BUSINESS STRUCTURE (Evs)

A business structure refers to how a company wants to represent itself legally in the industry on formation on the basis of profit & loss ,taxation , liabilities, no of members. Role of members etc. It is the type of setup that allows and restricts activities a business undertakes after its establishment.

➢ TYPES OF BUSINESS STRUCTURE:-

1.Sole Proprietorship 2.Partnership 3.Limited Liability Company (LLC) 4.Corporations.

➢ Sole Proprietorship.

• A structure is termed sole proprietorship when a person is the sole owner of a business.

•It is a simple setup where the owner is the single person responsible for the daily business operations.

• The revenues and liabilities are merged into their personal accounts, which are calculated and taxed on a personal level.

Features of Sole Proprietorship

 The main features of a Sole Proprietorship are as follows:

•• Legal Formalities – No legal formalities are required to either commence or to shut down a sole proprietorship. But the owner must have a special license or certificate to run the business for specific occupations. For example, a sole proprietor planning to start a pharmacy must have a pharmacist’s degree.

• Risk and reward – A sole proprietor has complete ownership over the profits or losses from their firm’s operations.

➢Control – The rights and responsibilities of a sole proprietorship lies solely with its 

owner. No other person can interfere in the business activities of a sole proprietor without prior permission.

➢Unlimited Liability – The sole proprietor is liable for the success or failure of their financial transactions. In case the proprietor takes a loan and fails to repay it, the creditors can attach the business owner’s property to recover the loans.

➢ Advantages –

➢ Swift decisions – A sole proprietor has complete responsibility in terms of making business decisions. It results in faster decision-making for the business as there is no need to consult multiple parties for every minor issue.

➢ Confidentiality – A sole proprietor can keep all business-related information to themselves as the business’s only decision-maker. The law does not bind them to make the accounts of a sole proprietorship public.

➢ Profit-sharing – A sole proprietor has complete ownership of profits arising from business operations. They are not obligated to share profits with anyone else.

➢ Disadvantages –

➢ Lack of Resources – It is challenging to raise vast amounts of capital in a sole proprietorship compared to a partnership or company. This form of business runs mainly on personal savings and borrowings made by its owner. Lack of adequate finances can become an obstacle in growing the business.

➢ Unlimited Liability – If the proprietor cannot pay debts arising out of business from its assets, his/her personal property is also at stake. This results in sole traders taking zero or very minimal risks to ensure the survival of the business.