Unit-II
Types of Business Structure
Type of Structure
No of People as Registration
owners
process
Liability
Sole Proprietorship
Single
Not Required
Unlimited Ceases if the
owner dies
Partnership
More than Two
Partnership Act
1932
Unlimited Ceases if the
partner
mutually agree
Public Limited Company Min : 7
Max: unlimited
Registrar of
Companies (ROC)
Limited
Perpetual
Existence
Private Limited
Company
Registrar of
Companies (ROC)
Limited
Perpetual
Existence
Min:2
Max:50
Continuity
Sole Proprietorship
• Sole proprietorship is a business organization in the name of particular
individual itself. This has a disadvantage as it does not get the
recognition in the market, from point of view of funding and
investment. Also, markets show less faith in it because there is no
regulatory body that regulates its functioning like in the case of
Companies
SOLE TRADER
 Nature of the organization: it is the simplest form of business
organization.
 Governing law: there is less legislation to worry about than with other
business organizations.
 Establishment procedure: establishment is very simple, involving
more practical problems (such as finding a place to work from) than
legal considerations.
Sole Trader
 Finance: the ease of raising capital will generally be determined
by the trader's personal credit.
 Continuity of existence: the business is tied to the trader and so
dies with them.
 Limitation of liability: the trader is personally liable for the debts
of the business.
 Control of the organization: the trade owns and operates the
business and makes all the decisions.
Partnership

Partnership is yet another structure, which can be used for making investments
in India. Partnership is created by an agreement entered between two or more parties
(individuals/ companies) to share the profits of a joint business. Such an agreement
is called the ‘Deed of Partnership’.

Partnership law in India is governed by the Indian Partnership Act 1932.
Foreign entities and foreign individual investors can form partnerships in India.
Registration of partnership is advisable as it confers certain legal rights upon the
partnerships and its partners.
Difference between public and private limited companies
Public Ltd; companies
Private Ltd; Companies
 Liability : Limited liability
 Liability: Limited Liability
 Min Number of Members:7
 Min Number of members:2
 Max Number of Members: unlimited
 Max Number of members:50
 Can issue shares to the public and can be
 Cannot issue shares to the public and
listed in the stock exchange.
cannot be listed in the stock exchange
 Has the right to transfer the shares
 Cannot transfer the shares
 Requires both certificates incorporation and
 Requires certificate of incorporation only
commencement
Companies
• Indian companies can be divided into two basic categories: private
limited company and public limited company. A private limited
company is one which· Restricts its members’ right to transfer of
shares Limits the number of its members to fifty, and Prohibits
invitation to public to subscribe for its shares and debentures. A public
limited company is any company which is not private limited
company. Public limited companies whose shares are traded in the
stock exchange are called listed companies
Governing Documents
• The Companies Act 1956 contains all the rules and regulations for the
incorporation as well as functioning of the company. The basic
governing document for the company registered in India is the
Certificate of Incorporation, and Memorandum and Article of
Association, which should be printed and always be available at the
Registered office of the company as per the provisions of the
governing Act.
Forming a company
• Formation of a Company in India is governed by the Indian
Companies Act, 1956. The procedure for formation of a company is as
under: A suitable name is to be decided for the proposed company
Drawing up Memorandum of Association
 - Name of the Company
 - Main objects of the Company
 - Share Capital of the Company
 - Statement of liability of the members
 - State where registered office of the Company will be situated
Role of SME’s In Indian Economy
 SME’s play a vital role in Indian Economic Growth.
 40% share in industrial output, produce 8000 + value-added products.
 Contribute 35% in direct Indian Exports
 45% in the overall exports from India.
Role of SME’s In Indian Economy
 Biggest employment-providing sector after agriculture.
