Types of Firms
1- Proprietary Firms
2- Partnerships Firms
3- Joint Stock Companies
Partnerships Firms
More than two firms but less than 20 persons come to and build a business and operate it.
Each parent is the owner of the business and owns the profits/loses made in the proportion decided prior to setting up the business. This type of relationship is governed by the conditions laid down in Partnership Deed.
- Its easy & economical to operate.
- There are more resources to handle the complex issues and operations.
- At present the tax works out to be = 30%+ 10%+ +2%= 33.66%
Expenditure allowed
- Can pay interest on the capital to the partners on the amount of capital put by them in the business at the rate of interest of 12%
- Firm can remunerate parents in the for of bonus. Salary commission etc provided partner takes part in the day-to-day operations of the firm and act as a working Partner. The remuneration is calculated as follows -
Professional Firm
- On the first Rs 100000 of the book profit or in the case of the loss = Rs50000 or 90% of the book profits whichever is more.
- On the next 100000 of book profits at the rate of 60%.
- On the balance amount of book profits at the rate of 40%.
Any Other Firm
o On the first Rs 75000 of the book profit or in the case of the loss = Rs50000 or 90% of the book profits whichever is more.
o On the next 75000 of book profits at the rate of 60%.
o On the balance amount of book profits at the rate of 40%.
Disadvantages
- Do not have a legal status
- Unlimited liability firm therefore personal property of the owners was always at risk if it runs into loses.
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