What are the Different types of Business Organisation

by Aditya
What are the Different types of Business Organisation

What are the different types of Business Organisation - How to find the right one for you?

Table of Contents

Not all business types are the same.

All of them have different meanings and require a different level of compliance and paperwork.

How do you identify the right business type for you?

You identify the right business type by figuring out the needs of your Startup.

Answer to the following questions will help you identify your requirements:

  • Are you a single person company, or do you have partners?
  • Do you want to start small and then go for Private Limited after you have extra money to meet compliance?

The different business types across the globe are:

  • Sole Proprietorship Firm
  • Partnership Firm
  • LLP Company
  • A Private Limited Registered Company
  • A Limited Company

I will skip the limited company option. They are for the big players who have reached a certain level and now want to raise more funds for this company by listing it on the stock market.

Let’s visit the other four options.

What is the right business type for your Startup?

  • Sole Proprietorship is a business type where one person is the sole owner of the firm. All liabilities are of the proprietor of the firm.
  • A Partnership firm is a business entity with more than one partner.

Based on my experience, I suggest new startups and businesses start as a registered sole proprietorship or partnership firm and then eventually turn into a private limited company – once the Business reaches a respectable position.

In starting – the only reason for you to go for a private limited company is either you are working with a government or are trying to get a big brand name on board as a client.

Clients start looking at you more respectable once you are a private limited company (it is all purely based on my experience).

However, don’t go for it (initially) – it is not worth the money and compliance work it requires to run a private limited company for a business just trying to find its feet.

One of the reasons, I do not suggest a privately limited option for startups is to save them the paperwork involved with private limited companies.

Less paperwork means less money spent on Chartered Accountant fees 😊.

Don’t you think you need to save every single penny to grow your Business? Let’s save some here.

Moving to LLP Companies – LLP companies is the business type where one partner has unlimited liability while the others have limited liability.

Before I shift to the next step, here is another vital point to remember

“You must know how to handle all Paperwork, Licensing, and Compliance.”

I know paperwork is not exactly a part of this step. Yet, you need to do it all as the government won’t let you move forward until they are satisfied with your paperwork.

Some of the examples of paperwork and compliance being – industries need a certificate from the Fire department, labour department, etc.

Restaurants need a compliance certificate from some 100 departments. (they are the toughest to run ☹ ).

I wish I knew a code to crack the restaurant business challenge. Imagine – grumpy customers, online reviews, government compliance, staffing troubles, expensive rent.

It makes me wonder – How do restaurants survive?)

So, before you finish the formalities, figure out all the compliance you will need to have the Business officially registered.

The Action list to identify the right Business Organization

  1. Action Point 1 and only 1:

 Talk to a Chartered Accountant or the business registering authority in your country and understand the needs and requirements of your business.

Do not rush into registering your business until you understand the cost and other implications of starting one.