Key Points

The five major forms of business organisation are Sole Proprietorship, Joint Hindu Family Business, Partnership, Cooperative Society, and Joint Stock Company.

A sole proprietorship is a business owned, managed, and controlled by a single individual who receives all profits and bears all risks alone.

In sole proprietorships and partnerships, owners have unlimited liability, meaning their personal assets can be used to pay business debts if business assets are insufficient.

This form of business is found only in India and is owned by members of a Hindu Undivided Family. It is governed by Hindu Law and managed by the eldest member, known as the Karta.

In an HUF business, the Karta has unlimited liability, while all other members, called co-parceners, have limited liability up to their share in the family property.

A partnership is an association of two or more persons who agree to share the profits of a business. It is governed by the Indian Partnership Act, 1932.

Every partner is both an agent and a principal. This means a partner can bind all other partners by their acts and is also bound by the acts of other partners.

A partnership deed is a written agreement among partners that outlines the terms and conditions of the partnership, such as profit-sharing ratios, duties, and salaries.

A cooperative society is a voluntary association of persons who join together for the welfare of the members, operating on the principle of 'one man, one vote'.

A company is an artificial person created by law, having a separate legal entity, perpetual succession, and a common seal. It is governed by The Companies Act, 2013.

The main features include limited liability for members, easy transferability of shares (in public companies), and perpetual existence, meaning it is unaffected by the death or exit of members.

A private company restricts the transfer of shares and cannot invite the public to subscribe to its securities. A public company has no such restrictions.

A private company must have a minimum of 2 and a maximum of 200 members. A public company requires a minimum of 7 members with no maximum limit.

Key factors include the cost and ease of formation, degree of liability, continuity of the business, capital requirements, managerial ability, and the desired level of control.

Partners can be active (manages business), sleeping (contributes capital but does not manage), nominal (lends name only), or partner by estoppel (appears to be a partner).