TYPES OF BUSINESSES
A person can operate under following forms:
A sole proprietor is an individual who manages, operates and runs his own business. Its just like normal grocery store in a small market. This type of business has no recognition in the eyes of law. There are some drawbacks of such kinds of businesses:
- A single person is responsible for the losses of the business
- He is solely responsible for the breach of laws.
- He does not enjoy the benefits of limited liability.
Partnerships/Association of persons
In such kind of a business, two or more persons mutually agree to carry on a business under a mutually agreed name. The firm collectively called as “Association of Persons or Partnership Firm” and individuals are referred to as “partners”. In such business, partners are collectively as well as individually responsible for the acts or debts of the business. Their liability is defined under the partnership deed signed with registrar.
Business in which corporate structure is followed is referred to as company. In a company, shareholders are considered as the owners of the business and are referred to members or subscribers of the company. Each company is governed by Securities and Exchange Commission of Pakistan under the Companies Act, 2017 (repealed Companies Ordinance, 1984). It has a legal status of a “person” means it is an artificial person, separate from its owners (known as doctrine of corporate personality).
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