Before determining how to set up a business operation, prospective entrepreneurs must determine the legal structure that will best meet the needs of the endeavour. The most crucial step in starting a business is choosing the right organisational structure because it determines how the enterprise will operate, be controlled, raise capital, manage risk, distribute profits, and adhere to regulatory requirements, among other things. You can express your thoughts at the Business Write For Us category.
Different types of Business
Different types are-
1. Sole Proprietorship
A sole proprietorship is a common type of business structure where the company is owned, run, and controlled by one person. This person shares in the company’s gains and losses and is also responsible for all of the company’s risks. In this context, sole refers to the solitary owner of the business, while proprietor refers to the owner. Businesses that offer specialised services, such hair salons, spas, retail stores, etc., typically operate as single proprietorships. There is no separate legal entity in this type of business because the owner is not separate from the enterprise. Additionally, the proprietor can launch the business anytime they want and is not required to follow any legal procedures.
2. Joint Hindu Family Business
Joint Hindu Family Business is a type of business organisation that is unique to India and in which the HUF (Hindu Undivided Family) members own and operate the company. One of the earliest types of business organisation in India is this one. The ‘Hindu Law’ is in charge of this form. The family’s patriarch and oldest member, also referred to as “Karta,” manages the company. This type of corporate organisation bases membership on birth into a certain family. The three succeeding family members may be the company’s employees. These individuals, referred to as “coparceners,” each have an equal title to and ownership over the assets of their ancestors.
A sole proprietorship’s most significant drawback, which is also its solution, is a lack of sufficient capital for the company. A partnership is a type of business organisation defined by the Indian Partnership Act, 1932 as a relationship between two or more people with an agreement to split the firm’s earnings, operated by each partner individually or by any one of the partners acting on behalf of the others. In contrast to sole proprietorship and joint Hindu family businesses, it addresses the requirement for higher capital investment, risk-sharing, and a range of capabilities in the firm. In a partnership firm, two partners are required at the very least.
4. Cooperative Society
A cooperative society is an organisation of individuals working together voluntarily with the primary goal of promoting the benefit of its members. As the name implies, members of this type of corporate organisation collaborate with one another to achieve a common goal. An elected managing committee is in charge of making decisions in a cooperative society. It is required to register a cooperative society, according to the Cooperative Societies Act of 1912. This type of business organisation must have the approval of ten or more adults in order to be established. Members of the company raise funds by issuing shares to the public.
The Bottom Line
Changes in tax legislation, the availability of capital or funds, liability scenarios, and the complexity of business creation all contribute to the need for selecting an appropriate structure.