Forms of Organisation

and their Legal status

Sachin Kapoor,
Director
kapoors@cag.gov.in
 OUTLINE
 Introduction
 Forms of business organisation and Legal status
 Sole Proprietorship
 Partnership
Limited Liability Partnership
 Joint Stock Company
 Co-operative Society
 Club

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 Introduction-Business Organizations

 Please define various types of Business

Organizations

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 Forms of Business Organisation
 While establishing a business the most important
task is to select a proper form of organisation.
 This is because the conduct of business, its control,
acquisition of capital, extent of risk, distribution of
profit, legal formalities, etc. all depend on the form of
organisation.
 The most important forms of business organisation
are as follows:
– Sole Proprietorship
– Partnership
– Joint Stock Company
– Co-operative Society
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 Sole Proprietorship
 When the ownership and management of business are in
control of one individual, it is known as sole proprietorship or
sole-tradership.
 Meaning: A sole proprietorship is a business owned by a single
individual where one person provides the finances and in return,
has full control of the business and is able to keep all the profits.
 The individual who owns the business is called Proprietor and
hence the name Proprietorship Concern.
 This is the most common form of business organization. Most of
the small businesses are run in this form. It is seen everywhere,
in every country, every state, every locality.

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 Sole Proprietorship - Characteristics
 Ownership:
 The business enterprise is owned by one single individual, i.e. the
individual has got legal title to the assets and properties of the
business. The entire profit arising out of business goes to the sole
proprietor. Similarly, he also bears the entire risk or loss of the firm.
 Management/control:
 The owner of the enterprise is generally the manager of the business;
he is the sole decision maker. Owner has a complete control over all
the aspects of his business and it is he who takes all the decisions
though he may engage the services of a few others to carry out the
day-to-day activities.
 Source of Capital:
 The entire capital of the business is provided by the owner and he
depends largely on his own savings and profits of his business.

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 Sole Proprietorship - Characteristics

 Legal Status:
 The proprietor and the business enterprise are one and the
same in the eyes of law. There is no difference between the
business assets and the private assets of the sole proprietor.
This means that all the assets, liabilities, profit, loss etc. of the
business are property of the proprietor and they are also taxed
at individual rates instead of business rates. This is also the
reason why proprietorship businesses do not have a
separate PAN card for them and the PAN card of the Proprietor
is used for any tax related purposes. The business ceases to
exist in the absence of the owner.

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 Sole Proprietorship - Characteristics
 Liability:
 The liability of the sole proprietor is unlimited. This means that, in case
the sole proprietor fails to pay for the business obligations and debts
arising out of business activities, his personal property can be used to
meet those liabilities.
 Stability:
 The stability and continuity of the firm depend upon the capacity,
competence and the life span of the proprietor.
 Ease of formation/Legal Formalities:
 In the setting up, functioning and dissolution of a sole proprietorship
business legal formalities are minimal. Ease of formation is its most
important feature because it is not required to go through elaborate
legal formalities. No agreement is to be made and registration of the
firm is also not essential. However, the owner may be required to obtain
a license specific to the line of business from the local administration.

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 Let us Ponder
 Please identify the advantages/disadvantages of Sole
Proprietorship

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 Sole Proprietorship - Advantages
 Easy Formation:
 The biggest advantage of a sole trader ship business is its easy
formation. Anybody wishing to start such a business can do so in many
cases without any legal formalities.
 Better Control:
 Full authority of the owner over his business allows prompt decision
making & flexibility in operations and thus ensures effective control.
 Retention of Business Secrets:
 Another important advantage of a sole proprietorship business is that the
owner is in a position to maintain absolute secrecy regarding his
business activities.
 Social Desirability:
 It promotes Entrepreneurship, Self-employment & Equitable Distribution
of Wealth.
 Maximum incentive for work

