This document discusses the four main forms of entrepreneurial establishments in India: sole proprietorships, partnerships, cooperatives, and companies. It provides details on the key features, types, merits and limitations of each form. Sole proprietorships are owned and controlled by a single individual, while partnerships involve two or more individuals who agree to share profits. Cooperatives are voluntary associations that promote members' economic interests. Companies are legal entities where ownership is shared by members through shares.

1. Forms of Entrepreneurial Establishments in India
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Debidutta Pattnaik, CFA (ICFAI)
MBA, MIFA

2. Forms of Entrepreneurial Establishments In INDIA
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1. Sole-Proprietorship
2. Partnership
3. Co-operative
4. Company

3. 1. Sole-Proprietorship
Owned, Managed and Controlled by a single entrepreneur called Sole-
proprietor.
The sole-proprietor arranges the finance, manages the business affairs, takes
the profits or bears the losses.
Legally, a sole proprietorship is inseparable from its owner i.e. the business and
the owner are one and the same.
The owner of the business reports the business income and losses on his or her
personal tax return and is personally liable to the business debts.
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4. 1.1. Features of Sole-Proprietorship
Single Ownership
Individual Management and Control
Individual Financing
Individual Accountability
Unlimited Liability
Minimum Government Regulations
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5. 1.2. Merits of Sole-Proprietorship
Simple Formation
Complete Control
Rapid Decisions
Flexible Management
Full Secrecy and Confidentiality of Affairs
Sole Receiver of Profits
Suitable for Small Scale Operations
Easy Dissolution
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6. 1.3. Limitations of Sole-Proprietorship
Limited Financial Resources
Limited Managerial Skills
Unlimited Liability
Lack of Continuity and Stability
Not Suitable for Large-scale Operations
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7. 2. Partnership
Partnership is an association of persons who agree to combine their financial
resources and managerial abilities to carry on a business and share the profits in
an agreed ratio.
Section 4 of the Indian Partnership Act, 1932 says that, “Partnership is the
relation between two or more persons who have agreed to share the profits of
a business carried by all or any of them acting for all.
The Persons who have entered into partnership with one another are called
`Partners’ and collectively a `firm’. The name under which their business is
carried on is called the `Name of the Firm’.
The Partnership Act specifies the minimum number of persons to form a
partnership i.e. 2, but is silent about the maximum number of partners.
Companies Acts specifies the maximum limit to 10 for Banking Business and 20
in case of Non-banking Business.
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8. 2.1. Features of Partnership
Two or More Persons
Agreement – There must be an agreement to form a partnership.
Business – There must exist a business to form a Partnership.
Sharing of Profits – There must be sharing of Profits unless otherwise agreed
Mutual Agency – It means that a partner is both an agent and a principal.
Unlimited Liability – Partners bear unlimited Liability.
Joint Ownership and Control.
Non-transferability of Share – A partner cannot transfer his share to others.
Duration – The Partnership may or may not have a fixed duration.
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9. 2.2. Types of Partners
Actual or Ostensible Partner
Sleeping or Dormant Partner
Nominal Partner
Partner-in-Profit
Sub-partner
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10. 2.3. Merits of Partnership
Easy Formation
More Financial Resources
More Managerial Resources
Flexible Management
Balanced Business Decisions
Sharing of Risks
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11. 2.4. Limitations of Partnership
Uncertainty of Existence
Risks of Implied Authority
Risks of Disharmony or Conflicts
Lack of Institutional Confidence
Limited Capital
Unlimited Liability
Suitability
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12. 3. Co-operative Organization
Co-operative Organization is a voluntary association of people who come
together to promote their common economic interest through the principle of
self-help.
Sec. 4 of Indian Co-operative Society Act, 1912 defines Co-operative Society as a
voluntary association of people primarily formed to promote the economic
interests of its members.
A minimum of 10 members are required to form an Indian Co-operative Society.
Co-operative Organizations are to be registered with the Registrar of Co-
operative Societies of the concerned state in which the society’s registered
office is situated.
Co-operative Organizations are also known as cooperatives or coops.
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13. 3.1. Features of Co-operative Organizations
Voluntary Association
Equal Voting Rights
Democratic Management
Separate Legal Entity
Service Motive
Distribution of Surplus as Dividend and Bonus
Capital
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14. 3.2. Types of Co-operative Organizations
Consumer’s Cooperative
Producer’s Cooperative
Marketing Cooperative
Credit Cooperative
Farming Cooperative
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15. 3.3. Merits of Co-operative Organizations
Easy Formation
Open Membership
Perpetual Existence
Limited Liability
Economic Operations
Relief by Government
Social Services
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16. 3.4. Limitations of Co-operative Organizations
Limited Capital
Inefficient Management
Absence of Motivation
Conflicts among members
Rigid Government Rules and Regulations
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17. 4. Company
Association of a number of persons formed for
some common object(s) is termed as “Company”.
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18. 4.1. Features of Company
An Artificial Person
Separate Legal Entity
Perpetual Existence
Common Seal
Limited/Unlimited Liability
Distribution of Surplus as Dividend
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19. 4.2. Merits of Company
Large Financial Resources
Limited/Unlimited Liability
Free Transferability of Shares
Stability of Existence
Scope for Expansion and Growth
Efficient Management
Public Confidence
Democratic Management
Dispersal of Ownership
Assumption of Social Responsibilities
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20. 4.3. Limitations of Company
Lengthy and Expensive Procedure for Formation
More Government Regulations
Lack of Personal Interest
Delay in Decision-making and Action
Conflicts of Interests
Oligarchic Management
Speculation by Directors
Growth of Monopolistic Decisions
Influencing Government Decisions
Suitability
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21. 4.4. (A) Types of Companies
(On the basis of incorporation)
Chartered Company
Statutory Company
Registered or Incorporated Company
Not-for-Profit Company
Producers Company
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22. 4.4. (B) Types of Companies
(On the basis of Liability)
Company Limited by Shares
Company Limited by Guarantee
Unlimited Company
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23. 4.4. (C) Types of Companies
(On the basis of Control)
Government Company
Non-Government Company
Foreign Company
Domestic Company
Holding and Subsidiary Company
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