products are processed and assembled to create utility. Hands and next
important function of a business is to create utility. For satisfaction of consumers buy
production of goods.
4. Marketing function: this function of business is not complete. With the production of
goods and service only. The main goal is of production is to satisfy human wants
through consumption of goods and service. There for marketing function help to
transfer codes and service from producer to Ultimate consumers. Marketing function
can divide it into concentrating and dispersing, which include buying, selling,
transportation, storage, risk, taking, marketing information., etc.
5. Employment function: the next important function of business is to provide
employment opportunities. A country. Every business required large number of
manpower to perform their activities. So they are helpful in solving employment
problem of a country by providing maximum Employment Opportunities.
Financing types.

Forces of finance.
FORMS OF BUSINESS ORGANISATIONS
CONTD.....

• Consider a Sole Proprietorship

• Just as its name implies, a sole proprietorship is owned by one person, who assumes all
the assets of the business as well as all the debts. In the eyes of the law, there is no
“line” between the business and the owner; they are one and the same.
• Draw: This type of business organization – so simple to form and dissolve – may appeal
to people with low-risk businesses or those who wish to do a “test run” before
committing to a more formal structure.
• Drawback: A high-risk venture, or one that requires a large amount of start-up debt,
would put the sole proprietor's personal assets at risk, too.
• Consider a Partnership
• Partnerships bring two or more owners together, usually in the form of a general
partnership – which splits profits, management and liability – or a limited partnership or
a limited liability partnership. A common choice of doctors and lawyers, an LLP insulates
each partner's assets. Forward-thinking partners draft a legal agreement that spells out
who will make decisions, how disputes will be reconciled, how (or if) future partners will
be added to the business and how partners can be bought out.
• Draw: Partners who realize they have different strengths can flourish in a partnership
when they build a business to play to those strengths.
• Drawback: Partners who do not share the same values, purpose and mission can quickly
find themselves at odds – and their partnership at risk of imploding.

Sole Proprietorship
Features of Sole Proprietorship

• 1] Lack of Legal Formalities

• A sole proprietorship does not have a separate law to govern it. And so there are not
many special rules and regulations to follow. Furthermore, it does not require
incorporation or registration of any kind. In fact, in most cases, we need only the license
to carry out the desired business.
• 2] Liability
• Since there is no separation between the owner and the business, the personal
liabilityof the owner is also unlimited. So if the business is unable to meet its own debts
or liabilities, it will fall upon the proprietor to pay them. For instance, he may have to
sell all of his personal assets (like his car, house, other properties etc) to meet the debts
or liabilities of the business.
• 3] Risk and Profit
 • The business owner is the only risk bearer in a sole proprietorship. Since he is the only
one financially invested in the company. As a result, he must also bear all the risk. In
other words, if the business fails or suffers losses he will be the one affected.
•
4] No Separate Identity
• In legal terms, the business and the owner are one and the same. No separate legal
identity will be bestowed upon the sole proprietorship. So the owner will be responsible
for all the activities and transactions of the business.
• 5] Continuity
• As seen above the business and the owner has one identity. So a sole proprietorship is
entirely dependent on its owner. The death, retirement, bankruptcy. insanity,
imprisonment etc will have an effect on the sole proprietorship. In such situations, the
proprietorship will cease to exist and the business will come to an end.

Advantages of Sole Proprietorship

• A proprietor will have complete control of the entire business. Thus this will facilitate
quick decisions and freedom to do business
• Law does not require a proprietorship to publish its financial accounts or any other such
documents to any members of the public. As a result, there is enough confidentiality
which is important in the business world
• The business owner derives the maximum incentive from the business. Because he does
not have to share any of his profits. So the work he puts into the business is completely
reciprocated in incentives
• Being your own boss is a great sense of satisfaction and achievement. Moreover, you
are answerable only to yourself. Hence it is a great boost to your self-worth as well

Disadvantages of Sole Proprietorship

• One of the biggest limitations of a sole proprietorship is the unlimited personal liability
of the owner. If the business fails it can wipe out the personal wealth of the owner as
well as affect his future business prospects too
• Another problem is that a sole proprietor has access to limited capital. The money he
can borrow from his own personal savings may not be enough to expand the business.
Moreover, banks and financial institutions are also wary of lending to proprietorships.
• The life cycle of a sole proprietorship is undecided and attached to its owner. An
incapacitated owner may have a negative effect on the business, and it may even lead
 to the closure of the business. A sole proprietorship cannot carry on without its
proprietor.
• A sole proprietor also has limited managerial ability. He cannot be an expert in all the
fields of the business. Furthermore, limited resources may mean that he cannot hire
competent people to help him out. As a result, the business may suffer from
mismanagement and poor decisions.

