Forms of Business Organization

Top 6 types of businesses are basics of every organizational structure you see. Business vary with little amendments but the core reason is to earn handsome profit. 

The different from of business organization can be summarized

  • Sole trader ship / Sole Proprietorship
  • Co-ownership
  • Partnership
  • Joint Stock Company
  • Co-operative Undertaking
  • Combination

1. Sole trader ship / Sole Proprietorship

Sole trader ship is the oldest form of business house which is owned, controlled and managed by an individual. It is also named as sole proprietorship or sole ownership. This type of organization may easily by formed and its registration is not required by law. One man invests his capital and devotes full time and energy into his business and so he enjoys hundred percent profit of business. On the other side if there is loss, he sustains all the losses of his business. Sole proprietor has unlimited liabilities and his private assets are also liable to pay the obligations of his business. Retailers, hawkers and all other persons who perform direct services for the public near to their home are of sole trader ship type.

2. Co-Ownership

It is the relationship who employ their money in order to own property. In other words, it is the joint ownership of property by two or more persons. This ownership is generally created by the operation of law as well as from status. Agreement is not essential for its formation. The property of the owners is used in business of commercial purposes or it may be rented out. But there is not concept of community sharing of profit or loss. The persons who form his type or organization are individually known as co-owners and are collectively named as co-ownership.
Read: Nature of Businesses

3. Partnership

Partnership is the relationship between two or more persons who agreed to share profit of a business carried on by all or any of them acting for all. The number of partners must not exceed twenty in ordinary business and not more than ten in banking business. It can be formed without any legal formalities. Like individual ownership it is simple to form and easy to run. Similarly, it may be dissolved without performing any legal process. Every partner has unlimited liabilities in partnership. It does not possess a legal entity apart from its members. This type of organization is very popular in our country. The small and medium size business activities are performed under such organization. Two or more persons may start this business with a moderate capital and new partners may be admitted for getting additional capital. In Pakistan, it is controlled under the partnership Act 1932.
Reading: Important aspects of Partnership Deed

4. Joint Stock Company

A joint stock company is a voluntary association of different persons created by law as a separate body for specific purposes. It enjoys a common capital contributed by its members, such capital being divided into transferable shares. The liability of each such member is limited to the face value of the shares he holds. It has a legal entity apart from its members. It can sue and be sued in its own name. In our country, joint Stock Company is controlled under the company ordinance 1984.It is managed by the group of persons known as Board of Directors who are appointed by the shareholders. Public company and private company are two major forms of Joint Stock Company. These are very popular in the field of large scale production and distribution due to its greater benefits.

5. Co-operative Undertaking

A co-operative undertaking is a voluntary association of individual for the common interest of its members. It is formed for conducting some business activities. It is protective device used by the economically weak persons of the society to safeguard their common interest against the exploitation of economically strong group or individual. It is thus organized to render services to its members. Its capita is generally divided into a number of shares of equal value. In this form of organization all members enjoy equal rights of ownership and have equal voice in the management.
Reading: How Businessman Speaks?
Its formation is governed by the provisions of the co-operative Society Act 1925 in our country. It can be established with limited or unlimited liability. There are several types of co-operative societies i.e. Consumer, Producer, Marketing, Housing, Agriculture and Insurance Co-operative Societies. There are all rendering valuable services for the public.

6. Combination

When two or more business undertaking units combine to carry on business together for achieving the economic benefits, Combination takes place. It is also formed for defensive purposes: But it is considered to be unlawful if any of its objects be against public Interest. It is set up in various sectors i.e. trading, industrial and technical. It may be temporary or permanent. It may be found In loose or strong form, Horizontal, vertical, circular and diagonal are the types of combination, Trust, cartel, pool, holding company and ring are the major forms of combination, But the main object of combination is always to achieve common economic welfare for its constituent members.
Forms of Business Organization Forms of Business Organization Reviewed by Janet D'Suza on 2:10:00 PM Rating: 5

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