 Constitute 80% of total number of industrial enterprises
 Forms backbone of industrial development
 Their growth is higher than rate of growth of industry sector as a
whole, contributing 7% to our GDP
NUMBER OF ENTERPRISES IN MSME SECTOR
EMPLOYMENT IN MSME SECTOR
NATURE OF ACTIVITY
SECTOR
(%)
Manufacturing/ Assembling/
Processing
66.67 %
Repairing & Maintenance
16.33 %
Services
17.00 %
TYPES OF MANAGEMENT/OWNERSHIP
No. of enterprises managed by
Male
86.17 %
Female
13.83 %
Total
100 %
TYPES OF ORGANIZATION
DISTRIBUTION BY TYPE OF ORGANISATION
Proprietary
90.36%
Partnership
3.85 %
Pvt. Company
2.69 %
Pub. Ltd. Company
0.53 %
Cooperatives
0.30 %
Others
2.27 %
MINISTRY OF MICRO,
SMALL & MEDIUM ENTERPRISES
• Role of the Ministry of Micro, Small &Medium Enterprises
• The primary responsibility of promotion and development
of micro and small enterprises lies with the State
Governments.
MINISTRY OF MICRO,
SMALL & MEDIUM ENTERPRISES
• The Government of India set up the Small Industries Development Organization
(SIDO) [now Office of the Development Commissioner (Micro, Small & Medium
Enterprises)] in 1954, a public sector enterprise called the National Small Industries
Corporation Limited(NSIC) in 1955, and enacted the
Commission Act in 1956. Establishment of
K hadi and Village Industries
K hadi and Village Industries
Commission (KVIC), Coir Board and Micro, Small & Medium EnterprisesDevelopment Institutes [formerly known as Small Industries Service Institutes
(SISIs)] in nearly every State followed.
MINISTRY OF MICRO,
SMALL & MEDIUM ENTERPRISES
 Besides, the Ministry runs three training institutes, namely,
Micro, Small and Medium Enterprises (NIMSME),

National Institute for
Hyderabad
National Institute for Entrepreneurship and Small Business
Development (NIESBUD), NOIDA, and

Indian Institute of Entrepreneurship (IIE), Guwahati, with the objective
of training and development of human resource relevant to small
industries as also entrepreneurship.
The Khadi & Village Industries Commission (KVIC),
• The Khadi & Village Industries Commission (KVIC), established
under the Khadi and Village Industries Commission Act, 1956 (61 of
1956),is a statutory organization engaged in promoting and
developing khadi and village industries for providing employment
opportunities in rural areas, thereby strengthening the rural economy.
The Commission is headed by full time Chairman and consists of 10
part-time Members.
The Khadi & Village Industries
Commission (KVIC),
• The main functions of the KVIC are to plan, promote, organize and
assist in implementation of programmes /projects/schemes for
generation of employment opportunities through development of
khadi and village industries. Towards this end, it undertakes activities
like skill improvement, transfer of technology, research &
development marketing, etc. KVIC co-ordinates its activities through
State KVI boards, registered societies and cooperatives.
National Small Industries Corporation Limited (NSIC)
 NSIC, established in 1955, is headed by Chairman-cum-Managing
Director and managed by a Board of Directors.
 The main function of the Corporation is to promote, aid and foster
the growth of micro and small enterprises in the country, generally on
commercial basis.
 NSIC provides a variety of support services to micro and small
enterprises catering to their different requirements in the areas of raw
material procurement; product marketing; credit rating; acquisition of
technologies; adoption of modern management practices, etc.
Salient Features of Micro, Small &
Medium Enterprises Development
(MSMED) Act, 2006
•
Classification of Enterprises
The earlier concept of ‘Industries’ has been changed to ‘Enterprises’.
• Enterprises have been classified broadly into:
(i) Enterprises engaged in the manufacture/production of goods
pertaining to any industry; and
(ii) Enterprises engaged in providing/rendering of services
Manufacturing Enterprises have been defined in terms of investment
in plant and machinery (excluding land &buildings)and further
classified into:
Classification of Enterprises
• Micro Enterprises – investment up to Rs. 25 lakh.
• Small Enterprises – investment above Rs. 25 lakh and upto Rs. 5 crore
•
Medium Enterprises – investment above Rs. 5 crore and up to Rs. 10
crore.
Classification of Enterprises
• Service Enterprises have been defined in terms of their investment in
equipment (excluding land & buildings) and further
classified into:
• - Micro Enterprises – investment up to Rs. 10 lakh.
