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Classification of Firms by System of Organisation

Manufacturing organizations can be operated under any of the following organizationalstructures:

1) Proprietorship:is a type of business entity that is owned and run by one individualand in which there is no legal distinction between the owner and the business. Theowner receives all profits (subject to taxation) and has unlimited responsibility for alllosses and debts. very asset of the business is owned by the proprietor and all debts ofthe business are the proprietor!s.

2)Partnership:is defined as the relation between two or more persons who haveagreed to share the profits according to their ratio of business run by all or any one ofthem acting for all. ach partner is personally and e"ually liable for debts of thepartnership. #ormal terms of the partnership are usually contained in a writtenpartnership agreement.

3) Co-operative:is an autonomous association of persons who voluntarily cooperate fortheir mutual$ social$ economic$ and cultural benefit. %t is owned and managed by thepeople who wor& in it. %n such organizations$ every wor&er'owner participates in decisionma&ing in a democratic fashion$ or$ they may elect managers and administration fromamong themselves for decision ma&ing.

xamples: mul (nand Mil& nion *imited)$ +hri Mahila ,riha dyog *ijjat -apad$ etc.

4) Private imite!: private limited company is a voluntary association of not less thantwo and not more than fifty members$ whose liability is limited$ the transfer of whoseshares is limited to its members and who is not allowed to invite the general public tosubscribe to its shares or debentures. The profits of the organisation are sharedamongst its shareholders. *imited by shares means that the liability of theshareholders to creditors of the company is limited to the capital originally invested.

xamples: M/0 captives in specific countries (e.g. %1M %ndia -vt. *td.)

") P#blic imite!:%t is a limited liability company whose shares are freely sold andtraded to the public$ unli&e that of -rivate *imited firms.

xamples: *isted firms on stoc& exchanges

$) %epartmental organisation:%t is considered as a suitable form of organisation of,ovt. nterprises. The departmental form of ,ovt. sector operates under the control andguidance of the concerned ministry.

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xamples are the railways$ broadcasting$ post and telegraphs$ telephone services$ etc.

&) Corporation:n incorporated entity is a separate legal entity that has beenincorporated through a legislative or registration process established through legislation.%ncorporated entities have legal rights and liabilities that are distinct from theirshareholders$ and may conduct business for either profit'see&ing business or not for

profit purposes. arly incorporated entities were established by charter (i.e. by an ad hocact granted by a monarch or passed by a parliament or legislature). Most jurisdictionsnow allow the creation of new corporations through registration. %n addition to legalpersonality$ registered companies tend to have limited liability$ be owned byshareholders who can transfer their shares to others$ and controlled by a board ofdirectors whom the shareholders appoint.

xamples: Most #ortune 233 companies

') imite! iability Partnership (P):is a partnership in which some or all partners(depending on the jurisdiction) have limited liability. %t therefore exhibits elements ofpartnerships and corporations. %n an **-$ one partner is not responsible or liable foranother partner!s misconduct or negligence. This is an important difference from that ofan unlimited partnership. %n an **-$ some partners have a form of limited liability similarto that of the shareholders of a corporation.