Joint Hindu Family Business

• The Joint Hindu Family Business or the Hindu Undivided Family (HUF) is a unique form of
business organisation found only in India. Nowhere else in the world is this a legal form
of business entity. Let us learn about this form of organisation and its unique features.
• Hindu Undivided Family (HUF)
• The Joint Hindu Family Business or the Hindu Undivided Family (HUF) is a unique type of
business entity. It is governed and dictated by the Hindu Law, which is one of the
several religious laws prevalent in India.
• So who all are members of such an organization? Well, any person born into the family
(boy or girl) up to the next coming three generations is a part of the HUF. These
members are the coparceners. The head of such a Joint Family Business is the eldest
member of the family, the “Karta”. He is the main person responsible for the business
and the finances.

Features of a HUF
• Formation: To begin a Hindu Undivided Family there must be a minimum of two related
family members. There must be some assets, business or ancestral property that they
have inherited or will eventually inherit. The formation of a HUF does not require any
documentation and admission of new members is by birth.
• Liability: The liability of all the various coparceners is only up to their share of the
property or business. So they have limited liability. But the Karta being the head of the
HUF has unlimited liability.
• Control: The entire control of the entity lies with the Karta. He may choose to confer
with the coparceners about various decisions, but his decision can be independent. is
actions will be final and also legally binding.
• Continuity: The HUF can be continued perpetually. At the death of the Karta, the next
eldest member will become the Karta. However, keep in mind a Hindu Undivided Family
can be dissolved if all members mutually agree.
• Minority: As we saw earlier the members are eligible to be coparceners by the virtue of
their birth into the family. So in this case, even minor members will be a part of the HUF.
But they will enjoy only the benefits of the organization.
 Advantages of the HUF
A Hindu Undivided family is comprised of family members running a business. Like any
other organization, there is scope for disagreements and conflicts. But since the Karta
has absolute power and takes all decisions by himself, it will lead to effective
management.
• Just like a company, the existence of a HUF is perpetual. The death or retirement of one
member of even the Karta will not affect it, and it will continue on.
• Since the coparceners do not have any effective control over the management of the
HUF, and all power lies with the Karta, the liability of the members has also been limited
to only their share of the property. This keeps the balance between power and
responsibility.
• Also since all members of the HUF are relatives and members of the same family, there
is a sense of loyalty and cooperation. The trust among members is also there and leads
to overall cooperation.

Disadvantages of the HUF

• No outside members other than family members can be introduced to the HUF. This
makes it very difficult to get additional capital from the market. With limited capital, the
chances of expansion are very low. It limits the scope of the business.
• While the Karta has all the power he also has the burden of unlimited liability. This may
make him overly cautious and timid in his business dealings. In turn, the business could
suffer. Another factor is that he may even be held responsible for the actions of other
members.
• Also, the absolute dominance of the Karta overall business and financial decisions make
cause conflict among the HUF. His decisions and business acumen may be questioned by
other members, and cause issues within the HUF.
• Another issue may be that the Karta may not be the most qualified person to lead the
business. The position is given to the senior most family member, whether he is the
most qualified or not is not taken into consideration.

Partnership
• Definition
• A partnership is an arrangement where parties, known as business partners, agree to
cooperate to advance their mutual interests. The partners in a partnership may be
individuals, businesses, interest-based organizations, schools, governments or
combinations.
 • In India, we have a definite law that covers all aspects and functioning of a partnership,
The Indian Partnership Act 1932. The act also defines a partnership as “the relation
between two or more persons who have agreed to share the profits from a business
carried on by either all of them or any of them on behalf of/acting for all”
• So in such a case two or more (maximum numbers will differ according to the business
being carried) persons come together as a unit to achieve some common objective. And
the profits earned in pursuit of this objective will be shared amongst themselves.
• The entity is collectively called a “Partnership Firm” and all the individual members are
the “Partners”. So let us look at some important features.

Features of a Partnership
• 1] Formation/Partnership Agreement
• A partnership firm is not a separate legal entity. But according to the act, a firm must be
formed via a legal agreement between all the partners. So a contract must be entered
into to form a partnership firm.
• 2] Unlimited Liability
• In a unique feature, all partners have unlimited liability in the business. The partners are
all individually and jointly liable for the firm and the payment of all debts. This means
that even personal assets of a partner can be liquidated to meet the debts of the firm.
• 3] Continuity
• A partnership cannot carry out in perpetuity. The death or retirement or bankruptcy or
insolvency or insanity of a partner will dissolve the firm. The remaining partners may
continue the partnership if they so choose, but a new contract must be drawn up. Also,
the partnership of a father cannot be inherited by his son. If all the other partners agree,
he can be added on as a new partner.
• 4] Number of Members
• As we know that there should be a minimum of two members. However, the maximum
number will vary according to a few conditions. The Partnership Act itself is silent on this
issue, but the Companies Act, 2013 provides clarity.
• 5] Mutual Agency
• In this type of organization, the business must be carried out by all the partners
together. Or alternatively, it can be carried out by any of the partners (one or several)
acting for all of them or on behalf of all of them. So this means every partner is an agent
as well as the principal of the partnership.