• - Small Enterprises – investment above Rs. 10 lakh and upto Rs. 2
crore
• Medium Enterprises – investment above Rs. 2 crore and up to Rs. 5
crore.
Institutions Supporting Small Business Enterprises
Institutions Supporting Small-scale Industries
CENTRAL LEVEL
• SSI BOARD
• KVIC
• SIDO
STATE LEVEL
• DIs
• NSIC
• NSTEDB
• NPC
• NISIET
• DICs
SSIs
• SFCs
• SIDCs/SIICs
• NIESBUD
• IIE
• EDI
• SSIDCs
OTHERS
• Industry Association
• Non Governmental Organizations
• R & D Laboratories
Small-scale Industries Board (SSI Board)
• Constituted in 1954 to facilitate the coordination and interinstitutional linkages for the development of SSI sector
• The Board is an apex advisory body constituted to render advice to the
government on all issues pertaining to the SSI sector
• The office of the Development Commissioner (Small-Scale Industry)
serves as the secretariat for the board
• The Board operates broadly in the following areas:
Policies & programs
- Development of industries in specific region like Northeast
Ancillary development, quality improvement, mktg. assistance
- Credit facilities, taxation and modernization
- Industrial sickness
Industries Association
CII : Confederation of Indian Industries
FICCI: Federation of Indian Chambers of Commerce and
Industry.
ASSOCHAM: Associated chambers of Commerce and
Industry of India.
Khadi and Village Industries Commission (KVIC)
• Statutory body created by an act of Parliament
• It is charged with planning, promotion, organization and implementation of the
program for the development of Khadi and other village industries in the rural areas
in coordination with other agencies engaged in rural development
• KVIC’s functions also comprise building up a reserve of raw materials and
implements for supply to producers, creation of common service facilities for
processing of raw materials and provision of marketing of KVIC products
• KVIC is entrusted with the task of providing financial assistance to institutions or
persons engaged in the development and operation of Khadi and village industries
and guide them through supply of designs, prototypes and other technical
information
National Small Industries Corporation Ltd. (NSIC)
• Established in 1955 by GOI with the main objectives to promote, aid
and foster the growth of SSIs in the country
• Over four decades of transition and growth in the SSI sector, NSIC
has provided strength through a progressive attitude of modernization,
upgradation of technology, quality consciousness, strengthening
linkages with large and medium-scale enterprise and boosting exports
of products from small enterprises
• Main services provided by NSIC are:
Machinery and Equipment (Hire Purchase / Lease scheme) Financial Assistance Scheme
Assistance for Procurement of Raw Material
Government Store Purchase Program
Technology Transfer Centre (TTC)
Marketing Assistance
Schemes of NSIC
• Raw Material Distribution:
 The core business activity is raw material distribution and marketing
assistance to the MSMES.
 Entering into arrangements with bulk manufacturers of industrial raw
materials so as to enable the MSMEs to avail economies of scale.
Types of Materials
 Iron and steel
 Aluminum
 Paraffin wax
 Coal
 HDPE (high density polythene )
 LDPE (Low density polythene)
Government Stores Purchase Program
• Under this scheme NSIC registers micro and small enterprises and
fixes their monetary limit as per their capacity so as to empower them
for participation in Government tenders.
• The enterprises registered under this scheme get the following
facilities:
 Issue of tender sets free of cost
 Advance intimation of tenders issued by DGS&D(Director General of
Supplies and Disposals)
Government Stores Purchase Program
 Exemption from payment of earnest money
 Consortia and Tender Marketing:
MSMEs in their individual capacity face problems to procure and
execute large orders, which inhibit and restrict their growth. NSIC
accordingly adopts consortia approach and forms consortia of units
manufacturing similar products thereby easing out marketing
problems of small enterprises.
Consortia of Units
• NSIC explores the market and participates in the tenders on behalf of
then consortia members to secure orders for bulk quantities. On
receipt of the bulk orders it distributes the same amongst consortia
members in accordance to their production capacity.