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 Sole Proprietorship - Disadvantages
 Unlimited Liability:
 In sole proprietorship, the liability of business is recovered from the
personal assets of the owner. It restricts the sole trader to take more risk
and increases the volume of his business.
 Limited Financial Resources:
 The ability to raise and borrow money by one individual is always limited.
The inadequacy of finance is a major handicap for the growth of sole
proprietorship.
 Limited Capacity of Individual:
 An individual has limited knowledge and skill. Thus his capacity to
undertake responsibilities, his capacity to manage, to take decisions and
to bear the risks of business are also limited.
 Uncertainty of duration:
 The existence of a sole tradership business is linked with the life of the
proprietor. Illness, death or insolvency of the owner brings an end to the
business. The continuity of business operation is, therefore, uncertain.
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 Suitability
 This form of organisation is suitable for the
businesses which involve moderate risk/resources,
capital requirement is small and risk involvement is
not heavy like automobile repair shops, small bakery
shops, tailoring, etc.
 It accounts for the largest number of business
concerns in India.

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 PARTNERSHIP
 Meaning: A partnership form of organisation is one where two
or more persons are associated to run a business with a view to
earn profit.
 Definition (Section 4 in The Indian Partnership Act, 1932):
Partnership is a relation between two or more persons who
have agreed to share the profits of a business carried on by all
of them or any of them acting for all.
 The owners of a partnership business are individually known
as the "partners" and collectively as a "firm".
 A partnership is formed by an agreement, which may be either
written or oral.
 When the written agreement is duly stamped and registered, it
is known as "Partnership Deed".
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 PARTNERSHIP
 Ordinarily, the rights, duties and liabilities of partners
are laid down in the deed. But in the case where the
deed does not specify the rights and obligations, the
provisions of the Indian Partnership Act, 1932 will
apply.
 Persons from similar background or persons of
different ability and skills, may join together to carry
on a business.

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 PARTNERSHIP -
CHARACTERISTICS
 Number of Partners:
 A minimum of two persons are required to start a partnership
business. The maximum membership limit is 10 in case of
banking business and 20 in case of all other types of business.
 Contractual Relationship:
 The relation between the partners of a partnership firm is
created by contract. The partners enter into partnership through
an agreement which may be verbal, written or implied. If the
agreement is in writing it is known as a ‘Partnership Deed’.
 Competence of Partners:
 Since individuals have to enter into a contract to become
partners, they must be competent enough to do so. Thus,
minors, lunatics and insolvent persons are not eligible to
become partners. However, a minor can be admitted to the
benefits of partnership i.e. he can have a share in the profits.
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 PARTNERSHIP -
CHARACTERISTICS
 Legal Status:
 The firm means partners and the partners mean the firm. Law does not
recognise the firm as a separate entity distinct from the partners.
 Principal-Agent Relationship:
 The business in a partnership firm may be carried on by all the partners
or any one of them acting for all. This means that every partner is an
agent when he is acting on behalf of others and he is a principal when
others act on his behalf.
 Sharing of Profit and Loss:
 The partners can share profit in any ratio as agreed. In the absence of
an agreement, they share it equally.
 Unlimited Liability:
 The partners have unlimited liability. Creditors can lay claim on the
personal properties of any individual partner or all the partners jointly.

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 PARTNERSHIP -
CHARACTERISTICS
 Transfer of Interest:
 No partner can sell or transfer his interest in the firm to anyone
without the consent of other partners.
 Voluntary Registration:
 A partnership is easy to form as no cumbersome legal
formalities are involved. Registration of partnership is not
compulsory but considered desirable as this entitles the firm to
several benefits. For example, if it is registered, any partner can
file a case against other partners, or a firm can file a suit against
outsiders in case of disputes, claims, disagreements, etc.
 Dissolution of Partnership:
 Dissolution of partnership implies not only a complete closure or
termination of partnership business, but it also includes any
change in the existing agreement among the partners due to a
change in the number of partners.
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 Let us Ponder

