Types of Organisations

A business entity is an entity that is formed and administered as per corporate law in order to
engage in business activities. Most often, business entities are formed to sell a product or a service.
The major types of business organisations are as follows:

1. Sole Proprietorship

A sole proprietorship is a business that can be owned and controlled by an individual. In this type,
the business owner has unlimited liability, i.e, all the debts and losses incurred by the business will
be the direct responsibility of the owner of the business. It is the oldest form is business in all
countries. Since it is run by one individual, capital acquiring and organizational skill are limited,
hence reducing the work area. Here, the individual is free to select what type of business, the
commencement of business and the closure of business. Sole proprietorship business is most
favourable when the business requires a small capital, the involved risk is less and the market is
limited to only one place. Normally, even sole proprietorship companies are incorporated, in order
to avoid risk of the owner being sued. Once the company is registered, the company act as a
separate entity from its owner, where it can sue or be sued by a third party.

2. Partnership

Partnerships are formed when two or more people agree to carry out a business. They will be co-
owners of that business. However the type of partnership and the level of involvement will vary. But
since the business is owned by multiple people, the risks and rewards will be shared depending on
the respective investments. There are four types of partnerships: General partnership (GP), Limited
Partnership (LP), Limited Liability partnership (LLP), Limited Liability Limited Partnership (LLLP). In
partnership business, there is flexibility to make decision, the partners can decide how to manage
and finance the business. One of the biggest advantages of partnerships is the tax benefit. In
partnership, tax is not paid on income; instead, it passes through the profit and loss of the individual
partners of the business. During tax payment time, the partnership files a tax return showing its
profits and losses. In addition to this each partner should report his share of income and losses in the
business.

3. Cooperative business

This is a kind of business where the business is owned by multiple people and also the product and
services of the business are consumed by the owners. Generally cooperate businesses are started in
order to provide goods and services to their user-owners and not to generate profit for investors. In
cooperative business, there is a sense of equality. There is no employee and an employer.
Cooperative businesses are almost always seen in small scale businesses because they do not need
much capital or organizational skill. In cooperative business, members are charged tax only once on
the cooperative income, and not both on the individual and the corporate level. Cooperative
business follows a democratic structure. The power of decision making doesn't depend on the
monetary investment of an individual in the business. But one of the disadvantages of cooperative
businesses is the difficulty in getting investors. Since it follows a one-member one-vote policy,
investors tend to put money elsewhere that promises them better decision making power.

4. Family owned business

A family owned business is one such business where two or more owner of the business are form
the same family. Family businesses may have numerous combinations of family members in various
business roles, including husbands and wives, parents and children, and multiple generations playing
the roles of stockholders, board members, working partners, employees etc. Conflicts often arise
due to the overlap of these roles. A family owned business typically limits the number of shares
available to the non-family member. This is to ensure that the ownership of the business comes
within the same family. Family owned business demands that at least one family member must be
on the board of directors of the business, if not more. It can be a traditional business, community
business or a home-made business.

5. Private company Ltd.

Private Company Ltd is a type of business where the no. of owners is above 2 and below 200. Here,
the liability of the owners is limited to the amount of shared help by each of the owners. A private
company can function with a minimum of two directors on board. Private companies are of three
types: Limited by shares, Limited by guarantee and Unlimited Liability. For private companies
minimum capital is not required and all private companies should register with "Pvt Ltd". Unlike
cooperative business, decision making power lies in the hands of the people who have invested
more. There is also a greater flexibility in running the business since it is a limited company and all
the members enjoy this facility. It has he advantages of a partnership and a public company. One
major disadvantage of a private company is that the shares of a Private company cannot be publicly
traded. For a private company, there is no need to send copies of the balance sheet, profit and loss
etc. to the registrar.

6. Public sector undertaking (PSU)

Commonly known as PSU, they are the companies that belong to the government. They are also
known as Public Sector Enterprises. They can be owned by the union Central government, the state
governments or the territorial governments. There are mainly two types of PSUs: The Central Public
Sector Enterprises, which are owned and controlled by the Government of India; and the State Level
Public Enterprises (SLPEs) which are owned and controlled by the state governments. While most of
the other types of organisations are profit-based, PSUs are service based. There are times even
when PSUs incur losses, while serving the people. Creating employment opportunities, generating
financial resources, accelerating import and export etc. are some of the main objectives of Public
Sector Undertakings. ONGC, BHEL, BPCL etc. are some of the major PSUs.