TYPE OF BUSINESS ENTITIES IN INDIA

BUSINESS ENTITIES IN INDIA:

Indian business sector is basically divided into organized and unorganized business entities. Organized sector is one which is under the direct control of Reserve Bank of India (RBI) though the unorganized sector is not governed by RBI. 

ORGANIZED SECTOR:

The organized sector comes under the direct control of the Indian Government and RBI through formation of different Act, rules and polices this sector is being directly and indirectly controlled by the government. Organized sector consists of the followings:  

1. Company: Company is a separate business entity from its owners. Which means the owner of the Company are the Shareholders/ Members of the Company though the liabilities of the Company are not the personal liabilities of its shareholders. With enactment of the Companies Act, 2013 there are three types of Companies in india:

1. One Person Company (OPC): This is a new entity introduced by the Companies Act, 2013. OPC is a private company having only one member, one nominee and minimum one director. An OPC has to add the word “OPC” with its name.

2. Private Company: Private company is a company incorporated under the Companies Act, 2013 or any earlier act, having minimum 2 and maximum 200 members, minimum 2 directors and by its articles restricts the right to transfer its share and any invitation to public to subscribe for any securities of the Company. 

3. Public Company: Public company is a company which is not a private company, having minimum 7 members and 3 directors. Public company can be further divided into listed and unlisted public companies.

2. Partnership: Partnership is one of the oldest business entity existing world-wide. In India the Partnership form of business entity was given a legal purview by enactment of the Partnership Act, 1932. In it there must be minimum two persons willing to work together for their common benefits. This sector is not a completely organized sector as the registration of partnership is optional but to avail the tax benefits businessmen get their partnership registered. The Partnership is being governed by the agreement between its partners, which can either be oral or in writing. For getting the partnership registered the formalities of the registration shall be fulfilled with the sub-registrar of the area in which the Partnership Firm’s office is situated. The main disadvantage of this form of entity is unlimited liability i.e. to pay off the liabilities of the firm the personal assets of the partners could be attached.

3. Limited Liability Partnership (LLP): LLP was introduced in India by the Indian Government in the year 2008 by way of Limited Liability Act, 2008. LLP is a form of partnership in which the liabilities of its partners are limited unlike partnership. This concept has became very popular among the working professionals of the country specially Chartered Accounts. LLP is an entity which has features of both Company as well as the partnership. Like a company it is managed by the Designated Partners (Directors n case of Companies) and like partnership it is governed by the LLP Agreement.

4. Joint Hindu Family Business (HUF): Joint Hindu Family or Hindu Undivided Family (HUF) is the oldest form of business in India, which is prevalent throughout the Country. In this form of business entity person becomes a part of business by birth in the subjective family. It is governed by the Hindu Law. There are two forms of HUF Dayabhaga & Mitakshara. Dyabhaga are the HUF of Bangal and Assam where Mitakshara is the kind of HUF applicable to rest of India. The basic difference between Dayabhaga & Mitakshara is in Dayabhaga both male as well as femal members of the family inherit the property and becomes a part of it by birth whereas in Mitakshara only male members become part of the HUF with birth and can demand part in its properties.

5. Cooperatives: As the name suggests the cooperatives are the organizations formed by the co-operation of the people for their mutual benefits. The best example of cooperative society in india is “Amul”. Mr. Verghese Kurien is the man behind Diary Co-operative Society which is now well known in the country as “Amul”. There are different kinds of cooperatives working in India as:

1. Cooperative Housing Society

2. Cooperative Agricultural Society

3. Cooperative Banking Society

4. Cooperative Diary Society

5. Consumer Cooperatives\

6. Cooperative Retailers

7. Cooperative Whole Sale Society etc.

6. Others: The other form of business entities are Joint Ventures, Liasion Office, Branch Office etc. When a foreign entity decides to start their business in India they took these routes. They invest either by wholly owned subsidiary company or by way of Joint Ventures. Some of the foreign entities have not directly invested in any Company but they have opened their Liason office or Branch Office in India.

UNORGANIZED SECTOR: 

The unorganized sector is basically the organizations which are not organized with respect to the working hours, conditions, reporting of income or expenditures etc. Proprietorship is a fine example of the unorganized sector where a sole person does any business to earn profit but he doesn’t have any standards set and doesn’t not comply any of the labour or other laws of the Country. A fruit hawker is an unorganized sector businessman.

By Nikita Singh