Forms of Business Ownership and their main features

Category: Bank
Posted on: Monday, September 18, 2017

Share:

Different forms of ownership of business organization available to each sector they are as follows :-

(1) Private Sector: In private sector, the following forms of ownership/organization are available:

(a) Sole Proprietorship

(b) Partnership

(c) Joint Hindu Family Business firm

(d) Company

(e) Cooperative Society

 (2) Public Sector: In public sector, the following are the main forms of ownership of business organization:-

(a) Departmental Organization

(b) Corporations

(c) Government Company

 Private Sector: 

 (i) Sole Proprietorship: Sole proprietorship is a form of business organization which is established, owned controlled and usually operated by an individual and that individual also assumes all the risks of the business and entitled to all the profits made from it.

 Characteristics: 

 

  • The oldest form
  • Sale ownership
  • Unlimited liability
  • Entitled to all profits
  • No separate existence of the business
  • Free from legal formalities
  • Sole decisions and control
  • Limited scope of operations

 (ii) Partnership: A partnership is an association of two or more persons who agree to carry on business for earning and sharing profit among them.

 Characteristics: 

 

  • At least two persons
  • Maximum number of partners – (Banking sector – 10 persons, Any other sector – 20 persons)
  • Agreement
  • Business
  • Sharing of profit
  • Mutual agency
  • Unlimited liability
  • Jointly and several liability
  • Mutual trust and confidence
  • Business in firm’s name
  • No separate existence of the firms
  • Registration not compulsory
  • Unanimous decisions
  • Contribution of capital

 (iii) Hindu Undivided Family: When a Joint Hindu Family carries on a business, it is called Joint Hindu Family Firm. The members of such firm are called co-partners Joint Hindu family consist of all persons lineally descended from a common ancestor and includes their wives and unmarried daughter. There are two schools of Hindu law namely ‘Dayalhagya’ and Mitakshra’. According to ‘Dayalhagya’ school of Hindu law, each son acquires an interest in the ancestral property only after the death of his father. According to Mitakshra school a son acquires such interest by birth or by adoption.

 (iv) Company: Company is a voluntary association of persons formal and registered under the present Companies Act, or under any previous law. In the eyes of the law, it is an artificial persons having separate entity from its members, with perpetual succession and a common seal. The capital of the company is divided into transferable shares and shareholders are called members.

 Characteristics: 

 

  • Registered voluntary association
  • At least seven persons in case of public company and two in case of a private company.
  • Maximum number of member in a private company may be 50. No limit in case of public company
  • Company is an artificial person
  • Separate legal entity
  • Perpetual succession
  • Limited liabilities
  • Minimum paid up capital of BDT 5 lakh in case of public company and BDT 1 lakh in case of private company
  • Governance by majority
  • Nationality
  • It is not a citizen and has no fundamental rights
  • Managed by board of directors
  • Transferable shares

 (v) Cooperative Organizations: A co-operative society or organization is one which has been voluntarily formed by some persons for the promotion of their common economic interest.

 Characteristics: 

 

  • Voluntary organization/association
  • Registered under the co-operative societies
  • Legal existence
  • Limited liabilities
  • Perpetual existence
  • Every member contributes in its capitals
  • Non transferable shares.
  • One member – one vote
  • Democratic management
  • Equitable distribution of profit
  • Service motives
  • Based on principles of equality, justice and mutual help

 Public Enterprises: A public enterprise refers to an industrial, commercial or service enterprise which is owned and controlled by the government or by public authority/ government organization for providing goods or services to the public.

 (i) Departmental Organization: Departmental form of organization is the oldest form of organizing public enterprises. Under this form of organization, an enterprise is put under the control of a department. Such department is leaded by the concerned minister. Example:- Railway Department.

 Characteristics : 

 

  • Managed by a department of the government.
  • Minister-in-charge of the department has the direct control.
  • Financed by annual appropriations.
  • Wholly owned and financed by the government.
  • Accountable to the Lok Sabha, Rajya Sabha & Vidhan Sabha
  • Employees are civil servants.

 (ii) Public or Statutory Corporation : A public or statutory corporation is a body corporate incorporated under a special Act of the Parliament or state legislature for the purpose of carrying on certain industrial or commercial activities or rendering specific type of services.

 Characteristics : 

 

  • Incorporated body under a statute enacted by a parliament or state legislature.
  • Artificial person having all the rights of a person but not of a individual.
  • Separate legal existence from the government.
  • It can sue and be sued by the government.
  • Wholly owned by the central and/ or state government.
  • When ownership is shared by private entrepreneurs it is said to be a mixed corporations.
  • It can enjoy independence in the matters of its financial management.
  • Employees are not civil servants.
  • Autonomy in its operation.
  • Accountable to the parliament and/or state legislature.

 (iii) Government Company: Government Company is one in which not less than 51% of the paid-up capital is held by the central or state government; and/or by the government company and/or by any public corporation, authorities.

Characteristics: 

 

  • It is registered or an incorporated body under the Indian companies Act, but all the provisions of the act will not apply to it.
  • Majority of shares are held by the central government on by the state government or by any public corporation/authority or government company.