A sole proprietorship is a type of business company in which an individual owns the business and operates it on its own. In Sole proprietorship, there is no legal distinction between the business and the owner. The owner is responsible for all the business related responsibilities and liabilities.
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Advantage of Sole Proprietorship:
Ease of Setup: Sole proprietorship companies are always easy to establish with less expense, making them accessible to students with limited resources.
Full Control: The owner has full/complete control over all the decision-making and business operations of the company. It also allows the owner to make quick decisions according to the market trends.
Direct Profits: The owner retains all profits generated by the company as he is the only owner of his business.
Minimal Regulatory Requirements: Sole proprietorship companies have fewer legal and regulatory requirements compared to other business structure modules.
Disadvantage of Sole Proprietorship:
Unlimited Liability: As there is only a sole owner of the business, the owner is personally liable for all the debts and obligations of the business.
Limited Access to Capital: Sole proprietor owners may find it difficult and challenging to raise capital since they rely primarily on personal funds or loans.
Limited Growth Potential: Sole proprietorships may face limitations in scalability and expansion due to lack of resources and the sole proprietor's capacity.
Examples of Sole proprietorship Companies:
Freelance Graphic Design Studio: A student with graphic design skills can start a sole proprietorship offering creative graphic designs and services to clients.
Tutoring Services: A student good in any particular subject can establish a sole proprietorship tutoring services to other younger students.
Handmade Crafts Business: A student with creative and crafting skills can start a sole proprietorship by creating and selling handmade crafts online or at local markets.
Fitness Coaching: A student passionate about fitness can start a sole proprietorship and provide fitness coaching services.
Some real life examples are:
Fitness trainer, Local bakery, freelancing graphic designer, photographer.
Partnership Company
A partnership company is a business structure where two or more individuals join together, and work to operate a business for profit. Partnerships can take various forms, including general partnerships, limited partnerships, and limited liability partnerships (LLPs). In a partnership, the partners share the profits, losses, and responsibilities of the business according to the terms of their partnership agreement.
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Advantages of Partnership Company for Students:
Shared Responsibility: Partners share the workload, responsibilities, and decision-making, which each other rather creates a burden on individual students.
Diverse Skill Sets: Partners may bring different skills, experiences, and perspectives to the business, enhancing its capabilities and adaptability.
Ease of Formation: Partnerships are relatively easy and inexpensive to establish compared to other businesses, requiring minimal formalities and paperwork.
Tax Benefits: Profits and losses of the partnership are typically passed through to the partners' personal tax returns, avoiding double taxation.
Disadvantages of Partnership Company for Students:
Shared Profits: Partners must share the profits of the business with their partners according to the terms of the partnership agreement.
Potential Conflicts: Differences in opinions, goals, or work ethics among partners can lead to conflicts and challenges in managing the business.
Dependency on Partners: The success and stability of the business may rely heavily on the commitment and contributions of each partner.
Examples of Partnership Companies:
Google (formerly Google Inc.): Google was founded in 1998 by Larry Page and Sergey Brin, who initially operated the company as partners while they were students at Stanford University. They later incorporated Google as a corporation, but its early days exemplify a partnership company.
Warby Parker: Warby Parker is an American online retailer of prescription glasses and sunglasses. It was founded in 2010 by four students from the Wharton School of the University of Pennsylvania—Neil Blumenthal, Andrew Hunt, David Gilboa, and Jeffrey Raider—operating initially as partners.
The Home Depot: The Home Depot, a home improvement retailer, was co-founded by Arthur Blank and Bernard Marcus in 1978. They started the business as partners after being fired from their previous jobs.
Ben & Jerry's: Ben & Jerry's Homemade Holdings Inc., known for its ice cream, frozen yogurt, and sorbet, was founded in 1978 by Ben Cohen and Jerry Greenfield. They started the business as partners in a renovated gas station in Burlington, Vermont.
Microsoft Corporation: Microsoft, one of the world's largest technology companies, was founded in 1975 by Bill Gates and Paul Allen, who started the company as partners while they were students at Harvard University.
These examples illustrate how partnerships can serve as an effective business structure for student entrepreneurs to collaborate and launch successful ventures.
Limited Liability Partnership(LLP)
A Limited Liability Partnership(LLP) is a type of business structure that includes features of both the partnership and corporations. In a LLP, partners have limited liability, meaning they are not personally liable for any debts and obligations of the partnership. That is if the LLP faces any financial difficulties or any legal issue, the personal assets of the partner are protected. LLPs are commonly used by professionals and big companies.
