Legal Entities:

Business organization may be owned and managed by single individual or group of individuals who
may form a partnership form or a joint stock company. such arrangement of ownership and
management is termed as a form of business organizations or entities.

1.Sole Proprietorship

2. Partnership

3. company /Joint stock company.

Sole Proprietorship: Sole Proprietorship form of business organizations refers to a business

enterprise exclusively owned and managed by single person with all authority, responsibility and
risk.

Advantages:

He is the Boss

You keep all the profits

Startup costs are low

Establishing and operating his business is simple.

Disadvantages:

You have unlimited liability for debts as there’s no legal distinction between private and business
assets.

Your capacity to raise capital is limited.

Partnership: A partnership is a formal arrangement by two or more parties to manage and operate a
business and share its profits.

Advantages:

Their business is easy to establish and startup costs are low.

More capital is available for the business.

They will have more borrowing capacity.

Disadvantages:

The liability of the partners for the debts of the business is unlimited.

Company or joint stock company: In simple words company is a voluntary association of persons
formed for the purpose of doing business and sharing profits.
Advantages :

Liability for the shareholders is limited.

Its easy to transfer ownership by selling shares to another party.

Disadvantages:

The company can be expensive to establish, maintain and windup.

Your financial affairs are public.

TYPES of the Company : companies are divided in to two types based on ownership and nationality.

Based on the ownership: Public, private and government

Based on the nationality: Indian and foreign.

Private company: These companies can be formed by at least two individuals having minimum paid
up capital of not less than one lakh.

Private company is a firm that is privately owned. Private company may issue the stock and have
shareholders, but their shares do not trade on public exchanges or not issued through an IPO.

The high costs of an IPO is one of the reason companies choose to stay private.

They are required to add private limited after their names.

Public Company:

A minimum of seven members are required to form a public limited company.

It must have minimum paid up capital of 5 lakhs.

There is no restriction of maximum numbers of members.

A public company is a company that has sold all or portion shares of itself to the public via an initial
public offering.

They are required to add limited after their names. Ltd

Government Companies: Government (Either state or central government or both) holds a majority
share capital i.e., not less than 51% in either public or private company.

Based on the nationality:

Indian Company:

Any company registered in India which pays taxes in India, and carrying its business operations in
India is considered as Indian company.

Foreign Company: A company registered in foreign country and carrying its business operations in
India is called foreign company.