Advantages of Partnership:
 • Easy Formation – An agreement can be made oral or printed as an agreement to enter
as a partner and establish a firm.
• Large Resources – Unlike sole proprietor where every contribution is made by one
person, in partnership, partners of the firm can contribute more capital and other
resources as required.
• Flexibility – The partners can initiate any changes if they think it is required to meet the
desired result or change circumstances.
• Sharing Risk – All loss incurred by the firm is equally distributed amongst each partner.
• Combination of different skills – The partnership firm has the advantage of knowledge,
skill, experience and talents of different partners.

Types of Partners
• Not all partners of a firm have the same responsibilities and functions. There can be
various types of partners in a partnership. Let us study the types of partners and their
rights and duties.
• Active Partner: As the name suggests he takes active participation in the business of the
firm. He contributes to the capital, has a share in the profit and also participates in the
daily activities of the firm. His liability in the firm will be unlimited. And he often will act
as an agent for the other partners.
• Dormant Partner: Also known as a sleeping partner, he will not participate in the daily
functioning of the business. But he will still have to make his share of contribution to the
capital. In return, he will have a share in the profits. His liability will also be unlimited.
• Secret Partner: Here the partner’s association with the firm is not public knowledge. He
will not represent the firm to outside agents or parties. Other than this his participation
with respect to capital, profits, management and liability will be the same as all the
other partners.
• Nominal Partner: This partner is only a partner in name. He allows the firm to use the
name of his firm, and the attached goodwill, But he in no way contributes to the capital
and hence has no share in the profits. He does not involve himself in the firm’s business.
But his liability too will be unlimited.
• Partner by Estoppel: If a person makes it out to be, through their conduct or behavior,
that they are partners in a firm and he does not correct them, then he becomes a
partner by estoppel. However, this partner too will have unlimited liability.

Partnership Deed and Registration

• A partnership is a very common form of business organisation. Especially in India,
partnership firms are generally finding favour when the business is medium scale. So it
 is important that we learn about the Partnership deed and the registration of such
deeds.
• Partnership Deed
• Now a partnership is when two persons form an association to carry out a business with
the motive to earn profits. They share the profits from such a business. Such an
association will be voluntarily entered into by the partners based on an agreement
between them.
• Such an agreement between partners can be written or can even be oral. However, it is
strongly advised for legal and practical purposes that such an agreement or contract be
in the written form. And this written agreement between partners to form a partnership
firm is what we call a Partnership Deed.

Contents of Partnership Deed

• This partnership deed will contain all the conditions and the legalities of the partnership
deed. It will provide a guiding basis for all future activities. And in case of a dispute or
legal proceedings, it can also be used as evidence. A general partnership deed will
contain the following information,
• The agreed name of the Partnership Firm. Please note that such a name cannot have the
words “company” or “private company” in it.
• The nature of the business will also be mentioned in the deed
• Date of commencement of such business
• The place of business, i.e addresses of main office or branch offices if any, where
communication can be sent
• The duration of a partnership if it is a partnership for a specific purpose or time. If it is a
partnership at will then no such duration will be mentioned

Contribution to the capital of all the partners

• Profit sharing ratio. However, if no ratio is given it is assumed that the profit is shared by
all the partners equally.
• Salary of all active partners
• Interest on contribution and the interest on drawings (must be according to the
provisions of the Indian Partnership Act 1932)
• Terms and conditions of the retirement or expulsion of a partner, and the terms to
continue the partnership after such an incident
• The day-to-day functioning of the firm and the distribution of the managerial duties
among the partners
• Preparation of the firm’s accounts and the provisions for internal and statutory audit
 • Procedure for voluntary or forced dissolution of the firm
• Guidelines for solving any disputes and arbitration process to be followed

Registration of Partnership
• As per the Partnership Act 1932, it is not compulsory to register a partnership firm. The
firm does not have a separate legal identity and registration will not alter this fact.
However, registration is the definite proof of the existence of the firm and its legality.
• Non-registration of a firm has some real-life legal consequences for the partners and the
firm itself. So it is always advisable to draw up a written partnership deed and register
the firm with the Registrar of Firms. The consequences of not doing so are as follows,
• The firm cannot file legal proceedings against any third party for any situation. For
example, if the client has not paid his dues to the firm, the firm cannot sue him if it is
unregistered.
• An unregistered firm cannot fail a case against a partner for any reason (like
mismanagement, theft etc)
• A partner of an unregistered firm cannot file a suit against one of the other partners
either.

