Forms of Business : Different types of Business

Now when you have already read about what is a company and characteristics of a company it is time to know about other types of business and differences with company form of business. If you have still not read about the features of a company kindly check out the previous page before proceeding further.

There are mainly the following types of business

1. Company
2. Partnership firm
3. Hindu Undivided family
4. Limited liability firm

1.Company – You have already acquainted yourself with this form of business. Kindly read the previous page to read in details and come back soon to read further.

2.Partnership firm– In partnership firm the firm is not distinct from the partners who have promoted the business. In other words a partnership firm is not a distinct legal person and all the liability and assets are attached to the partners unlike the company form of business where the assets and liabilities are attached to the the company itself.

3. Hindu Undivided Family(HUF)– This form of business is formed by the a group of homogeneous persons who belongs to the same joint family. The Karta (manager) is the sole authority to enter into any contract for the purpose of business.

4.Limited Liability Partnership(LLP) – In Limited Liability Partnership form of business the firm will get the benefit of partnership and limited liability. LLP is a separate legal entity which means that the firm continues to have its existence even if the partners of the company changes. Besides the liability of the partners is limited to the extent of contribution of respective partners.

Let us now tabulate the differences of the above mentioned form of business to get a crystal clear understanding of the above.

Difference between a partnership firm and a company

[Partnership firm]	[Company]
Partnership firm is not distinct from different persons who form the partnership	A company is a distinct legal person
In partnership firm the property of the firm is property of the individual partners	In a company the property of the firm is in the name of the company
Creditors of the partnership firm are the creditors of the partners. The creditors of the company proceed against the partners in case of default.	The creditors to a company can proceed against the company in case of default and not against the members.
Partners are the agents of the firm.They can dispose assets or incur liabilities in the course of business	Members of the company are not the agents. A member cannot incurr liability or dispose assets of a company.
A partner cannot contract with the firm	A member can enter into contract with the firm
The death or insolvency of partners dissolves the firms	The company continues to exists even if any members dies or parts away from the company
The accounts of the firm are audited at the discreation of the partners.	The company has to get its account audited annually by a chartered accountant
A partnership firm is created by its partners and can be dissolved any time by agreement between partners	A company is formed by law and can be dissolved only by the process mentioned in the law.

Difference between Hindu Undivided Family(HUF) business and a company form of business

[Hindu Undivided Family] business	[Company]
Consists of homogeneous group of persons belonging to the same joint family	Consists of heterogeneous group of members
Karta is the manager who takes all decisions to incur liability for the business	There is no such system in a company
A person becomes member by the virtue of birth.	There is no such provision.
No registration is necessary for carrying out business.	Registration of company is necessary.

 

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