 Please identify the advantages/disadvantages of

Partnership

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 PARTNERSHIP -
ADVANTAGES
 Easy Formation:
 A partnership can be formed without many legal formality and
expenses. Registration is not mandatory.
 Larger Resources:
 As compared to sole proprietorship, a partnership firm can pool
larger financial & human resources.
 Better Management and Flexibility in Operation:
 Prompt decision making due to a limited number of partners
leads to flexibility of operation and better management.
 Sharing of Risk:
 In partnership, risk of loss is easier to bear by individual
partners as it is shared by all the partners.
 Protection of minority interest:
 Every partner has an equal say in decision making. A dissenting
partner may withdraw from partnership and can dissolve it
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PARTNERSHIP:
DISADVANTAGES
 Limited Capital:
 As there is a restriction on the maximum number of partners, the capital which
can be raised is limited.
 Unlimited Liability:
 As the liability of partners is joint and several to an unlimited extent, any one of
the partners can be called upon to pay all the debts even from his personal
properties.
 Instability:
 A partnership firm does not continue to exist indefinitely. The death, insolvency
or lunacy of a partner may bring about an unexpected end to partnership.
 Lack of Harmony:
 Since every partner has equal right, there are greater possibilities of friction due
to differences of opinion among partners which might ultimately result in
disruption and closure of the firm.
 Absence of ultimate authority
 Liability for the actions of other partners

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 Suitability
 Partnership is an appropriate form of ownership for
medium sized business involving limited capital.
 This may include small scale industries, wholesale
and retail trade; small service concerns like transport
agencies, real estate brokers; professional firms like
charted accountants, doctors, law firms etc.

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Limited Liability Partnership (LLP)

 LLP, a legal form available world-wide is now

introduced in India and is governed by the
Limited Liability Partnership Act 2008, with
effect from April 1, 2009.
 LLP combines the advantages of ease of
running a Partnership and separate legal
entity status and limited liability aspect of a
Company.

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 Main features of a LLP
 LLP is a separate legal entity separate from its
partners, can own assets in its name, sue and be
sued.
 Unlike corporate shareholders, the partners have the
right to manage the business directly
 One partner is not responsible or liable for another
partner’s misconduct or negligence.
 Minimum of 2 partners and no maximum.
 Should be ‘for profit’ business.
 Perpetual succession.
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 Main features of a LLP
 The rights and duties of partners in LLP, will be governed by the
agreement between partners and the partners have the
flexibility to devise the agreement as per their choice. The duties
and obligations of Designated Partners shall be as provided in
the law.
 Liability of the partners is limited to the extent of his contribution
in the LLP. No exposure of personal assets of the partner,
except in cases of fraud.
 LLP shall maintain annual accounts. However, audit of the
accounts is required only if the contribution exceeds Rs. 25
lakhs or annual turnover exceeds Rs.40 lakhs.

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 Advantages
 Lower cost of formation.
 Lesser compliance requirements.
 Easy to manage and run.
 Easy to wind-up and dissolve.
 Partners are not liable for the acts of the
other partners.

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 Disadvantages
 LLP cannot raise money from the
public.
 Financial Institution may not lend the
large amount to the LLP.

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 QUIZ
 Whether the liability of sole proprietorship is
limited or unlimited?
 How many minimum – maximum members
are required to form partnership firm?
 Is it compulsory to register the partnership
firm?

