Forms & Establishment of Business Enterprises in India
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Forms & Establishment of Business Enterprises in India
Presented to the students of Maitri English School, Adipur
Compiled & Presented By: Anuj Sharma
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What is Business?
An organization or economic system where goods and services are exchanged for one another or for money.
Every business requires some form of investment and enough customers to whom its output can be sold on a consistent basis in order to make a profit.
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Forms of Business Enterprises
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Advantages of Sole Propreitorship
Easy establishment Dynamism Quick decisions & implementation Maintaining secrecy Managerial independence Personal interest Favourable for small interest Low taxation Other benefits
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Limitations of Sole Propreitorship
Unlimited liability Limited capital Limited capacity Short life span Faulty decisions Unsuitable for big business
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Partnership Firm
Relationship between two or more persons who have agreed to share the profits of a business carried on by all or any of them
acting for all
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Characteristics of Partnership Firm
Agreement based on relation Written / Oral / Implied
Number of Partners 20 in general & 10 in banking business
Unlimited Liability Legal activities Profit motive Life span
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Contents of Partnership Deed Firm’s name & address
Partner’s name, address, age, gender Type of business activities Capital of each partner Ratio of distribution of profit / loss Period & type of firm Details pertaining to entry of partner & retirement Interest on capital & withdrawals Interest on loan from partner Remuneration, salary, commission of active partners Accounting methods & audit arrangement Rights & Duties of partners Arbitration clause Opening & Maintaining bank account Removal of partner Authority to sign important documents on behalf of the firm Provision for dissolution & settlement of accounts
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Types of Partnership
According to
duration
Partnership at will
Term Partnershi
pSpecific
job partnershi
p
According to liability
Unlimited Liability
Limited Partnershi
p
According to
business
Banking Firm
General Firm
According to
registration
Registered Firm
Unregistered Firm
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Types of Partners
Active Partner Sleeping or Dormant Partner Nominal Partner Partner by Estoppel Partner in Profit only Minor as a partner Partner with limited liability
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Merits of Partnership
Easy establishment More efficiency More capital More creditworthiness Maintaining secrecy Right decisions Distribution of risk Contact with customers Dynamism Decentralisation of economic power
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Limitations of Partnership
Unlimited liability Limited duration Absence of ownership transfer Possibility of dispute
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1.Management – Karta2.Membership – By birth, minor is also
member3.Liability – Only Karta has unlimited
liability4.Membership Strength – No limit5.Duration – Continues even after death
of Karta6.Insolvency – Karta & HUF both are
declared insolvents
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Co-Operative Society
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Advantages of Co-Op Society Easy to form – 10 or more members
Open & voluntary membership Democratic management –Exec Committee Limited liability Separate entity – Death, resignation, insolvency Economical – Members give voluntary service Encouragement from Government Economic uplifting of members – No middlemen Social welfare activities – dispensaries, schools Low burden of taxes Training school of co-operation
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Limitations of Co-Op Society Limited Capital – Weak members &
limit on shares
Inefficiency – honorary members
Government interference
Difference of opinions amongst members
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Joint Stock Company
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Characteristics of a Company
Compulsory registration Separate and perpetual existence Voluntary membership Limited liability Transfer of shares Common seal Management by representatives Voting per share
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Chartered Company
Registered Company
No. Of member viewpoint
Private Company Public Company
Deemed Public Company
Liability viewpoint
Limited Liability
Limited by Share Capital
Limited by Share Guarantee
Unlimited Liability
Control viewpoint
Holding Company
Government Company
Subsidiary Company
Registration viewpoint
Indian Company
Foreign Company
Company created under
special law
Types of Companies
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Advantages of Company
Limited Liability High Capital Separate & perpetual existence Easy share transfer Efficient management Democratic management Large scale production Social benefits
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Limitations of Company
Long & expensive incorporation procedure Autocratic management Observance of law – More legal interference Probability of speculation Delay in decision making High administrative expenses Difficulty in keeping secrets High taxation Absence of personal interest
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Points of Difference
Private Company Public Company
Number of Members Minimum 2 & Maximum 50 members
Minimum 7 & maximum unlimited members
Share transfer Restricted Free
Number of Directors Minimum 2 directors Minimum 3 directors
Invitation to subscribe for shares
Not allowed Allowed
Provision for minimum subscription
No provision There is a provision
Name ‘Private Limited’ words are to be added at the end of the name
The word ‘Limited’ is to be added at the end of the name
Beginning of business
Immediately after Certificate of Incorporation
Has to obtain Certificate of Commencement
Articles of Association
Has to prepare AoA Table – A can be accepted
First statutory meeting
No need Compulsory within stipulated time-period
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Stages of Formation of Company1. Promotion
2. Incorporation
3. Commencement of Business
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Step 1: Promotion
Idea
Primary & extensive tests
Mobilising the resources
Making arrangement for finance
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Step 2: Certificate of Incorporation
Memorandum of Association Articles of Association List of Directors Written consent of Directors Acceptance to subscribe for
qualification of shares The address of registered office Statement of observation of law
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Memorandum of Association
1. Name Clause2. Registered Office Clause3. Object Clause4. Liability Clause5. Capital Clause – Authorised & Paid-
Up6. Association Clause
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Step 3: Certificate of Commencement of Business
(Public Company)
Prospectus or statement in lieu of prospectus
Applying to recognised stock exchange
Determining & getting minimum subscription
Approving contracts entered prior to Certificate of Incorporation & Commencement
Declaration of payment of qualification shares
Returning money to share applicants
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Prospectus Main objects No. of qualification shares for
directors Details of Directors Details of Auditors Application & Allotment amount of
shares Details of Underwriting Agreement Information about Primary Expenses Information about Minimum
Subscription Statement about fictitious name
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Limited Liability Partnership Concept is still very new in India
Features of both partnership & company Governed by LLP Act, 2008 Word ‘LLP’ has to be written at the end
of the name LLP Agreement Compulsory registration Foreign nationals can be partners Separate legal entity Perpetual succession LLP has its own common seal
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Determining the Form of Ownership of Business
Type of business Size of business Requirement of capital Degree of risk Need of managerial skill Duration of business Preference of directors Interference of government Tax burden
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Factors to be Taken Into Account While Starting a
Business Market
Location
Financial Requirement
Government Policy
Efficiency – Preference of Promoter
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“Ethics is what you do when no one is looking.”
~ George Bernard Shaw
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Thank You!!!
Grazie Gracias Domo Arigato Merci Danke Obrigado Mahalo शुक्रि�या