Every activity which yields monetary benefits can be called a business. All over the world there are millions of people thriving on some or the other business venture. Every person who doesn’t enjoy taking orders rather giving them dreams of becoming an entrepreneur. Starting from a scratch, they undergo the entire procedure of establishing a business by placing its first brick which can multiply in the future and reciprocate in terms of revenue generation.
A lot of brain storming as well as hard work goes into the entire process of setting up a business. Right from the first step of conceiving an idea to the last step of making the organisation functional, it commands great dedication, innovation and perseverance. A single wrong move can turn the tables completely against the aspiring business man.
The first and the most important decision to be taken is the right type of organisation which a man wishes to erect. It depends upon a plethora of factors such as the amount of capital for investment, its sources, the industry, the profile of the business and many more. In order to facilitate the decision making of budding entrepreneurs regarding their type of business, mentioned below are the forms of businesses which a man can establish.
Different Kinds Of Business Organisations
A sole proprietor is the owner and controller of a small business. Generally retail outlets or dealing agencies are incorporated as sole proprietorship business. A lesser requirement of capital and non-dilution of interest are the two major advantages of this apart from the obvious non-sharing of profits.
The personal attention given by the owner himself acts as another boon for the business to flourish. But at the same time, unlimited liability which is the whole and sole bearing of all the financial obligation and losses and difficulty to raise finance are some inevitable problems faced by individual businessmen.
Two or more individuals conducting a productive activity yielding profits is called a partnership. Bound by a written or oral partnership deed, partners of a partnership firm contribute the initial investment on the basis of which they share earnings, liabilities as well as losses. Partnership firms do not necessarily require registration but registered firms enjoy additional benefits of a legal recognition.
Sharing of risk, initial finance and liabilities are the factors which drive people towards partnership. However, disputes and lack of trust can lead to disastrous implications for such ventures. There are many types of partners in a partnership such as limited liability, unlimited liability, dormant partners, minor partners etc.
Co-operatives, as the name suggests, is a group of people coming together voluntarily to form a body of individuals in order to perform an activity for a common cause. They might or might not be profit oriented.
The three main types of co-operative bodies are retail co-operatives, workers co-operatives and marketing or traders co-operatives. The main reason as well as the benefit of establishing a co-operative organisation is to attain a strong buying or bargaining power.
Hindu Undivided Family
A business set up and run by the members of a Hindu undivided family is called Hindu undivided family business (HUF). Managed and controlled by the Karta who has all the decision making powers, such a business venture comes under Hindu Marriage Act, 1955.
Unlike earlier now females are also allowed to participate and inherit the family business. The share of an HUF is divided among all the family members and there is a change in the ratio of share on the entry or exit of a member because of birth or death respectively. A new born child becomes the member of HUF at the time of his or her birth only.
A limited company is a large business enterprise established by a business man with the help of promoters. The stake of a limited company is divided among its shareholders by means of shares distributed among them. The share of each shareholder depends upon the number of shares held by him.
Separation of ownership and management is a distinguishing feature of such firms which separates a limited company from other forms of businesses. A limited company can be private as well as public. A public limited company has its shares distributed among public and requires a regular maintenance and audit of its books of accounts.
While a private company is not compulsorily required to offer its shares to public. They can offer their shares to a selected group of individuals or investors which is often referred to as private placement. Moreover, the existence of unlimited liability and risk sharing are the primarily benefits of public companies.
On the contrary, the reduced restrictions to be complied with and lesser dilution of control on the part of private companies acts in their favour. So depending upon the initial corpus a businessman can opt for a type of business to suit his requirements. But the most important thing for anyone stepping into this terrain is to take every decision with utmost precision.