TYPES OF BUSINESS OWNERSHIP

Dr C K Biswas
Dept of ME
NIT RKL

CONTENT

Types of business ownership

Advantages & disadvantages

TYPES OF BUSINESS OWNERSHIP

1.
2.
3.
4.
5.

Sole Proprietor
Partnership General / Limited
Corporation Private / Public / Crown
Co-operative
Franchise

SOLE PROPRIETOR
A business owned and operated by
one person.
The owner is responsible for all
operations of the business and
assumes all the risk.
e.g.: a single person art studio, a
local grocery, or an Income Tax
consultation service

ADVANTAGES OF A SOLE PROPRIETORSHIP

Owner makes all decisions

Owner is her/ his own boss
Owner keeps all the profits
All financial information can be kept
secret
This type of business is easy to start or
close

DISADVANTAGES OF A SOLE PROPRIETORSHIP

Owner has responsibility for all debts

Costs and time commitment can be
high
Funding can be difficult to obtain
Owner is responsible for all aspects of
the business
Owner doesnt have fringe benefits

PARTNERSHIP
a form of business organization in
which two or more people own
and operate the business together
e.g.: Google, a company founded
by Larry Page and Sergey Brin,
Ebay, Proctor and Gamble

ADVANTAGES OF A PARTNERSHIP

Partners co-own the business

They share responsibilities
They may have greater financial
resources than sole proprietors
They share business losses
They share time commitment

DISADVANTAGES OF A PARTNERSHIP

Partners have unlimited personal

liability for all the other partners
They may have conflicts
Profits are shared
Partnerships are more difficult to close
down than sole proprietorships
Agents of the business dilemma

GENERAL AND LIMITED PARTNERSHIP

General
Each partner
has unlimited
liabilities
Partnership is
dissolves
when a
partner dies.

Limited
Limited
liabilities

Partnership

is
not dissolved

CORPORATION

A legal entity that exists

independently of its owners
Owners are called
shareholders
e.g. Reliance Industries Limited, Infosys
Three types:

Private e.g. SAIL, BHEL, NTPC

e.g. GAIL, Uranium
Public
corp of India
Crown (solely government owned)

ADVANTAGES OF A CORPORATION

The owners are shareholders. They

have limited liability for the debts of
the corporation and share the profits
Usually shareholders do not operate
the company they hire employees to
do so
Corporations can usually raise funds
more easily than sole proprietors or
partners

ADVANTAGES OF A CORPORATION

Corporations usually have a lower tax

rate than private owners
A corporation can continue to exist
after the death of its owners

DISADVANTAGES OF A
CORPORATION

Corporations have more complicated

structures than sole proprietorships or
partnerships
Employees who are not owners may
not be committed to the business

DISADVANTAGES OF A
CORPORATION

Corporations must publish annual

reports, which could give away
important secrets to competitors
The value of company shares can
change depending on changes in the
stock market

PRIVATE CORPORATE
PUBLIC
CORPORATE
Capital collected by issuing

Capital collected from

private partners
Shares can only be
transfer privately
Need not file documents
to registrar of company
Need not circulate
balance sheet
Shares cannot be traded
on Stock Exchange
No. of Share holders 2 - 50

public shares
No restriction shares
Need to file documents to
registrar of company
Must circulate balance
sheet among stock holders
can be traded on Stock
Exchange
No. of Share holders 7 unlimited

CO-OPERATIVE
Businesses owned and operated by a
group of people with a strong
common interest
Start-up costs are shared among the
members of the co-operative
Members own and control the
business and make all business
decisions
e.g.: AMUL, Indian Coffee House, Shri
Mahila Griha Udyog Lijjat Papad

ADVANTAGES OF A CO-OPERATIVE

Members own and control the business

Members share the start-up costs and
the running of the business
They share the financial risk
Members may pay less for goods and
services and get more for those they
sell

DISADVANTAGES OF A COOPERATIVE

Because each member only has one

vote, members may not want to invest
money for expansion
Because of the number of members,
making decisions can be difficult
Members can have conflicts

FRANCHISE

A business in which a
franchisor sells to another
person, called the franchisee,
the rights to use the business
name and to sell a product or
service in a given territory
e.g.: DTDC, McDonnell, KFC,
Pizza Hut

ADVANTAGES OF A FRANCHISE

Franchisees buy a business with a good

reputation
Franchisors supply training and
financial knowledge
Franchisors usually provide packaging,
advertising, and equipment to the
franchisee

DISADVANTAGES OF A FRANCHISE

Franchises can be expensive to buy

Franchisees may have to follow a lot of
rules laid down by the franchisors
If a franchisors business fails, so will
the franchisees business

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