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 JOINT STOCK COMPANY
 A Joint Stock Company form of business organisation is a voluntary
association of persons who generally contribute money to carry on
business.
 A company is formed by the initiative of a group of persons known as
promoters.
 The money so contributed is the capital of the company. The proportion
of capital to which each member is entitled is called his share, therefore
members of a joint stock company are known as shareholders and the
capital of the company is known as share capital. The total share capital
is divided into a number of units known as ‘shares’.
 The companies are governed by the Indian Companies Act, 2013. The
Act defines a company as an artificial person created by law, having
separate entity, with perpetual succession and a common seal.
 Joint Stock Companies are of Two types: Private Limited & Public
Limited
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 JOINT STOCK COMPANY -
CHARACTERISTICS
 Artificial Person
 A Joint Stock Company is an artificial person in the sense that it is created
by law and does not possess physical attributes of a natural person.
However, it has a legal status.
 Separate Legal Entity
 Being an artificial person, a company has an existence independent of its
members. It can own property, enter into contract and conduct any lawful
business in its own name. It can sue and can be sued in the court of law.
A shareholder cannot be held responsible for the acts of the company.
 Common Seal
 Every company has a common seal by which it is represented while
dealing with outsiders. Any document with the common seal and duly
signed by an officer of the company is binding on the company.
 Perpetual Existence
 A company once formed continues to exist as long as it fulfils the
requirements of law. It is not affected by the death, lunacy, insolvency or
retirement of any of its members. 29
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 JOINT STOCK COMPANY -
CHARACTERISTICS

 Capital
 A Joint Stock Company generally raises a large
amount of capital through issue of shares.
 Transferability of Shares
 The members of a company are free to transfer their
shares to anyone else.
 Limited Liability
 The liability of a member of a Joint Stock Company is
limited by guarantee or the shares he owns.

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 JOINT STOCK COMPANY -
CHARACTERISTICS
 Formation
 A company comes into existence only when it has been
registered after completing the formalities prescribed under the
Indian Companies Act 2013.
 Membership
 A Private Limited Company has a minimum membership of two
persons and maximum Two Hundred. In case of a Public
Limited Company, the minimum is seven and the maximum
membership is unlimited.
 Management
 Joint Stock Companies have democratic management and
control. Even though the shareholders are the owners of the
company, all of the them cannot participate in the management
process. The company is managed by the elected
representatives of shareholders known as Directors.
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 Let us Ponder

 Please identify the advantages/disadvantages of JSC

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 JOINT STOCK COMPANY -
ADVANTAGES
 Limited Liability
 In a Joint Stock Company the liability of its members is limited to the
extent of shares held by them. It helps the company to raise huge
capital. Because of limited liability, a company is also able to take larger
risks.
 Continuity of existence
 A company is an artificial person created by law and possesses
independent legal status. It has a perpetual existence.
 Benefits of huge capital and large scale operation
 Only this form of organisation can provide enough capital for large
scale operations.
 Social Benefit
 A joint stock company offers employment to a large number of people.
It facilitates promotion of various ancillary industries, trade and
auxiliaries to trade. It promotes Research and Development and
facilitates innovation.
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 JOINT STOCK COMPANY -
DISADVANTAGES
 Formation is not easy
 The formation of a company involves compliance with a number of legal
formalities under the companies Act and compliance with several other Laws.
 Excessive government control
 A company is expected to comply with the provisions of several Acts. Non-
compliance of these invites heavy penalty.
 Delay in Policy Decisions
 A company has to fulfill certain procedural formalities before making a policy
decision. These formalities are time consuming and, therefore, policy decisions
may be delayed.
 Control by a Group
 Even though the shareholders are the owners of the company, it is controlled by
a group of elected persons known as the Board of Directors. Minority interest is
not always secured.
 Social abuses
 A JSC being a large scale business organisation, have huge resources and
power. Any misuse of such power creates unhealthy conditions in the society.

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 Private Limited Company
 A private limited company is a voluntary association of not less than two
and not more than 200 members, whose liability is limited, the transfer
of whose shares is limited to its members and who is not allowed to
invite the general public to subscribe to its shares or debentures.
 It has an independent legal existence.
 The Indian Companies Act, 2013 contains the provisions regarding the
legal formalities for setting up of a private limited company.
 Registrars of Companies (ROC) appointed under the Companies Act
covering the various States and Union Territories are vested with the
primary duty of registering companies floated in the respective states
and the Union Territories.
 The liability of its members is limited.