Procedure of Registration
• According to the India Partnership Act 1932, there is no time limit as such for the
registration of a firm. The firm can be registered on the date when it is incorporated or
any such date after so. The requisite fees and fines must be paid. The procedure for
such a registration is as follows,
• Application to the Registrar of Firms in the prescribed form (Form A). Nowadays this
facility is even available online. Such an application must contain certain basic details
about the firm such as,
• Name of the Partnership Firm
• Name and address of all partners
• Place of business (address of main and branch offices)
• Duration of the partnership
• Date of joining of partners
• Date of commencement of business
• 2] The duly signed copy of the Partnership Deed (which contains all the terms and
conditions) must be filled with the registrar
• 3] Deposit/pay the necessary fees and stamp duties
• 4] Once the registrar approves the application, the firm will be entered into the records.
And the registrar will also issue a certificate of incorporation.
 • And this is how the process of registration will be completed and the firm will attain
legal recognition.

Rights and Obligations of Partners as Mentioned in the Partnership

Act
• Right of a Partner:
• (i) Every partner has a right to take part in the conduct and management of the
business.
• (ii) Every partner has a right to be consulted before taking important decisions. The
decisions should be taken by mutual consent. If the decisions are unimportant, then
they can be enforced by majority, but consensus of all partners is necessary for taking
important decisions.
• (iii) The partners have a right to inspect books of accounts.
• (iv) Every partner will have an equal share in profits, unless otherwise mentioned, in
partnership deed.
• (v) No new partner can be admitted into partnership without the consent of all partners.
• (vi) Every partner has a right to receive interest at the rate of 6% per annum on the
excess money supplied over his capital.
•
(vii) Every partner has a right to be indemnified by the firm in respect of expenses
incurred or losses suffered for the normal conduct of the business.
• (viii) A partner has a right to get the firm dissolved under appropriate circumstances.
• (ix) The property of the firm shall be held and used exclusively for the purpose of the
business.

Obligations of a Partner:
• (i) Every partner should carry on the business to the greatest common advantage. He
must perform his duties honestly and diligently.
•
(ii) A partner is not entitled to get remuneration for the conduct of business, unless
otherwise it is specially mentioned in the partnership deed.
• (iii) A partner must indemnify the firm for loss suffered because of his fraudulent
conduct or willful neglect.
• (iv) A partner is bound to keep and render true and correct accounts of the business.
• (v) A partner cannot carry on a competing business. If he carries on such business he
shall account for and pay to the firm all profits made by him in that business.
• (vi) A partner is bound to act within the scope of his authority.
 • (vii) No partner can make a secret profit of the partnership business by way of
commission, etc. If he does so, he must return the money to the firm

LIMITED LIABILITY PATERNSHIP LLP

• The act came into existence in 7th January 2009
• The act contained 81 sections, 14 chapters and four schedules, The extent of whole of
India.
WHAT Is limited Liability Partnership LLP?
The Act states, LLP means a partnership formed and registered under the Act. thus an LLP came
into existence after its registration/ Corporation under LLP Act.

Features Of limited liability partnership firm.

1. Incorporated body : Every LLP is an incorporated entity, which is formed and
incorporated under provision of LLP Act 2008
2. Body corporate: Is a body corporate register under LP App 1008.
3. Minimum and maximum partners: an LLP shall have at least two partners. There is no
limit on maximum number of partners.
4. separate legal existence: LLP hasn't separate legal existence from its partners. It can
enter into contract with its partner and sue on a partners and can be sue By the past
partners.
5. Perpetual Succession: Or LLP is a legal entity with perpetual Contract. You did, partner
Succession, It can be would up in accordance with provisions of the Act.
6. Agreement: the partners of LLP are those who became partners of the LLP in accordance
with LLP agreement. However, the person named in incorporation document and who
subscribed to the incorporation documents and became partners of it.
7. Designated partner: every LLP shall have at least two designated partners. This must be
individual person and. At least one of them shall be resident of the India.
8. Limited liability: the liability of the partners in LLP is limited to his contribution to the
LLP. For stop, a partner of LLP is not personally liable for any obligation or liability of LLP.
9. Common seal. And can have a common seal, if it is Decides to have it.
10. Mutual rights and duties of a partnership and LLP: the mutual right and duties of a
partner are governed by LLP agreement.
Advantages of an LLP

• There are numerous benefits to be had from trading through an LLP -

• Limited liability protects the member’s personal assets from the liabilities of the
business. LLP’s are a separate legal entity to the members.
• Flexibility. The operation of the partnership and distribution of profits is determined by
written agreement between the members. This may allow for greater flexibility in the
management of the business.
• The LLP is deemed to be a legal person. It can buy, rent, lease, own property, employ
staff, enter into contracts, and be held accountable if necessary.
• Corporate ownership. LLP’s can appoint two companies as members of the LLP. In an
LTD company at least one director must be a real person.
• Designate and non-designate members. You can operate the LLP with different levels of
membership.
• Protecting the partnership name. By registering the LLP at Companies House you
prevent another partnership or company from registering the same name.
Disadvantages of an LLP

• The following may be considered disadvantageous in some cases.

