Legal Issues for Entrepreneur.pptx Final

7/30/2019 Legal Issues for Entrepreneur.pptx Final

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Module 05LEGAL ISSUES FOR the

ENTREPRENEURPRESENTED BY

Team 05Naveena N J

Vishwanath

Vippan K G

Shantesh Ayi

DivyashreeMadurasmitha

Jyothi

Veena


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Forms of Organization

An entrepreneur in the pursuit of setting up his enterprise is required to take

an important decision regarding the ownership. This decision has got bearing

on the availability of resources, rights, duties & obligations of the

stakeholder, and he has to take the decision in the light of businessrequirements, size, nature or type of business.

Broadly ownership form of business can be categorized in to following two

types

Public

Private

Joint enterprises


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Factors affecting the choice of ownership

i. Nature or type of business.

ii. Financial Requirement

iii. Liability

iv. Flexibility

v. Taxation

vi. Control

vii. Survival or Continuity

viii. Business secrets

ix. Government rules and regulations


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Various forms of ownership ( Businessentities)

1. Sole Proprietorship

2. Partnership

3. Joint Stock Company

4. Cooperative Organizations


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SOLE PROPRIETORSHIPS

It is a business that is owned and operated by one person. The

enterprise has no existence apart from its owner. This

individual has a right to all of the profits and bears all of the

liability for the debts and obligations of the business.

The individual also has unl imited liabil ity, which means

his/her business and personal assets stand behind the

operation. If the company cannot meet its financial

obligations, the owner can be forced to sell the family car,

house, and whatever assets that would satisfy the creditors.


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Cont

To establish a sole proprietorships a person merely

needs to obtain whatever local and state licenses are

necessary to begin operations. If the proprietor should

choose a fictitious or assumed business name. he/she

must file a certificate of assumed business name with the

country. Because of its ease of formation, the sole

proprietorship is the most widely used legal form of

organization.


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Advantages of sole proprietorships Easy of formation

Monopoly on profits

Decision making and control vested in one owner

Flexibility

Business secrecy

Freedom to start and freedom to end

Relative freedom from governmental control

Freedom from corporate business taxes


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Disadvantages ofsole propr ietorships

Unlimited liability

Lack of continuity

Lack of Specialization

Limited managerial ability

Less available capital

Relative difficulty obtaining long-term financing

Relatively limited viewpoint and experience


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PARTNERSHIPS

A partnerships is an association of two or more persons

acting as co-owners of a business for profit .each partner

contributes money, property, labor, or skills, and each shares

in the profits (as well as the losses) of the business.

According to Indian Partnership act of 1932.

Partnership is the relationship between persons who have

agreed to share the profi ts and losses of a business carr ied

on by all or any of them acting forall


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Advantages of partnerships

Easy of formation

More financial resources

Collective decision making

Sharing of risk

Complementary skills.

Growth and performance facilitated

Flexibility

Credit Worthiness

Business secrecy


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Disadvantages of partnerships

Unlimited liability

Uncertain existence

Limited funds

Transfer of shares

Bound by the acts of just one partner

Difficulty of disposing of partnership interest.


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Joint Stock Company[CORPARATIONS]

According to L.H. Haney A company is an artificial person created

by law having a separate legal entity with a perpetual succession

and a common seal

A Joint Stock Company [corporation] is an artificial being, invisible,and existing only in contemplation of the law As such, a

corporation is a separate legal entity apart from the individuals who

own it.

A corporation is created by the authority of state laws and is usually

formed when a transfer of money or property by prospective

shareholders takes place in exchange for capital stock in the

corporation.


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Advantages of Joint Stock Company

Limited liability

Diffused risk

More financial resources

Transfer of ownership

Perpetual existence (Unlimited life)

Economies of scale

Capital formation

Increased Managerial ability and expertise


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Disadvantages of Joint Stock Company

Difficulties in formation

Lack of personal interest

Difficult to maintain secrets

Delay in decision making

Excessive regulations

Organizing expenses

Double taxation


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Other corporation classification

Domestic and foreign corporations:

A corporation must be incorporated in a particular state.The corporation is referred to as a domestic corporation

by its home state. By contrast , a corporation operating

in any other state in the United state is known as a

foreign corporations.

Public and private corporations:

This corporations is one formed by the government to

meet some political or governmental purpose. Cities

and towns that incorporate are common examples.


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Nonprof it corporations:

A familiar from of nonprofit corporation is the religious, charitable, or

educational corporation.

Professional corporations:

Most of the professional corporations are private corporations involving

practitioners of professions such as law, accounting, or medicine.

Close corporations:

The close corporation or closely held corporation, is typically one in which all

shares of stock are held either by a single shareholder or a small number ofshareholders. These shares are not available for purchase by the general

public. close-corporation shareholders manage the firm directly.


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Cooperative Organizations

It is an voluntary association of individuals who join together on the

basis of equity for the promotion of their common economic or business

interest.

According to Cooperative Society act 1912, Cooperative organizations is

a society whi ch has as its objectives the promotion of the interests of i ts

members in accordance with the principles ofCooperation

Various features of Cooperative Organization are:

Voluntary association

Democratic management

Service motive

Open membership

Governmental control

Limited liability


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MERITSOF COOPERATIVE ORGANIZATION

Economy in cost

Democratic management

Service motive

Government regulations

DEMERITSOF COOPERATIVE ORGANIZATION

Limited financial resources

Political interference

Lack of personal interest

Lack of professional management


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Franchising

A franchise is any Agreement in which

the owner of a trademark, trade name, or

copyright has licensed others to use it in selling goods or

services

A franchisee is generally legal independent, but economically

dependent on the integrated business system of the franchisor.

The franchisee can operate as an independent businessperson

but still realize the advantages of a regional or national

organization.


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ADVANTAGESOF FRANCHISING

Training and Guidance

Brand-Name Appeal

A Proven Track Record

Financial Assistance

DISADVANTAGESOF FRANCHISING

Franchise fees

The control exercised by the franchisor

Unfulfilled promises by some franchisors


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Legal issues (Legal consideration)

RegistrationRegistration An act of enrolling, Document certifying an act of

registration.

MOA and AOA are the most important documents to be submitted at the time of

registration of company for the purpose of incorporation of company

Registration of small scale industrial unit is not compulsory. However

registration with the State Directorate of Industries or District Industry Centre

facilitates obtaining of assistance from the government.

The registration of small scale industr ial unit is

done in two stages i. e.

A. Provisional registration

B. Permanent registration


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Registration Certificate

Provisional Registration Certificate (PRC)

This is given for the pre operative period.

Obtain the facilities for accommodation, land, other approvals etc.

Obtain necessary NOCs and clearances from regulatory bodies such as

Pollution Control Board, Labour Regulations etc..

Permanent Registration Certificate

Enables the unit to get the following incentives/concessions

Income tax exemption & Sales tax exemption

Incentives & Concessions in power tariff etc.

Price & purchase preference for goods produced.

Availability of raw material depending on existing policy.

Permanent registration of tiny units should be renewed after 5 years


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Cont,

Objectives of the registration scheme

Features of the registration Scheme

Procedures for registration

Benefits of registration

De-Registration

Cancellation of registration


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Licensing

Exceptions from licensing Memorandum with SIA

Carry on business (COB) license

Industrial entrepreneur memorandum

Integration of Small & Large industries

State regulations

Environmental Clearance

Regulating the acceptance of loan


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LAWS GOVERNING INTELLECTUAL PROPERTY

Patent

Copyright

Trademark


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Legal Issues for Entrepreneur.pptx Final

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