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 FEATURES
 It is relatively less cumbersome to organise and operate it as it
has been exempted from many regulations and restrictions to
which a public limited company is subjected to. Some of them
are :-
– It need not file a prospectus with the Registrar.
– It need not obtain the Certificate for Commencement of business.
– It need not hold the statutory general meeting nor need it file the
statutory report.
– Restrictions placed on the directors of the public limited company
do not apply to its directors.

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 FEATURES
 The shares allotted to it's members are also not freely
transferable between them.
 It enjoys continuity of existence i.e. it continues to exist even if
all its members die or desert it.
 Hence, a private company is preferred by those who wish to
take the advantage of limited liability but at the same time desire
to keep control over the business within a limited circle and
maintain the privacy of their business.

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 Let us Ponder
 Please identify the advantages/disadvantages
of Private Limited company

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 Advantages/Disadvantages
 Advantages
– Continuity of existence
– Limited liability
– Less legal restrictions
 Disadvantages
– Shares are not freely
transferable
– Not allowed to invite
public to subscribe to its
shares
– Scope for promotional
frauds
– Undemocratic control

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 Public limited company
 For starting a business on a large scale, one needs a
huge capital, which, even 200 members of a private
company cannot provide. In such a situation, a public
company is suitable.
 A public limited company is a voluntary association of
members which is incorporated and, therefore has a
separate legal existence and the liability of whose
members is limited.

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 Features
 The company has a separate legal existence apart from its
members who compose it.
 Its formation, working and its winding up, in fact, all its
activities are strictly governed by laws, rules and regulations.
 The Indian Companies Act, 2013 contains the provisions
regarding the legal formalities for setting up of a public
limited company. Registrars of Companies (ROC) appointed
under the Companies Act covering the various States and
Union Territories are vested with the primary duty of
registering companies floated in the respective states and
the Union Territories.

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Continue…
 A company must have a minimum of seven members but there is
no limit as regards the maximum number.
 The company collects its capital by the sale of its shares and
those who buy the shares are called the members. The amount
so collected is called the share capital.
 The shares of a company are freely transferable and that too
without the prior consent of other shareholders or without
subsequent notice to the company.
 The liability of a member of a company is limited to the face value
of the shares he owns. Once he has paid the whole of the face
value, he has no obligation to contribute anything to pay off the
creditors of the company.

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Continue…
 The shareholders of a company do not have the right to
participate in the day-to-day management of the business of a
company. This ensures separation of ownership from
management. The power of decision making in a company is
vested in the Board of Directors, and all policy decisions are
taken at the Board level by the majority rule. This ensures a
unity of direction in management.
 As a company is an independent legal person, its existence is
not affected by the death, retirement or insolvency of any of its
shareholders.

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 Let us Ponder
 Please identify the advantages/disadvantages
of Public Limited company

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 Advantages/disadvantages
 Advantages
– Continuity of existence
– Larger amount of
capital
– Unity of direction
– Efficient management
– Limited liability
 Disadvantages
– Scope for promotional
frauds
– Scope for directors using
resources for personal
profit
– Subjected to strict
regulations
– Cumbersome to form