• Public disclosure is the main disadvantage of an LLP. Financial accounts have to be
submitted to Companies House for the public record. The accounts may declare income
of the members which they may not wish to be made public.
• Income is personal income and is taxed accordingly. There may be tax advantages in
registering as a company, but this will depend on your personal circumstances.
• Profit can not be retained in the same way as a company limited by shares. This means
all earned profit is effectively distributed with no flexibility to hold over profit to a future
tax year.
• An LLP must have at least two members. If one member chooses to leave the
partnership the LLP may have to be dissolved.
• Residential addresses were historically recorded at Companies House. Whilst the use of
‘service addresses’ now allows for home addresses to be kept out of public view, any
address previously supplied to Companies House is still part of the public record unless
you pay for the records to be suppressed. For many businesses this is not a problem.
However, there are some examples where this may not be desired. Consider solicitors
and partners of law firms that may not want their home address so freely available if
their work involves sensitive cases.

Cooperative Society
• A business organization can take many forms. One such form is that of a cooperative
society. Such societies have unique features of joint ownership and democratic
leadership. Let us take a brief look at their features and some types of societies.
• Introduction
• A cooperative society is not a new concept. It prevails in all the countries, this is almost
a universal concept. The cooperative society is active in all countries worldwide and is
represented in all the sectors including agriculture, food, finance, healthcare, etc.
• To protect the interest of weaker sections, the co-operative society is formed. It is a
voluntary association of persons, whose motive is the welfare of the members.

Features of a Cooperative Society

• As it is a voluntary association, the membership is also voluntary. A person is free to join
a cooperative society, and can also leave anytime as per his desire. Irrespective of their
religion, gender & caste, membership is open to all.
 • It is compulsory for the co-operative society to get registration. The co-operative society
is a separate legal identity to the society.
• It does not get affected by the entry or exit of its members.
• There is limited liability of the members of co-operative society. Liability is limited to the
extent of the amount contributed by members as capital..
• An elected managing committee has the powers to take decisions. Members have the
right to vote, by which they elect the members who will constitute the managing
committee.
• The cooperative society works on the principle of mutual help & welfare. Hence, the
principal of service dominates it’s working. If any surplus is generated, it is distributed
amongst the members as a dividend in conformity with the bye-laws of the society.

Types of Cooperative Society

1] Producer Cooperative

• To protect the interest of small producers, these societies are set up. The co-operative
society members may be farmers, landowners, owners of the fishing operations. To
increase the marketing possibilities and production efficiency, producers decide to work
together or as separate entities.
• They perform several activities like processing, marketing & distributing their own
products. This helps in lower costs and strains in each area with a mutual benefit to
each producer.

2] Consumer Cooperative

• These businesses are owned and governed by consumers of a particular area for their
mutual benefit. Their view is to provide daily necessary commodities at an optimum
price. Rather than earning a pecuniary profit, their aim is towards providing service to
the consumers.
3] Credit Unions

• Credit unions are generally member-owned financial cooperatives. Their principle is of

people helping people. They provide credit and financial services to the members at
competitive prices. Each and every depositor has the right to become a member.
Members attend the annual meeting and are given rights to elect a board of directors.
4] Marketing Cooperative Society

• With an aim of helping small producers in selling their products, these societies are
established. The producers who wish to obtain reasonable prices for their output are
the members of this society.
 • For securing a favorable market for the products they eliminate the middlemen and
improve the competitive position of its members. It collects the output of individual
members. Various marketing functions like transportation, packaging, warehousing, etc
are performed by the cooperative societies to sell the product at the best possible price.
5] Housing Cooperative Society

• To help people with limited income to construct houses at reasonable costs, these
societies are established. Their aim is to solve the housing problems of the members. A
member of this society aims to procure the residential house at lower cost.
• They construct the houses and give the option to members to pay in installments to
purchase the house. They construct flats or provide plots to members on which the
members themselves can construct the houses as per their choice

What is cooperation?
A Corporation is a legal entity created by state law to accomplish a stated purpose.
Three types:

1. operation for profit

2. Corporations, not for profit
3. Government Onwed Operations.
A corporation is a legal entity, meaning it is a separate entity from its owners who called
stakeholders. Accommodation is treated as a person with most of right and obligation for a real
person.
Our cooperation is a separate and distinct legal entity. This means that cooperation can. Open a
bank account, open property and do business, or under its own name for server. Corporation is
managed by a board or directors, which is responsible for making major Business decisions. and
overseeing the General Affairs of Cooperation.

