Forms of Business Organisations in India
The business organisations in India have not been defined in a codified manner. However, the business organisations are generally categorised in the following types in India:
Sole Proprietorship, as the name suggests, refers to a business run solely by one individual. It is one of the easiest business organisation to set up and manage in terms of finance. However, the owner of the business faces an unlimited liability and is the only source of investment for the business. However, this form of business allows for a greater scope of flexibility as the owner is in-charge of all the decision making procedures and other business related activities. This form of business is suitable for small scale business in India.
Any business owned by two or more persons can be called a partnership. This form of business is further divided into two types namely general partnership and limited partnership. Under general partnership, the partners have an unlimited liability. A limited partnership limits the liability of the partners according to the terms of a formal agreement which is required for a limited partnership to come into existence. However, general partnerships do not require a formal agreement for it to function. The partnership based businesses can thus, function in a formal and informal way.
A corporation has a separate legal existence from its owners. Thus, its existence does not depend on the changes in ownership. The owners have a limited liability on the basis of their shares in the business. This form of business is suited for large-scale investment based business ventures. Corporations cannot function as flexibly as partnership based business and sole proprietorship as their activities are monitored by certain government agencies and regulatory bodies.
4. Joint Hindu Family Business
The Joint Hindu Family Business is unique business entity whose functions are governed by Hindu law in India. The head of this form of business is the head of the family i.e. the Karta and is responsible for the activities and important decision making processes in the business.
The forms of business organisations discussed above are suited for different types of needs and aspirations of an individual. Certain factors like scope of investment, type of business activity, liability, flexibility, market conditions etc. must be considered before initiating a business venture of any kind.
