types of business structures

Let’s try and understand the types of business structures available in

India. Here is a list of some of them:

1. One Person Company (OPC)

Recently introduced in the year 2013, an OPC is the best way to start
a company if there exists only one promoter or owner. It enables a
sole-proprietor to carry on his work and still be part of the corporate
framework.

2. Limited Liability Partnership (LLP)

A separate legal entity, in an LLP the liabilities of partners are only

limited only to their agreed contribution.

3. Private Limited Company (PLC)

A company in the eyes of the law is regarded as a separate legal

entity from its founders It has shareholders (stakeholders) and
directors (company officers). Each individual is regarded as an
employee of the company.

4. Public Limited Company (PLC)

A PLC is a voluntary association of members which is incorporated

under company law. It has a separate legal existence and the liability
of its members are limited to shares they hold.
You can choose what business structure suits your business needs
best and accordingly register your business.

Private Limited Company

The private limited legal structure is most commonly used for the
incorporation of a company. It is preferred because this structure
keeps the liability of the members limited to their share in the capital.
A private limited company is ideal for anyone who is looking to raise
capital from external sources and/or give ESOPs to employees.
A private limited company has to be registered with the Registrar of
Companies (ROC). Upon completion of the registration process, a
Certificate of Incorporation (COI) is issued. The Ministry of Corporate
Affairs (MCA) has introduced a fast-track registration process that
enables company registration via a single form. The registration
process is done online and all documents are required to be submitted
in electronic format.
Registering for a private limited company means the company
becomes regulatory-compliant. This makes the company attractive to
venture capitalists and private equity funds. Even bank loans are
easier to get for private limited companies. From the perspective of
the directors in a private limited company, their personal property
would not be used to repay the company’s debt.
Convinced about registering for a private limited company? Get
started right away.

 What is a statement Financial Report?

o Balance Sheet
o Statement of Profit and Loss
o Cash Flow Statement
o Notes and Schedules
 Why do you need financial reports?
o Owners, managers and employees
 o Investors/potential investors
o Financial institutions

Financial Report:
Communicating a financial is known as a Financial reporting. Financial
reports used in Financial reporting are records that disclose financial
information about a company’s activities and current status of
business.
The major components in Financial reporting are:

Balance Sheet
A balance sheet portrays the value of assets owned by an
organisation, liquidity and solvency of the organisation. The balance
sheet is utilised to study the ability of the organisation in meeting its
financial goals.

Statement of Profit and Loss

This document illustrates an organisations total income, expenses,
and profits/losses over a certain period of time. A profit and loss
statement also provides information on the operations of the
organisation.

Cash Flow Statement

The cash flow statement merges the balance sheet and the income
statement to highlight business activities which include operating,
investing and financing activities that involve inflow or outflow of taxes.

Notes and Schedules

This provides additional information explaining different parts of the
financial statement, such as risk, uncertainties or accounting policies
that affect the organization.
The basic objective of financial reports is to provide information about
the financial health, status, growth and modifications in the financial
position of an organisation that will be useful to a wide range of
stakeholders in making business decisions.

Why do you need financial reports?

Reports provide information to the following stakeholders:

Owners, managers, and employees

These require financial reports to make important business decisions
that will help sustain the organization’s continued operations.

Investors/potential investors
These enable them to utilize financial reports to assess the overall
feasibility of investing in a particular business. Financial reports also
help in analysis for making better investment decisions.

Financial institutions
They utilize financial reports to decide whether or not to grant an
organization loans that may be needed to expand or meet working
capital needs.
Different countries have developed indigenous accounting principles,
making international comparisons of an organization’s financial report
difficult to analyze. To ensure a universal uniformity between financial
reports prepared by different companies in different countries, a set of
guidelines and rules are used which is commonly referred to as
Generally Accepted Accounting Principles (GAAP). These are a set of
accounting guidelines which provide the foundation for the preparation
of financial reports.
In brief, Financial reports are designed to be easily grasped and
understood by an audience who have a working knowledge of
business and accounting activities and who are willing to study the
respective information and implement it accordingly.
Flow chart of finance department:
Balance sheet