Business Law describes about organization types, legal structure of it

1. BUSINESS LAW

2. • A business organization is an establishment formed to carry on commercial
enterprise
• All businesses must adopt some legal configuration that defines the rights and
liabilities of participants in the business’s ownership, control, personal liability,
life span, and financial structure.
• There is a particular law involving in the business activity which is called as
business organization law.
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BUSINESS ORGANIZATION

3. • The business organizations can be mainly divided into two categories according to the intention of
their business activities.
1. Private Sector
• Private sector organizations are owned by individuals. These businesses are driven by profit. The
profit from private sector organizations benefits the owners, shareholders and investors. The funds
are collected from the shareholders and also by bank loans
• E.g.: - Sole Proprietorship, Partnerships and Companies
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TYPES OF BUSINESS ORGANIZATION

4. 2. Public Sector
• Public sector organizations are owned by the government. They provide goods and services for the
advantage of the public. They are run by the government. They operate with money raised from
taxes.
• E.g.: - Departments, Public Corporations and Government Companies
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TYPES OF BUSINESS ORGANIZATION

5. • The vast majority of small businesses start out as sole proprietorships. These firms are owned by
one person, usually the individual who has day-to-day responsibility for running the business. The
owner has all responsibility for any of its liabilities or debts.
• The funds are collected by the owner itself (savings, friend’s and family’s funds)
• Name for our entity can be registered under No. 07 of 1987 business name registration act.
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SOLE PROPRIETORSHIP

6. 6
SOLE PROPRIETORSHIP
Advantages Disadvantages
can easily be formed and simple to
run
Amount of the capital that can be
invested is limited
Minimum legal restrictions. Owner cannot be the master of all
technique’s management, sales,
engineering processes etc., since
work suffers.
Retain of all profit to the owner. Due to unlimited liability owner
cannot take risk to start a big industry.

7. • In a Partnership, two or more people share ownership of a single business.
• The Partners should have a legal agreement that sets forth how decisions will be made, profits will
be shared, disputes will be resolved,
• E.g. Pottery Barn & Sherwin-Williams, Casper & West Elm.
Types of Partnerships
1. General Partnership
2. Limited Partnership
3. Limited Liability Partnership
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PARTNERSHIP

8. 8
PARTNERSHIP
Advantages Disadvantages
Ease of Start-Up Partnerships are
easy to establish. There is no required
partnership agreement, but it is
recommended that partners develop
articles of partnership.
Unless the partnership is a limited
liability partnership, at least one
partner has unlimited liability.
Shared Decision Making and
Specialization. In a successful
partnership, each partner brings
different strengths and skills to the
business.
General partners are bound by each
other’s actions.
Minimal government regulation Profits must be shared with others

9. • This type company can be formed by two or more persons.
• The maximum number of memberships is limited to 50.
• In this transfer of shares is limited to members only.
• Should be registered under No. 07 of 2007 companies act.
• For example: Google India Pvt. Ltd., Facebook, Flipkart
9
PRIVATE LIMITED COMPANY

10. 10
PRIVATE LIMITED COMPANY
Advantages Disadvantages
No minimum capital Private Limited Company is that it
restricts the transfer ability of shares
by its articles.
Separate legal entity In a Private Limited Company, the
number of shareholders in any case
cannot exceed 50.
Limited liability Private Limited Company is that it
cannot issue prospectus to public.
Free and easy transfer of shares In stock exchange shares cannot be
quoted.

11. • It is one whose membership is open to general public.
• The minimum number required to form such company is seven, but there is no upper limit.
• Such companies can advertise to offer its share to general public through a prospectus.
• These public limited companies are subjected to greater control & supervision of control.
• E.g. Rolls-Royce Holdings PLC, Royal Dutch Shell
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PUBLIC LIMITED COMPANY

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PUBLIC LIMITED COMPANY
Advantages Disadvantages
Led by Board of Directors High Costs
Number of member are infinity Greedy Shareholders
Limited liability Slow control
Free and easy transfer of shares Low power for the company
comparing to private limited
company

13. • All the departments have following essential characteristics
• Financed out of government bud get
• All the rules regulations of government are applicable.
• Direct control of the concerned ministry.
• Employees are government servant.
• The examples are posts & Telegraphic, Railways, Defense, Industries, Broadcasting.
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DEPARTMENTS – PUBLIC SECTOR

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DEPARTMENTS
Advantages Disadvantages
Because of the government control it
is easy to achieve the economical
political & social objectives.
Because of bureaucratic control
generally timely decision are not
taken.
Such organizations are suitable for
public utility serviced & defense
industries.
Government officials prefers to work
according to certain rules &
regulation & thus it becomes difficult
to ring out major modifications is
innovation etc.
Because of the government control,
complete secrecy is possible like in
ordinance factories etc.
Lack of initiative because promotions
are seniority based rather than merit
based.

15. • A public corporation is wholly owned by the Government Centre to state.
• It is established usually by a Special Act of the parliament.
• Special statute also prescribes its management pattern power duties & jurisdictions.
• Though the total capital is provided by the Government, they have separate entity & enjoy
independence in matters related to appointments, promotions etc.
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PUBLIC CORPORATIONS

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PUBLIC CORPORATIONS
Advantages Disadvantages
These are expected to provide better
working conditions to the employees
& supported to be better managed.
Any alteration in the power &
Constitution of Corporation requires
an amendment in the particular Act,
which is difficult & time consuming.
Quick decisions can be possible,
because of absence of bureaucratic
control.
Public Corporations possess
monopoly & in the absence of
competition, these are not interested
in adopting new techniques & in
making improvement in their
working.

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