There are different Forms of Business. Sole Proprietorship, Partnership, Company, Limited Liability Partnership, and Hindu Undivided Family are the names of different forms of business.
Forms of Business
When a single person is the owner of the business, it is known as a sole proprietorship. There is an unlimited liability in this Forms of Business. The private property of the proprietor can be sold to pay off the debts of the firm in times of liquidation. One person gets all the profits of the business. One person has to bear all losses also.
When a group of persons comes together to do business, it is known as a partnership. These persons share profits and losses among themselves in the pre-decided ratio. There is unlimited liability in these Forms of Business. Private property of partners can be sold to pay off the debts of the partnership firm in times of liquidation. The agreement among the partners is recorded in the form of partnership deed. Every partner is co-owner of the partnership firm. Every partner is bound by the acts of other partners.
The capital in the company Forms of Business is divided into a number of equal parts. These parts are known as shares. The owners of these shares are known as shareholders. Shareholders are the owners of a company. Profits are distributed among the shareholders in the form of dividends. The liability of shareholders is limited to the number of shares purchased by them.
In the time of liquidation of the company, they may be called to pay the unpaid amount on shares held by them. Articles of association and memorandum of association are the documents of a company. The rules are laid down in these documents. The company is an artificial judicial person. The company is a separate entity in the eyes of law. Members may come and members may go but the company goes on forever. The shareholders elect a board of directors for the management of the company. There are a lot of legal formalities in the company Type of Business.
Limited Liability Partnership combines the characteristics of the company and the partnership form of business. It has limited liability for members like a company. As a partnership firm, there are partners in limited liability partnerships.
Hindu Undivided Family is a Forms of Business in which all members of the family are the owners. The senior-most member of the Hindu Undivided Family is the Karta. Karta takes decisions in the Hindu Undivided Family.