Forms of Business Organization

When we check the definition of business it shows as an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit entities or they can be non-profit organizations that operate to fulfill a charitable mission or further a social cause. In simple words, Business is the activity, which makes one’s living or makes money by producing or buying and selling products; such as goods and services. Are you looking to start a business of your own?  If yes, you need to know the types of business. 

Forms of Business Organization

Here are the major forms of business organization.

Sole Proprietorship

Sole Proprietorship

It is the most popular and simple business type, that one can operate. It refers to a person who owns the business and is personally responsible for its debts. One of the features of a Sole Proprietorship is that it can operate under the name of its owner or it can do business under a fictitious name (i.e., simply the trade name). As mentioned above, it is a popular business form due to its nominal cost and easy setup structure. You can be a Sole Proprietor only by registering your name and secure a local license.  


Manage and operate a business by two or more parties and share its profit is termed as Partnership business.   Partnerships come in two varieties: General Partnerships and Limited Partnerships. The partners manage the company and assume responsibility for the partnership’s debts and other obligations in General Partnership. Whereas limited partnership has both general and limited partners. The general partners own and operate the business and assume liability for the partnership, while the limited partners serve as investors only; they have no control over the company and are not subject to the same liabilities as of the general partners.



If a Sole Proprietorship is the most popular business type, a Corporation is the most advantageous way to start a business. A Corporation is a legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that individuals possess. An important element of a Corporation is limited liability, which means that shareholders may take part in the profits through dividends and stock appreciation but are not personally liable for the company’s debts.

Private Limited Company

A Private Limited Company is a business entity held by a small group of people. It is registered for pre-defined objects and owned by a group of members called shareholders. Startups and businesses with higher growth aspirations popularly choose Private Companies as a suitable Business structure. In simple words, a private Limited Company is any type of business entity in ‘private’ ownership.


Limited liability companies (LLCs) are the blend of taxation of a Partnership or a Sole Proprietorship business and the limited ability of a Corporation business. These are the business structure that is allowed under state statutes and the regulations surrounding LLCs vary from state to state. The term member is used for defining owners in LLC. Different from a corporation, an LLC is much easier to set up and provides more flexibility and protection. Individuals, corporations, foreigners and foreign entities, and even other LLCs can be a member because many states don’t restrict ownership.


Co operatives

A Co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise. As the word says, it is based on the cooperation of its members. It is a member-owned business structure with at least five members. Regardless of their level of involvement or investment, they All have equal voting rights. All members are expected to help run the Co-operative.

There are different Co-operatives-

Consumer Co-operative:- Businesses owned and managed by the people who use their services.

Worker Co-operatives:- Organizations managed by the people who work there.

Multi-stakeholder or hybrid Co-operatives:- Share ownership between different stakeholder groups.

Second-and third-tier Co-operatives:- Whose members are other cooperatives.

Platform Co-operatives:- use a cooperatively owned and governed website, mobile app, or a protocol to facilitate the sale of goods and services.


Non Profit

Non Profit Businesses are also known as Non-profit organizations. It is a legal entity organized and operated for a collective, public or social benefit. And in contrast with an entity that operates as a business aiming to generate a profit for its owners. Mainly such organizations intended to promote educational or charitable purposes.

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