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3. ownership structure


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3. ownership structure

  1. 1. Ownership Structure
  2. 2. Ownership Structure • Proprietorship : Is the oldest form of business ownership in India. In a proprietorship, the enterprise is owned and controlled by one person. • Proprietorship is the simplest and easiest to form. It does not require legal recognition and attendant formalities.
  3. 3. Proprietorship features • One Man ownership: In proprietorship, only one man is the owner of the business. • No Separate Business Entity: No distinction is made between the business concern and the proprietor. Both are one and the same. • No Separation between Ownership and Management: In proprietorship, managements rests with the proprietor himself/herself. The proprietor is a manager also.
  4. 4. Proprietorship features • Unlimited Liability: Unlimited liability means that in case the enterprise incurs losses, the private property of the proprietor can also be utilized for meeting the business obligations to outside parties. • All Profits or Losses to the Proprietor: Being the sole owner of the enterprise, the proprietor enjoys all the profits earned and bears the full burnt of all losses incurred by the enterprises.
  5. 5. Proprietorship features • Less formalities: A proprietorship business can be started without completing much legal formalities. There are some businesses that can be started simply after obtaining necessary manufacturing license and permits.
  6. 6. Proprietorship Advantages • • • • • Simple form of Organization Owner’s Freedom to take Decisions High Secrecy Tax Advantage Easy Dissolution
  7. 7. Partnership • Partnership: Is defined as an association of two or more persons to carry on as co-owners a business for profit”
  8. 8. Main Features of Partnership • More Persons: As against proprietorship, there should be at least two persons subject to a maximum of ten persons for banking business and twenty for non-banking business to form a partnership firm. • Profit and Loss Sharing: There is an agreement among the partners to share the profits earned and losses incurred in partnership business.
  9. 9. Main Features of Partnership • Contractual Relationship: Partnership is formed by an agreement oral or written among the partners. • Existence of Lawful Business: Partnership is formed to carry on some lawful business and share its profits or losses. If the purpose is to carry some charitable works, for example it is not regarded as partnership.
  10. 10. Main Features of Partnership • Utmost Good faith and Honesty: A partnership business solely rests on utmost good faith and trust among the parties. • Unlimited liability: Like proprietorship, each partner has unlimited liability in the firm. This means that if the assets of the partnership firm fall short to meet the firm’s obligations, the partners private assets will also be used for the purpose.
  11. 11. Main Features of Partnership • Restrictions on Transfer of share: No partner can transfer his share to any one outside person without seeking the consent of all other partners.
  12. 12. Advantages of Partnership • • • • • • Easy formation More capital Available Combined Talent, Judgment and Skill Diffusion of Risk Flexibility Tax Advantage.
  13. 13. Company • A company is an artificial person being created by law that has an existence separate and a part from its owners. In other words, company is an artificial person created by law, with a distinctive name, a common seal and it can sue and be sued in its own name.
  14. 14. Main features of Company • Artificial legal Person: A company is an artificial person created by law. Though it has no body, still it exists as a person. Like a person, it can enter into contracts in its own name and like wise may sue and be sued by its own name. • Separate legal Entity: A company has a distinct entity separate from its members or shareholders. Therefore, a shareholder of the company can enter into contract with the company .
  15. 15. Main features of Company • Common seal: Being an artificial person, company cannot sign the documents, hence it uses a common seal on which its name is engraved. Putting the common seal on papers relating to company’s transactions makes them binding on the company. • Perceptual Existence: Unlike partnership, the existence of a company is not affected by the death, insolvency or retirement of its members or directors. This is because company enjoys a legal separate entity.
  16. 16. Main features of Company • Limited liability