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Advantages of Limited Liability Partnership:
Limited Liability: LLPs offer limited liability protection to partners, and safeguarding their personal assets from business liabilities.
Flexibility: LLPs provide flexibility in management and decision-making, allowing partners to structure the business accordingly.
Pass-through Taxation: LLPs typically pass profits and losses directly to partners, avoiding double taxation at both, the entity and individual level.
Professional Services: LLPs are well-suited for startups in professional services sectors such as law, accounting, consulting, and healthcare.
Disadvantages of Limited Liability Partnership:
Complex Formation: Setting up an LLP involves more formalities and as compared to partnerships. Further, legal requirements are also more for which businesses require professional assistance.
Joint Liability: The partners may still be held personally responsible for their own actions while enjoying limited liability.
Regulatory Compliance: LLPs are subject to regulatory compliance and reporting requirements, which may entail additional administrative burdens.
Risk of Disputes: Disagreements among partners on various business decisions or changes in partnership dynamics can lead to conflicts and delay in decision making process and may affect business operations.
Examples of Limited Liability Partnership (LLP) Companies:
Legal Firm: A group of lawyers may form an LLP to provide legal services while protecting themselves from personal liability.
Accounting Firm: Students studying accounting or finance may establish an LLP to offer accounting, auditing, and other services to clients.
Consulting Agency: Students with experience in various fields such as management, marketing, or technology can form an LLP to provide consulting services and advices to business companies.
Healthcare Practice: Medical students may create an LLP to operate a medical practice.
These examples demonstrate how students can leverage the benefits of LLPs to establish collaborative ventures in diverse professional domains.
Some real life examples of LLP:
Deloitte, EY, KPMG, Bain & Company, McKinsey & Company
Private Limited Company
A Private Limited Company is a type of business where the owners are protected from losing their personal belongings if the company gets into debt or legal trouble. This means their personal stuff, like their house or savings, is safe. These companies can collect money from investors by selling parts of the company, called shares. However, these shares can't be bought and sold by anyone freely like in the stock market. Private Limited Companies must follow certain rules set by the government, like reporting their finances and following specific laws.
In short, a Private Limited Company is a business where owners are protected from losing everything if things go wrong, and they can raise money by selling shares, but there are rules they have to follow.
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Advantages of Private Limited Company for Students:
Limited Liability: Shareholders' liability is limited to the amount invested in the company.
Access to Capital: Private Limited Companies can raise funds by issuing shares to investors, thus with funds they can expand businesses and grow.
Credibility: Starting as a Private Limited Company can enhance the credibility and reputation of the startup, especially when dealing with suppliers, customers, and investors.
Perpetual Existence: The company has perpetual existence, which means that its existence does not get affected by changes in ownership or the death of shareholders.
Disadvantages of Private Limited Company for Students:
Regulatory Compliance: Private Limited Companies are subject to various legal and regulatory requirements which sometimes takes a lot of time and effort, including filing annual financial statements and complying with corporate governance norms.
Costs: Setting up a Private Limited Company and maintaining it can involve higher initial costs and several ongoing expenses compared to other business structures.
Ownership Restrictions: Private Limited Companies have restrictions on the transfer of shares, limiting flexibility in ownership changes.
Disclosure Requirements: There may be disclosure requirements related to company information and financial performance.
Examples of Private Limited Companies:
Flipkart Pvt Ltd: Flipkart is an Indian e-commerce company founded by Sachin Bansal and Binny Bansal in 2007. It started as an online bookstore and has grown into one of India's largest e-commerce platforms, offering a wide range of products.
SpaceX, Inc.: SpaceX is an aerospace manufacturer and space transportation company founded by Elon Musk in 2002. It designs, manufactures, and launches advanced rockets and spacecraft, with the goal of reducing space transportation costs and enabling the colonization of Mars.
Ola Cabs Pvt Ltd: Ola is an Indian ride-hailing company founded by Bhavish Aggarwal and Ankit Bhati in 2010. It provides transportation services ranging from economy to luxury cars through its mobile app platform.
Airbnb, Inc.: Airbnb is an online marketplace for lodging, primarily homestays for vacation rentals and tourism activities, founded by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk in 2008. It connects travelers seeking accommodation with hosts offering unique lodging experiences worldwide.
Tata Consultancy Services (TCS) Ltd.: TCS is an Indian multinational IT services and consulting company founded by Tata Group in 1968. It provides IT services, consulting, and business solutions to clients globally and is one of the largest IT services firms in the world.
These examples demonstrate how Private Limited Companies can span various industries and sizes, while taking care to cater different market needs.