• A corporation is a company. In most countries, it means a large company, often with

subsidiaries. In the United Kingdom, however, it can also be a state company. For
example, the BBC (British Broadcasting Corporation) belongs to the state. Legally,
corporations are separate entities from their owners.
• The term does not always have the same meaning as a company. All corporations are
companies. However, not all companies are corporations.
 • For example, let’s suppose you own a small company that repairs lawn mowers, and you
employ eight workers. You cannot say that you have a corporation. You can, however,
say you have a company.
• Corporations are large entities that often do several different businesses. Many
corporations have some subsidiary companies.
• Corporations are firms in the sense that they are in business to make a profit.
• The definition of a corporation can vary from country to country. However, most people
globally would agree that a company can be any business.
• In fact, in some countries, people even class partnerships as companies. Corporations,
on the other hand, mostly have a board of directors whose members are chosen by
voting shareholders.
• Etymologists say that the word ‘corporation’ originates from the Latin corpus, which
means ‘a body’ or ‘a body of people.’

Corporation vs. Company in the US and UK

• The website translegal.com explains that the meanings of corporation and company in
the US and UK differ slightly.
• In the US, a corporation is a company whose shareholders are only liable for the shares
they own. If it goes bankrupt, they only lose the value of their shares. However,
creditors cannot go after their private assets.
• In the UK, corporations are large companies. However, in British English, the term may
also refer to a state company.
• The Financial Time’s ft.com/lexicon defines a corporation as:
• “A large company or group of companies acting together as a single organization. In
Britain, a large company or a public organization.”

Types of corporations
• There are several types of corporations. However, in most countries there are two basic
types:
• 1. For-profit companies.
• 2. Not-for-profit companies.
• Stock corporations are companies that issue stocks. The term ‘stocks’ means the same
as ‘shares.’ The ownership of such corporations is through shares.
• We refer to the owners of shares as ‘shareholders.’ We also use the term ‘stockholders’
with the same meaning ‘shareholders.’

Corporations have rights

 • Corporations are not people. However, the law sees them as legal entities just like
humans. In fact, they have many of the same rights and responsibilities that you and I
have.
• Corporations can be responsible for human rights violations. They can also exercise
human rights issues against the state and real individuals.
• There are many ways to dissolve corporations. It can be through voluntary action or
statutory operation. Stockholders can also dissolve corporations.
• Insolvency may be the result of corporate failure. For example, creditors may force the
liquidation and dissolution of the company under court order.

Consider a Corporation
• A corporation, also known as a C-corp, is legally considered a separate entity from the
people who own it. A C-corp can make contractual agreements, and it can also be taxed
and sued. The owners are known as shareholders, who elect a board of directors to
formulate policy and make business decisions. Sometimes, C-corp profits are taxed
twice: when the company turns a profit and then again when shareholders are paid
dividends.
• An S-corporation, also known as an S-corp, is designed to avoid this pitfall. S-corps are
known as “pass-through” entities because their profits, losses, credits and deductions
literally pass through the corporation and go to the company's shareholders. They
square the numbers on their personal income tax returns, thereby avoiding double
taxation. This feature helps explain why S-corps are the most favored form of business
organization among business owners.
• Draw: If you want the highest level of protection for your personal assets, a corporation
will provide it.
• Drawback: Corporations require thorough record-keeping, operational processes and
reporting.

Consider a Limited Liability Company

• Think of an LLC as a hybrid of a corporation and a partnership. It can shield the personal
assets of the owners, who are known as “members.” This shield covers savings,
investments, property and vehicles in case of a lawsuit or bankruptcy filing. And profits
and losses do not face corporate taxes.

Draw: LLCs provide superior protection as long as a business is run ethically and the members
are judicious about keeping their personal and business finances separate. After S-corps, LLCs
are the second-favorite choice among entrepreneurs.
Drawbacks: Members of an LLC are considered self-employed. As such, they must make
contributions toward Social Security and Medicare. Also, this business structure does not
always provide an iron-clad level of personal protection: an LLC owner found guilty of illegal or
fraudulent conduct could still be held personally liable in a lawsuit.

