Types of Business Ownership

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Types of Business Ownership by Mind Map: Types of Business Ownership

1. Sole Proprietorship, Section 2(62) of the companies act,2013.

1.1. Easy and inexpensive to register

1.2. Regulatory burden is generally light

1.3. All profits go to you directly

1.4. Unlimited liability

1.5. Lack of continuity for your business if you are unavailable

1.6. Can be difficult to raise capital on your own

2. Partnership, Section 4 of Indian partnership Act, 1932.

2.1. the ability to raise funds may be increased

2.2. Start-up costs are shared equally with you and your partner(s)

2.3. Equal share in the management and profits

2.4. Unlimited liability

2.5. Can be difficult to find a suitable partner

2.6. Profits must be shared with others

3. Corporation, Section 2(11) of the companies act, 2013.

3.1. Corporations may be able raise additional funds by selling shares in the corporation

3.2. Limited liability

3.3. Ownership is transferable

3.4. Possible conflict between shareholders and directors

3.5. Forming a corporation requires more time and money

3.6. A corporation is closely regulated

4. Co-operative, Section 2(e) of the cooperative society act, 1912.

4.1. Easy Formation

4.2. Democratic Management

4.3. Limited liability

4.4. Possible conflict between members

4.5. Participation of all members is required in order to succeed

4.6. Extensive record keeping

5. Franchise

5.1. The risk of business failure is reduced by franchising

5.2. Products and services will have already established a market share

5.3. Financing the business may be easier

5.4. Costs may be higher than you expect

5.5. The franchise agreement usually includes restrictions on how you can run the business

5.6. The franchisor might go out of business

6. Private Companies, Section 3(1)(b) of the companies act, 2013.

6.1. There is a Limited risk to personal assets in Private Limited Company.

6.2. Private Limited company is a Separate Legal Entity.

6.3. Shares of a company limited by shares are transferable by a shareholder to any other person. The transfer is easy as compared to the transfer of interest in business run as a proprietary concern or a partnership.

6.4. One of the main disadvantages of a private limited company is that it restricts the transfer ability of shares by its articles.

6.5. In a private limited company the number of members in any case cannot exceed 200.

6.6. Another disadvantage of private limited company is that it cannot issue prospectus to public. In stock exchange shares cannot be quoted.

7. Small Company, Section 2(85) of the companies act, 2013.

7.1. The annual return of a private limited company classified as a small company can be signed by a Company Secretary or by a Director of the private limited company.

7.2. The annual return of a private limited company NOT classified as a small company must be signed by a Director AND a Company Secretary.

7.3. small company need NOT prepare a cash flow statement as a part of the financial statement.

7.4. Less Resources to conduct business.

7.5. Small operation, There by small revenue.

7.6. The going concern concept does not apply wholly on small companies.

8. Public Company, Section 2(71) of the companies Act,2013.

8.1. Public limited company has the ability to raise share capital, particularly where the company is listed on a recognised exchange.

8.2. Offering shares to the public gives the opportunity to spread the risk of company ownership among a large number of shareholders. This may allow early investors in the company to sell some of their own shares at a profit while still retaining a substantial stake in the company.

8.3. Going public can enhance the options for the founders to exit the business at some point in the future, if they wish to do so. Both higher transferability of shares and the increased visibility of the business and its performance may increase the chances of bid interest from potential suitors.

8.4. The legal and regulatory requirements for a public limited company are more onerous than for private limited companies.

8.5. Limited companies, whether public or private, have more of their details in the public domain, available via Companies House, than other business types. But the required level of transparency is much higher for public companies.

8.6. A private limited company, the shareholders will typically be people known to the directors or founders. A private company will often be selective over who to admit as a shareholder, ensuring they support the vision and plans for the business.