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Starting a Business

Starting a Business. August 10, 2011. Types of Business. TYPE. OWNERSHIP STRUCTURE. DECISIONS. LIABILITY. Owner or Single Entity. Sole Proprietorship. All by Owner or Single Entity. Unlimited by Owner or Single Entity. High-end by Family Members Managerial by Karta. Joint Family (HUF).

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Starting a Business

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  1. Starting a Business August 10, 2011

  2. Types of Business TYPE OWNERSHIP STRUCTURE DECISIONS LIABILITY Owner or Single Entity Sole Proprietorship All by Owner or Single Entity Unlimited by Owner or Single Entity • High-end by Family Members • Managerial by Karta Joint Family (HUF) Group of Family Members led by Karta or manager Limited to the undivided share in HUF (Coparcener) Members Depending upon the nature of partnership (active / sleeping) Two or more members Partnership

  3. Types of Business (Contd…) TYPE OWNERSHIP STRUCTURE DECISIONS LIABILITY • Managerial decisions Board of Directors • Operational by managing directors Limited to value of investment Shareholders (public) Public Limited Company Private Limited Company Shareholders (private) or guarantee Depends on the size of the company Limited to value of investment Members Limited • Listed company with major state ownership • Unlisted company Public Sector Units (PSUs)

  4. Types of Business (Contd…) TYPE OWNERSHIP STRUCTURE DECISIONS LIABILITY • Managerial decisions Board of Directors • Operational by managing directors Group of members directly benefitted from association Limited to value of investment Cooperative Members or Owners Limited • Non-profit • Private • Cooperative Khadi, Village Handloom Businesses

  5. Example of Sole Proprietor • A watchmaker who repairs and sells watches owns his business. He obtains profits and bears his own losses and does not have partners • A freelance journalist not committed to a particular news company for a long term. Payment is on project-basis

  6. Example of Joint Family Business Two partners (who were also kartas) Govindram and Gangaprasad entered into a partnership and set a sugar mill. The two kartas represented their respective joint families. Govindram dies and the other continued the sugar business. The family of Govindram receives maintenance from the sugar business but property is not divided and the HUF continues. Govindram’s wife can claim share if there is a partition of business but is not a coparcener. Govindram’s son can be a coparcener who has the right to enforce partition. A firm cannot partner into a HUF.

  7. Example of Partnership Haria is a Chartered Accountant (CA) and Maria is a Lawyer. Both Haria and Maria set up a partnership firm. The profits are shared between Haria and Maria because most of their clients are small and medium businesses requiring consultancy in both, accounting and legal matters. Haria and Maria also have their individual clients with specific requirements. The profits out of the individual clients are accounted separately for Haria and Maria. The day-to-day operations of the firm are carried out by both through a manager.

  8. Example of Public Limited Company Asian paints is a public limited company with 14 Board of Directors managing operational, legal and financial aspects of the company. The company is listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) – ‘NSE: ASIANPAINT’. Investors in this company are either company or individual shareholders and debenture-holders. The investors receive share certificates, corpoate benefits like bonus, can call or direct Annual General Meetings (AGMs), participate and vote in general meetings, etc

  9. Example of Private Limited Company Knox Capital Advisors is a boutique investment bank exclusively focused on working with privately held, mid-sized companies in India, for helping them access financing from private equity investors across the globe. This company is privately held with a company size of 1 to 10 employees. Key management of the company includes Vishal Malik who is the managing partner and MeeraMurdeshwar who is a partner with the firm

  10. Example of Public Sector Unit • Steel Authority of India (SAIL) • Indian Oil Corporation Ltd (IOC) • Cotton Corporation of India • Engineers India Ltd • Hindustan Machine Tools (HMT) • Hindustan Aeronautics • Mahanagar Telephone Nigam Ltd • National Insurance Company • Rashtriya Chemicals & Fertilizers Listed Listed Not listed Listed Not listed Not listed Listed Not listed Listed

  11. www.headscratchingnotes.net bhaktij@gmail.com

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