• Be certain to investigate the details, requirements, caveats and exclusions before you
commit to one type of business organization – or even order business stationery.
Consult your lawyer and accountant for their best advice, too. Since they're no doubt
aware that you've embarked on an epic journey, they're probably waiting for your
phone call.
• The Advantages of a LLP Over a LLC

• Both LLPs and LLCs offer limited liability protection to business owners by separating
business liabilities from personal liabilities. However, various differences do exist
between these two legal structures for enterprises. While the specific laws can differ
from one state to another, general rules apply to most states that recognize these two
business types.
Liability

• Depending on the state, LLCs can have one or more members as owners, while LLPs
must have at least two partners owning them. In both cases, business owners can
usually enjoy a level of protection between business and personal liabilities. However,
many states stipulate that an LLP must have at least one member whose liabilities are
not limited. This means that, if the business defaults on its debts, the business's
creditors can hold that partner - the general partner - liable. While this lack of
protection is not ideal for the general partner, it does make it easier for the business to
obtain credit.

Allowable Businesses

• One principal advantage of the LLP structure is that, in many states, it does not place the
same limitations on the type of business in which the enterprise can engage. In such
cases, groups of professionals such as lawyers and physicians who would like to pool
their resources and liabilities cannot form LLCs. To enjoy the same limited liability
coverage without dealing with the complexities and taxes associated with forming a
corporation, professionals can get together and form LLPs.

Contd..
Protecting Partners

• While LLCs can have one member or multiple members, they are not as good at
attracting investors as LLPs. This is because the LLP structure isolates each partner when
it comes to claims of negligence. Unlike general business debt liabilities, negligence
 claims directed at a particular owner can pierce the company's veil of protection and
become his personal liability. In an LLC, plaintiffs may direct their claims toward both
the company and the negligent member. In an LLP, though, plaintiffs may only direct
their negligence or malpractice claims toward the negligent partner, protecting the
partnership and the other partners.
Taxation

• Corporations exist as entities separate from their owners, and they must pay income
taxes separate from the income tax each shareholder pays for. Neither an LLP nor an LLC
is a corporation. However, in some cases, LLCs pay taxes as a corporation does, which
means that they become subject to the same double taxation. LLPs, on the other hand,
are always "pass through" entities that pay no tax on the company level.

choice of form of business organization.

• Nature of business
• Size and area of operation
• Degree of control desired
• Amount of capital required next nine degree of risk involved
• Division of profit
• Duration of business
• Government controlled

How to Determine Which Type of Organization Structure to Use

• Consider the tax implications. According to the Internal Revenue Service, your choices
for forming you business are: sole proprietorship, partnership, corporation and limited
liability company. A sole proprietorship is the simplest. You own the business and pay
taxes on how much you earn. This is common for home-based businesses just starting
out. The company does not pay tax, only the owner does. Partnerships split the tax
liability between two or more partners, who own the business in percentages they
agree upon. The owners pay tax in those same percentages. A corporation requires
formal papers to be filed and gets taxed as a company. In addition, the owners get taxed
on their income from the corporation. This is known as the "double taxation" problem
with corporations. A limitied liability company (LLC) can help you get around double
taxation. Your company does not pay tax. It passes all profits through to you, and you
pay tax. While this sounds similar to a sole proprietorship or partnership, they are
treated the same for tax purposes, but have different liability protections they can offer.
• Choose the liability protection you want. Sole proprietorships and partnerships do not
offer any liability protection. The owners are considered identical with the company. In
 the event of a lawsuit, the owner's personal assets are at stake. A corporation offers
asset protection for owners. As long as personal money and corporate money do not get
co-mingled, personal assets cannot be pursued in the event of a lawsuit. An LLC offers
the same type of protection for liabilities
• Determine if you want to enter joint ventures. A joint venture is a partnership between
companies. These ventures are limited to a specific product or project the two
companies want to team up on. Corporations are more comfortable forming joint
ventures with other corporations. This is because LLCs, sole proprietorships and
partnerships do not survive their owners. This means that a successful product from a
joint venture could lose half its support if one of the partners in the venture dies
without forming a corporation. A corporation can outlive its owners.
• Balance all the elements. Look at your tax vulnerabilities with each type of company.
Then weigh the importance of having liablity protection. Finally, make some educated
guesses about your future need to form joint ventures. Your choice of a business entity
should be made based on your business needs in these three areas.

One person company.

The introduction of OPC in legal system is a move that would encourage corporatization Off
micro businesses and entrepreneurship with a simpler legal regime so that the small
intrapreneur is not compelled to develop considerable time and resources on complex legal
compliances.
With implementation of Companies Act, 2013, a single national person can constitute a
company, under the Open Person company.(opc) concept.
One person company are in existence in certain countries. In India, this concert has been
mooted. Ministry of Corporate Affairs. One person company have been in existence in UK for
several years now. China allowed formation of OPC as recent as in 2005. A few other countries
have also given a legal status for OPC

Definition aspect. Companies Act 2013

Clause. Define OPC as a company which has only one person as a member.
OPC or proprietorship concern

OPC SOLE PROPRIETORSHIP

Separate legal entity. Owner and entity are same personality.
Limited liability. Unlimited liability
Perpetual. Succession. No perpetual succession.
Loan not. The sole responsibility of the Lone sole responsibility of owner
owner.
 Registration required.