Trade fairs and exhibitions
• To showcase the competencies of MSMEs and to capture global
market opportunities, NSIC participates in select international and
national exhibitions and trade fairs. NSIC facilitates the participation
of MSMEs by providing built up space at concessional rates.
Buyer seller meets and marketing campaigns
• NSIC organizes buyers-sellers meets to
bring bulk buyers
Government departments and MSMEs together at one platform. Bulk
and departmental buyers such as
the railways , defense and
communication departments are invited to participate in buyer seller
meets.
Credit Support
• NSIC facilitates procurement of raw material from the bulk
manufacturers for a period of 90 days at a very competitive
rates of 9.5% to 10.75%.
Support Services
• Performance and credit rating scheme for Micro and small enterprises:
• NSIC has been implementing the performance and credit rating
scheme for the MSMEs on behalf of the government. The rating is
been carried through agencies like CRISIL (
Information Services of India Limited)
Credit Rating
District Industries Centers
 District Industries Centers were established in 1978 to serve as the
nodal agency in the Districts to assist the entrepreneurs for
establishment of the Industries.
 The District Industries Centers are entrusted with the responsibility of
providing all approvals/ clearances needed for setting up an Industry
under Single Window.
Single Window Act:
• Government have enacted “Industrial Single Window
Clearance Act” in 2002 for speedy processing and issue of
various approvals/ clearances/ permissions required for
setting up of an Industrial undertaking and also to create an
investment friendly environment in the State.
Single Window Act:
• Since beginning of the Single Window Act, 70,302 clearances were
issued under Single window in respect of 40,129 units (Micro, Small,
Medium and Large units) with a proposed investment of Rs.2,32,958
crore
Function of DIC Commisionerate
To Assist and guide the entrepreneurs for promotion and
setting up of industrial units.
To enable the entrepreneur to get different industrial
approvals and
clearances from various departments /
agencies at a single point.
Function of DIC Commisionerate
• To register Small Industry/ Tiny industry/Small Scale Service and
Business Enterprises.
• Sanction of incentives to eligible industrial undertaking.
• To arrange financial assistance to educated unemployed youth from
Banks
• to set up their firms under Prime Minister's Rozgar Yojana Scheme
(selfemployment schem
Function of DIC Commisionerate
 To provide marketing assistance to local industrial units.
 To Rehabilitate Sick small industrial units.
 To settle disputes arising due to non-receipt of payment to local SSI
suppliers from various purchasers especially Government
Departments by acting as arbitrator through the Industry Facilitation
Council.
Andhra Pradesh State Finance Corporation (APSFC)
• Andhra Pradesh State Financial Corporation [APSFC] is a term
lending Institution established in 1956 for promoting small and
medium scale industries in Andhra Pradesh under the provisions of the
State Financial Corporations Act, 1951.The corporation came into
existence on 1-11-1956 by merger of Andhra State Financial
Corporation and Hyderabad State Financial Corporation.
Milestone achievements of APSFC :
 So far sanctioned Rs.2,503 crores for 93,999 units in Andhra Pradesh
as on 31/03/2012.
 Disbursed Rs.8,571 crores to 73,480 units - 70% to Tiny/SSI sector as
on 31/03/2012.
 Recovered Rs.9,349 crores including interest since inception till
31/03/2012.\
 Established unblemished repayment track record since inception
Milestone achievements of APSFC
.
 Enjoying 60% of the market share in term lending in promoting First
Generation Entrepreneurs in Andhra Pradesh .
 Generated direct and indirect employment to about 11 lakh persons
Objectives of APSFC
 To industrialize the State through balanced regional development and
dispersal of industries
 To support promotion and development of tiny, small and medium
scale industries and service sector units by extending need based
credit to them.
 Nurtures
entrepreneurship
and
encourages
entrepreneurs
 To act as a catalyst for generation of employment
first
generation
APSFC Functions
• Andhra Pradesh State Financial Corporation (APSFC) extends
financial assistance for setting up industrial units in Small & Medium
Scale, Service enterprises in the state of Andhra Pradesh. The
Corporation extends finance basically through two products the Term
Loans and the Working Capital Term Loans.
