2. Types of Business Organisation

1. Sole Proprietorship

A form of business wherein one person owns all the assets of the business. No legal formalities are required to create a sole proprietorship other than appropriate licensing to conduct a business and registration of a business name if it differs from that sole proprietorship. The owner reports income/loss from this business and his personal income in the tax return.

2. Partnership Firm

The Indian Partnership Act, 1932 govern partnership firms in India. Partnership firms are created by drafting a partnership deed among the partners, and the partnership deed may or may not be registered to make a firm.

3. Limited Liability Partnership (LLP)

LLP is an alternative corporate business entity that provides the benefits of limited liability of a company but allows its members the flexibility of organising their internal management based on a mutually-arrived agreement, as is the case in a partnership firm introduced in India by way of Limited Liability Partnership Act, 2008.

4. One-Person Company (OPC)

An OPC means a company with only one person as a member. The shareholder can make only one nominee who shall become a shareholder in case of death/incapacity of the original stakeholder.

5. Private Company

A Private Company is a company which has the following characteristics:

  • Shareholders' right to transfer shares is restricted.

  • A minimum number of 2 members in the company.

  • Number of shareholders is limited to 200.

  • An invitation to the public to subscribe to any shares or debentures or any type of security is prohibited.

6. Public Company

A public company is a company which has the following characteristics:

  • Shareholders' right to transfer shares is not restricted.

  • Minimum 7 members.

  • An invitation to the public to subscribe to any shares or debentures or any type of security is permitted.