This salient feature of OPC are:

• Separate legal entity
• Incorporated as a private limited company
• Must have only one member/ shareholder.
• Should indicate nominee member in MOA, who shall become member in event of
death/flat in capacity of sole member.
• the member and nominee, should be natural person, Indian citizens and resident in
India.
• One person cannot incorporate more than one OPC
• No minor shall become member or nominee
• OPC cannot be incorporated/ converted.
• OPC cannot carry out non banking financial investment activities
• OPC lose its status if paid paid up capital extend rupees 50 lack or average annual
Turnover. Is more than two crores immediately immediate preceding consecutive year.
• OPC is required to specifically mention the word one person company below the name,
whatever it is used.

Privileges available to OPC.

• No animal Journal meeting is required., it shall be sufficient if the resolution is
communicated by the Member to the company and entered in the Minutes- Book,
which will be. Sign and dated by the members
• No board meeting is required when there is one director, If the resolution by such
director is entered in the minutes- Book. And signed and dated by such director
• Financial statement can be signed by one director alone
• Cash flow statement is not mandatory

Incorporation of OPC.
• Obtain digital signature certificate for proposed director
• Obtain director identification number for Proposed. Director
• Select suitable company name and make application form INC to Minister of Corporate
Affair for availability of name
• Draft Memorandum of association and Article of Association.[MOA AND AOA]
• Sign and file various document including MOAA and AOA with the signature of
companies electronically
 • Payment of requisite fee to Minister of Corporate Affair and also stamp duty
• Scrutiny Off document add register of company[ROC]
• Receipt of Certificate of Registration/ incorporation from ROC.

Conversions:
A. Conversion from private to open.
OPC convert itself. Within six months from fulfillment of any of the above condition into
either a private or a public company in accordance with the provision of section 18 of Act

1. Alter, its memorandum and article by passing a resolution in accordance with sub
sections of Section 122 of Act
2. File from number Inc 5- to Roc within 60 days from date of exceeding the above limit.

Benefits:
• Limited liability protection to directors and shareholder
• Legal status and social recognition
• Complete control of company with a single owner
• Help for testing of business model and enables funding
• Easy to get loan from banks
• Easy to manage and freedom compliance

Limitation of OPC:
• Minimum authorized share capital of rupees 1 LAKHS Is required
• Incorporation cost is high, require more paperwork and time-consuming
• Tax rate: 30%, And also applicability of minimum alternate tax and dividend distribution
tax.
• Professional like CA or Help is required
• Company audit and annual compliance to ROC.

Few important FAQ:

1) Who is eligible to act as a member of OPC?
Only a natural person who is Indian citizens and resident of India shall be eligible for act as a
member of and nominee of an OPC. Bottom resident in India means a person who is staying in
India for a period of not less than 182 days during the immediately preceding One Financial
year.

2) A person can be member is how many OPC’s?

A person can be member in only one OPC
3) What if a member of a OPC became a member in another OPC by virtue of being a
nominee in that another OPC ?

When a natural person, being member in one person company became a member of another
OPC by virtue of his being a nominee in that OPC, Then such person shall meet eligibility
criteria of being a member in only one OPC within a period of 100 and. 80 days, that is he/ she
shall withdraw his membership from either of her with 180 days.

4) How to inform ROC about the change in member of OPC?

The company shall file form INC-4 In In case of Cessation of a member of OPC on account of
death, incapacity to contract or change in ownership. In the same form user need to provide
detail of a new member of OPC.

5) Which form? Is to be filed in case of withdrawal of consent by the nominee of an OPC or

in case of intimation Of change. Nominee by the member?
Form INC-4 Shall be filed in case of withdrawal of consent by the nominee or in case of
initimation Of changing nominee by the member.

Conclusion.
• The concept of OPC is stills in its nascent Stage in India and would require some more
time to mature and it's fully accepted by the business world. With passage of time, the
OPCW mode of business organization is all set to become most preferred form of
business organization, specially for small entrepreneurs
• The one person company concept hold a bright future for small traders, entrepreneurs
and with low risk taking capacity., artisan and other service provider.
• An OPC As a business structure doesn't seem Efficient from Facts perspective as an OPC
would be treated as a company and subject to be higher rate of tax compared to Sole
proprietorship.. Since an OPC Is a company. There would be an incidence of tax while
contribution of a dividend
• It would be premature to comment on a success or failure of its new business model
just yet as it. Is yet to be put to the test. It remains to be seen if Opus would become
popular. Business model 4 entrepreneurs wanting to go it alone.