Any person when starts planning about opening up a new business has to address many issues before its successful launch . But the very first issue that needs concentration is deciding the form of your business. Whether you are looking up to start your business on small scale or large scale deciding the form of business is a crucial step. Law provides protection to all forms of business entities and enforces various obligations on as per the nature and form of your business entity.

Every country has a separate business law that defines rules and regulations of starting and running businesses in particular regions. These laws also define the forms of organizations and privileges enjoyed by each entity under a legal protection. Mostly in all countries there are three different forms of business organizations which are described below:

Sole Proprietorship:

It is absolutely right that “one man show is the best in the world”. In this form of business, one man opens and runs his own business. The ownership, control and management are totally in his hands. According to the laws of most countries this form of business does not require registration. The owner himself invests all the capital and puts all his efforts to run his business smoothly. As he has no partner or investor, whatever profit he drives it becomes his own income. But if he faces loss, he has to bear all the loss alone and in case if he borrows money from any company and he is unable to pay that amount, his personal assets become liable to pay his obligations. Mostly small scale businesses and the individual who like complete secrecy prefer sole ownership.

Partnership:

Partnership is a business entity in which two or more persons agree to share the amount of profit by working as an agent of one another. Each party brings capital and the profits and losses are shared according to the pre- agreed ratio. The law regarding the minimum number of partners in a business varies across countries. In this form of ownership registration is not compulsory in many countries but yet if partners want they can get their business registered. Personal assets of the partners are not liable if company becomes unable to pay off its debts. Rights, Obligations, duties, and dissolution of this entity is prescribed by the law which varies across the countries.

Joint Stock company:

It is a most renowned form of business organization in which a company is listed in the stock exchange of the country and its shares are widely issued to the public at large. The one who buys the shares become its members. Its registration is mandatory in almost all the laws. The capital required to start a company is contributed by promoters who are then issued preferred stock as a reward. Owners are paid divided on shares as per the profit earned. Also, it holds statutory and other meetings according to the law.

Above are mentioned   three legal forms of business organizations and if you are planning to start up a business, you should read this blog first!