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 CO-OPERATIVE SOCIETY
 A co-operative society is entirely different from all
other forms of organisation discussed previously in
terms of its objective. The co-operatives are formed
primarily to render services to its members.
 It functions under the Cooperative Societies Act,
1912 and other State Co-operative Societies Acts.
 Any ten persons can form a co-operative society.
 The main objectives of co-operative society are:
– rendering service rather than earning profit
– mutual help instead of competition and
– self help in place of dependence.
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 CO-OPERATIVE SOCIETY -
TYPES
Types On the basis of objectives, various types of co-operatives
are formed :
 Consumer co-operatives : These are formed to protect the
interests of ordinary consumers of society by making consumer
goods available at reasonable prices. E.g. Kendriya Bhandar in
Delhi, Alaka in Bhubaneswar etc.
 Producers co-operatives : These societies are set up to
benefit small producers who face problems in collecting inputs
and marketing their products. E.g. The Weavers co-operative
society, the Handloom owners cooperative society etc.
 Marketing co-operatives : These are formed by producers and
manufactures to eliminate exploitation by the middlemen while
marketing their product. E.g. Kashmir Arts Emporium, J&K
Handicrafts etc.
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 CO-OPERATIVE SOCIETY -
TYPES
 Housing Co-operatives : These are formed to provide housing
facilities to its members. They are called co-operative group
housing societies.
 Credit Co-operatives : These societies are formed to provide
financial help to its members. The rural credit societies, the
urban co-operative banks etc. come under this category.
 Farming Co-operatives : These are formed by small farmers to
carry on work jointly and thereby share the benefits of large
scale farming.
 Besides these types, other co-operatives can be formed with
the objective of providing different benefits to its members, like
the construction co-operatives, transport co-operatives, co-
operatives to provide education etc.
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 CO-OPERATIVE SOCIETY -
CHARACTERISTICS
 Voluntary association
 Individuals having common interest can come together to form a
co-operative society. Any person can become a member of such
an organisation and leave the same.
 Membership
 The minimum membership required to form a co-operative
society is ten and the maximum number is unlimited.
 Body corporate
 Registration of a society under the Co-operative Societies Act is
a must. Once it is registered, it becomes a body corporate and
enjoys certain privileges just like a joint stock company. Some of
the privileges are: (a) The society enjoys perpetual succession.
(b) It has its own common seal. (c) It can own property in its
name. (d) It can enter into contract with others. (e) It can sue
others in court of law.
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 CO-OPERATIVE SOCIETY -
CHARACTERISTICS
 Service Motive
 The primary objective of any co-operative organisation is to render
services to its members in particular and to the society in general.
 Democratic Set up
 Every member has a right to take part in the management of the
society. Generally the members elect a committee known as the
Executive Committee to look after the day to day administration.
 Sources of Finances
 A co-operative organisation starts with a fund contribute by its members
in the form of units called shares. It can also raise loans and secure
grants from the government easily. One fourth of the profits are
transferred to its fund every year.
 Return on capital
 The return on capital subscribed by the members is in the form of a
fixed rate of dividend after deduction from the profit.

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 CO-OPERATIVE SOCIETY -
ADVANTAGES
 Easy Formation
 Any 10 persons can voluntarily form an association and get themselves
registered with the Registrar of Co-operative societies.
 Limited Liability
 The liability of the members is limited to the extent of capital contributed by
them.
 Open Membership
 There is no restriction on any individual to be a member of any co-operative.
 Management
 A co-operative functions in a democratic manner. Each member has only one
vote.
 Stability
 It does not cease to exist in case of death, or insolvency or resignation of a
member. It has thus a fairly stable life.
 State Assistance
 Co-operatives get a lot of patronage in the form of exemptions and concessions
in taxes and financial assistance from the State Governments which no other
organisation gets.
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 CO-OPERATIVE SOCIETY -
DISADVANTAGES
 Limited Capital
 The amount of capital that a co-operative can generate is limited because of the
membership remaining confined to a locality or region or a particular section of
people.
 Problems in Management
 At times, co-operative do not function efficiently due to lack of managerial skill
and motivation.
 Lack of Co-operation
 Co-operatives are formed with the very idea of co-operation. However, friction
among the members due to individual interests are quite common.
 Lack of Secrecy
 Maintenance of business secrecy is one of the important factors for the success
of enterprise which the co-operatives always lack.
 Dependence on Government
 The inadequacy of capital and various other limitations make co-operatives
dependant on the government for support and patronage and subject
themselves to Interference.
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 Club
 A club is an association of two or more people
united by a common interest or goal.
 A service club, for example, exists for voluntary
or charitable activities; there are clubs devoted
to hobbies and sports, social activities clubs,
political and religious clubs, and so forth.

