In the previous post, we discussed the similarities between companies and people. If you have not read that post, you can check it out here. But there are various types of structures in which companies can be set up. In this post, we will explore the various types of companies available.
Disclaimer: This post is meant for knowledge purposes and should not be taken as a legal guide for selecting a company structure for business without further due diligence.
The legal structures can change from country to country. In this post, I am going to consider the country in which I reside for this discussion. So, first of all, let’s understand what a Business Structure is.
Business Structure
A business structure refers to the legal and organizational framework that determines how a company operates, pays taxes, raises capital, and handles liability. It’s like choosing the outfit your business wears in the eyes of the law and the market—it defines its form and function. These business structures can vary from country to country and are suited based on your goals, how you want to be taxed, and your appetite for administrative complexity.
Below are some common types of business structures.
- Sole Proprietorship: This is the simplest business structure to establish and operate. One person owns and runs the business. In this case, the owner is personally responsible for handling any debts or legal issues, which can be hectic and cumbersome, as the owner most likely lacks expertise in these areas. This is very famous due to the ease of setup, low compliance, and complete control. Common types of Sole Proprietorship are Freelancers, who can be writers, photographers, designers; local retail stores, which can be Kirana Stores, Boutiques; Food Vendors, and small eateries; Tutors and Coaching Centres; Repair and Maintenance Centres. Examples of Sole Proprietorships include:
- Patanjali Ayurved: Founded by Baba Ramdev and Acharya Balkrishna, it began as a sole proprietorship focused on Ayurvedic products before expanding into a larger enterprise.
- Haldiram: Originally started as a small sweets and snacks shop in Bikaner, it grew under sole ownership before branching into a larger brand.
- MDH (Mahashian Di Hatti): The iconic spice brand was built by Mahashay Dharampal Gulati as a sole proprietorship and became a household name.
- Nirma: Karsanbhai Patel started selling detergent door-to-door in Ahmedabad, which eventually became the Nirma brand.
- Khadi & Village Industries: Many Khadi stores across India are run as sole proprietorships under individual licenses.
- Partnership: This business structure is more of a coordinated group effort. In this, two or more people share ownership and responsibility. The characteristics of a Partnership include shared capital, flexibility in management, strong personal trust, and networks. This business structure is common in Law Firms, Medical Practices, and consultancies. There are different kinds of partnerships, like general partnerships or limited partnerships, depending on how liability is split. There are several types of partnerships, each with its flavor of collaboration, responsibility, and liability. Choosing the right type often depends on how involved each partner wants to be, how much personal liability they’re willing to assume, and what the long-term vision is. Some Famous examples of Partnerships are Flipkart, Infosys, Shemaroo Entertainment, Reddifusion Y&R. Here’s a quick tour through the main ones:
- General Partnership (GP)
All partners share equal responsibility in managing the business and are personally liable for its debts. It’s simple and flexible, but carries the most risk for each partner. - Limited Partnership (LP)
Includes at least one general partner who manages the business and is liable for debts, and one or more limited partners who invest but don’t have management authority. Limited partners enjoy liability protection up to the amount they’ve invested. - Limited Liability Partnership (LLP)
Partners have limited personal liability, protecting them from the negligence or misconduct of other partners. Popular among professionals like lawyers, doctors, or accountants. - Joint Venture
A partnership formed for a specific project or limited time. Once the objective is achieved, the partnership can dissolve unless the partners decide to continue working together. - Silent Partnership
One partner contributes capital and shares in the profits but doesn’t take part in daily operations or decision-making. They’re often called “silent” or “sleeping” partners.
- General Partnership (GP)
- Limited Liability Company (LLC): This is a dynamic business structure. It offers liability protection like a corporation but with more flexibility and less red tape. It’s a popular choice for small businesses. The equivalent of this is Private Limited in India. Examples of famous LLCs include OYO Rooms, Zerodha Private Limited, BYJU’s, Paytm, and Zomato. These demonstrate how this structure supports innovation, scalability, and investor confidence.
- Corporation (C Corp or S Corp): This is a fascinating business structure. A legal entity separate from its owners, which means limited liability but more regulations and taxation rules. It can raise capital through stock sales. Examples of Corporations include Reliance Industries, TCS, HDFC, and ICICI Bank. When corporations go global, they are referred to as Multinational Corporations or MNCs. Usually, corporations employ more people as compared to the previously discussed business structures.
- Cooperative: Owned and operated by a group of individuals for their mutual benefit, often seen in agricultural or retail sectors. They play an important role in inclusive economic development, especially in rural and semi-urban areas. There are different types of cooperatives in India, such as dairy cooperatives Amul and Nandini; Agricultural cooperatives such as IFFCO and KRIBHCO; Credit and Banking cooperatives such as Saraswat Cooperative Bank and SVC Bank; Consumer cooperatives such as Apna Bazar, and Housing cooperatives such as Greenfield Housing Multi-State Cooperative Society.
- Public Limited Company – A company that can raise capital from the public through shares. Corporations can be Public limited as well as Private
- One Person Company (OPC) – A structure for solo entrepreneurs who want the benefits of a private limited company. This should not be confused with sole proprietorship, as this offers limited liability compared to complete liability, complex setup as compared to easy setup, company tax rates as compared to individual tax rates, in Sole proprietorship. This is suitable for people who want to scale and are growth-focused.
- Section 8 Company – A non-profit organization focused on social or charitable objectives. India is home to a vibrant nonprofit sector tackling everything from education and healthcare to environmental conservation and human rights. Examples of Non-Profit Organisations are Smile Foundation, CRY, and Pratham.
Tell me in the comments how many of these business structures you knew beforehand, and how many companies you knew were related to either of the structures.
This is all for this post. I hope you got to learn something new in this post. Don’t forget to follow my Facebook and Instagram pages for regular updates. See you all in the next post. Till then, keep learning.