Everyone has a dream of becoming an Entrepreneur, especially after passing out from college & serving few years to any Enterprises of his/hers area of interest. Where this Enterprises/Entrepreneur/Business Entity/Organization is came from? How it is formed? How really to go to form an Enterprises? What are various types of Business Modules? What’s this terminology defined? What’s are its significance? What’s its advantages & Its Disadvantages?
After Independence the journey of business are controlled by License Raj commonly known as “Permit Raj”. It is pejorative for a system of government that adhered to strict rules, regulations and control over the Indian Economy. Under this system business in the country required license to operate. These license are difficult to get, which led to the term “License Raj”.
According to BBC article in 1998, due to high restrictions, business sometime had to receive approval from up to 80 agencies before they were granted license to produce. Moreover, the state (i.e. government) would decide what was produced, along with the quantity of production, market price as well as the course of the capital used in production. Additionally, the government also restricted firms from conducting layoffs and closing factories. This was in place from Independence till 1991when the country went through significant economic reforms.
♦ Proprietary Concern :-
As all of you know that when One Person starts its activity (i.e, whether its marketing/selling/finance/accounting/ auditing/research/medicine) then its commonly known as Proprietary Concern. As the Single person handle all the activity (i.e. Marketing/Selling/Buying/Human Resource/Taxation/Costing/Banking & Treasury), it’s a one man show/army. It generally well manage if the single person cover the entire area of commerce field. This Proprietary concern are either Individual assesse or it’s a legal separation from its individual status. In other words Managing Director of such entity is himself/herself but the legal name is Private Limited Company. How the Private limited company formed will be discuss later on. The main difference in this two type of assesse is the capital contribution. Below Rs.1Lakh any person can form its Private Limited Company but its nature is Proprietary concern. Whereas in Private Limited company minimum capital contribution required is Rs.1 lakh.
♦ Firms :-
Now we came to next level i.e. Partnership Firm. When it came to know to more than one individuals that joint operation can be carried on the common agenda then a legal entity is formed with the help of “Notarized” document called as Partnership Firm. This Firm either registered or non-registered. The basic difference between Notarized and registration is that in case of any legal issue the Firm which is notarized cannot sued to any other party including partners also as no Legal status exist for such firm. Whereas a Registered Firm have its legal existence separate from its partner and registered under Partnership Act 1932. Such type of unregistered firm is beneficial only in the initial days of operation, once operation are streamlined then it is always advisable to get it registered.
♦ Limited Liability Partnership Firm :-
Now a days another kind of Partnership Firm is in existence called as Limited Liability Partnership Firm. In above registered firm every partner is liable, jointly with all other partners and also severally for all acts of the firm done while he is a partner whereas under LLP structure the liability of the partners is “Limited” to his agreed contribution. A Private Limited company can be converted into LLP and vice versa. The minimum no of participants are 2 and 10 in case of banking and 2 and 100 in case of others in case of partnership firm, minimum participants are 2 in case of LLP and there were no maximum number fixed in case of LLP. All registered firms are governed under The Indian Partnership Act 1932 whereas all LLP are governed under The Limited Liability Partnership act 2008.
♦ Companies :-
Now next level of Business Module is Company (i.e Both Private and Public and Domestic & Foreign). Company is formed generally when someone see the bigger picture or task than the individual or even of LLP and Firm. Company is formed by at least 2 participants and maximum 200 participants in case of Private Limited Company. It exclude its Past & Present Employees. In India two types of Company exist i.e one is Private Limited and another is Public Limited. Other types are its subsequent classification according to its use and nature. For example a company which is registered on any Exchange (Bombay or National) is a listed Company whether it is private limited or Public limited. In other words the company which have more public interest are Substantial Interest Company and in which public interest is less are non-substantial interest company. All those companies which are registered under Companies act 1956 (now 2013) are Domestic Company other than this all companies which are registered outside India are Foreign Company.
In Public limited companies the minimum participants are 7 and there were no maximum number of participants. In general all Public limited companies are listed companies. In such listed Public companies government may have its stake ranging from 1 to 100%. If it’s so then its “Government Undertaking” companies.
♦ HUF :-
Now move on to other types of assessee as above types are already handled by common person in its day to day activity. The next immediate type of assessee is HUF i.e Hindu Undivided Family where the elder person of the family is act like as “Karta” and take all the decisions. You can say him like as Managing Director of that Family. Single men person can formed HUF with other members of family. Now a day’s female can also formed HUF if no male members exist in the family. It is run under Hindu Act. Its have no limitation on maximum number of participants. Many business entity are covered under this ambit.
♦ Societies :-
When more person join their hands for some common purpose/goal but without profit Motive or if there is a profit it is distributed to its members only then the entity termed as Society. To be registered as members of the society the person should contribute towards the “Corpus” of the society. A private limited company can be acted as Society if it is run as “Producer Company”. It is for the well-being of producer. All the activates are within the Producer itself including distribution of profit and transfer of shares. It have limitation to transfer the shares. Society are run under The Society Act 1960. All the functionality are parallel to Private limited companies other than distribution of Profit.
♦ Trust :-
The next level of group of people are called as Trust. It is formed with some definite objective and for charity. Trust are run by the Trustees which are duly appointed by the Trust. Profit making is not the prime motive of the Trust.
Association of Person/Body of Individuals
This type of organization comes into existence in combination of Individuals/firm/companies etc. They have the profit motive and dealing with Big Task.
Artificial Juridical Person
It is appointed by the law or by the adjudicating authority like as Liquidator or by Arbitrator (or by Hindu deity) in case of winding up of the organization. It have separate legal existence from the organization.
Local Authority
It means Municipal Corporation, Gram panchayat & local bodies etc.
Now a days a new terminology emerged which is called as “Start-up & MSME” business.
Startup business means the business which have a unique idea other than current Industry which may be present either in Research & Development, Sales & Marketing, Processing, Manufacturing.
MSME is also new concept which is emerged now a days. It means Micro, Small Medium Enterprises under the MSME Act.
Conclusion: The evolution of enterprises in India reflects a transition from regulatory constraints to a vibrant ecosystem supporting diverse business structures. Understanding these models is crucial for aspiring entrepreneurs and established businesses alike, enabling informed decisions and strategic growth initiatives.
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