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 Features
 Club can be of various type depends on the activity.
 Professional Clubs are partly social, partly professional in nature and
provide professionals with opportunities for advanced education,
presentations on current research, business contacts, public advocacy
for the profession and other advantages.
 Social activities clubs are a modern combination of several other types
of clubs and reflect today’s more eclectic and varied society. These
clubs are centered around the activities available to the club members
in the city or area in which the club is located.
 Social clubs are centric towards social outreach of its members. They
organize various events and social activities for benefit of society at
large.

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 Advantages/disadvantages
 Advantages  Disadvantage
– No legal hassle – Lack of
– Flexibility professionalism
– Voluntary – Casual
– Nepotism/vested
interest
– Chance of fraud

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 FORMS OF BUSINESS ORGANIZATION - DEFINITIONS

Sole General
Corporation
Proprietorship Partnership

Legislatively
Two or More Created and
Any Business
Persons Regulated
Owned and
Operating a Governance,
Operated by an
Business for a Ownership
Individual
Profit and Financial
Structure

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 FORMS OF BUSINESS ORGANIZATION - FORMATION

Sole General
Corporation
Proprietorship Partnership

No Formalities or
Written or Oral
Legal Filing of Articles
Agreement or
Documentation; of Incorporation
May be Implied
May be Implied and Payment of
from Conduct or
from Conduct or Fees
Actions
Actions

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 FORMS OF BUSINESS ORGANIZATION - GOVERNING DOCUMENTS

Sole General
Corporation
Proprietorship Partnership

Articles of
None Required;
Incorporation
Most have
(AOA & MOA)
Agreement
None Required create
specifying Rights,
Corporation; Bye
Duties and
laws prescribe its
Obligations
Operation

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 FORMS OF BUSINESS ORGANIZATION –
NATURE OF OWNERSHIP

Sole General
Corporation
Proprietorship Partnership

Partner receives
Proportionate
Wholly Owned
Share of Residual Claim on
by Single
Profits/Losses and Corporate Equity
Individual
Partnership
Property

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 FORMS OF BUSINESS ORGANIZATION - LIABILITY

Sole General
Corporation
Proprietorship Partnership

Sole Proprietor Partners are Shareholder’s

Personally Jointly and Liability limited to
Liable for All Severally Liable Extent of Capital
Debts and for all Partnership Contribution
Obligations Obligations. [Limited Liability]

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FORMS OF BUSINESS ORGANIZATION - TAXATION

Sole General
Corporation
Proprietorship Partnership

Not a Taxable
Entity; Income
Partnership not a Corporation taxed
(Loss) passes
Taxable Entity as Separate Entity
through to Sole
Proprietor

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 FORMS OF BUSINESS ORGANIZATION - MANAGEMENT

Sole General
Corporation
Proprietorship Partnership
Managed by Board
of Directors
All Partners have
Sole Proprietor elected by
Equal Rights in
has Complete Shareholders;
Partnership’s
Management Board may
Management and
Control Delegate Authority
Conduct
to Appointed
Officers

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 FORMS OF BUSINESS ORGANIZATION -
TRANSFER OWNERSHIP INTERESTS

Sole General
Corporation
Proprietorship Partnership

Sole
Proprietorship not Limited Right of Freely
Transferable; Transfer subject Transferable
Property and to Consent by all through Capital
Products are Partners Markets
Transferable

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 FORMS OF BUSINESS ORGANIZATION -
WITHDRAWAL OF OWNER

Sole General
Corporation
Proprietorship Partnership

Partner Death
Terminates Corporation
or Withdrawal
Sole has Unlimited
may Terminate
Proprietorship Life
Partnership

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 Questions/Suggestions/Comments???

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Sachin Kapoor, Director, NAAA-
Shimla