Small Industries Development Bank of India (SIDBI)
• Small Industries Development Bank of India (SIDBI), set up on April
2, 1990 under an Act of Indian Parliament, is the Principal Financial
Institution for the Promotion, Financing and Development of the
Micro, Small and Medium Enterprise (MSME) sector and for Coordination of the functions of the institutions engaged in similar
activities.
Four basic objectives are set out in the SIDBI Charter.
Financing
Promotion
Development
Co-ordination
National Science and Technology Entrepreneurship Development Board (NSTEDB
)
 Established in 1982 by GOI, is an institutional mechanism to help promote
knowledge-driven and technology-intensive enterprises
 Major objectives are:
- promote and develop high-end entrepreneurship for S&T manpower as well as selfemployment by utilizing S&T infrastructure and by using S&T methods
- facilitate and conduct various informational services relating to promotion of
entrepreneurship - network agencies of support system, academic institutions and
R&D organizations to foster self-employment using S&T with special focus on
backward areas - act as a policy advisory body with regard to entrepreneurship
National Productivity Council (NPC)
 Autonomous institution functioning under the overall supervision of the Ministry of Industry, GOI
 Primary objective is to act as a catalyst in enhancing the productivity of all sectors of the economy,
including industry and agriculture
 Administered by a tripartite Governing Council (GC) which has equal representation from the
government, industry and trade unions
 Active in the field of consultancy and training and has a number of specialized divisions to provide
tailor-made solutions to agriculture and industry. These divisions, manned by trained consultants, deal
with issues related to industrial engineering, plant engineering, energy management, HRD, informal
sector, agriculture and so on
 NPC is a member of the Asian Productivity Organization (APO), Tokyo, an umbrella body of all
productivity councils in Asian region
 To channelize expertise of NPC to small-scale and informal sector, SIDBI has tied-up with NPC for
enhancing technology in small units
National Institute for Small Industry Extension and Training (NISIET)
 Set up in early 1950s, NISIET acts an important resource and information centre for
small units and undertakes research and consultancy for small industry development
 An autonomous arm of the Ministry of Small Scale Industries, the institute achieves
its objectives through training, consultancy, research and education, to extension and
information services
National Institute for Entrepreneurship and Small Business Development (NIESBUD)
 NIESBUD is an autonomous body under the administrative control of the Office of the
DC(SSI)
 NIESBUD established in 1983 by the Ministry of Industry, GOI, as an apex body for
coordinating and overseeing the activities of various institutions/agencies engaged in
Entrepreneurship Development particularly in the area of small industry and business
 The policy, direction and guidance to the institute is provided by its Governing Council
whose chairman is the Minister of SSI.
 Besides conducting national and international training programs, the institute undertakes
research studies, consultancy assignments, development of training aids, etc.
Other State-level agencies Extending Facilities for SSI Promotion
 State Infrastructure Development Corporations
 State Cooperative Banks
 Regional Rural Banks
 State Export Corporations
 Agro Industries Corporations
 Handloom and Handicrafts Corporations
Other Agencies
National Bank for
Agriculture and
Rural
Development
(NABARD)
Set up in 1982, provide refinance assistance to State Cooperative Banks, Regional Rural
Banks, and other approved institutions for all kinds of production and investment credit to
SSIs, artisans, cottage and village industries, handicrafts and other allied activities. Helps
SSI entrepreneurs to get loan for setting up SSIs in any part of the country
Housing and
Urban
Development
Corporation Ltd.
(HUDCO)
Wholly owned company of GOI, incorporated Apr.1970, as a Pvt. Ltd. Co. and subsequently,
converted into a Public Ltd. Co. in 1986. Primary objective is to provide assistance for
urban, social sector infrastructure, and the creation of housing facility, of late, to create
SSI infrastructure. Also extends assistance for the promotion of building material
industries, besides imparting consultancy, training and technical in related matters.
Technical
Consultancy
Organizations
(TCOs)
Set up by all-India financial institutions during 70s and 80s to cater to consultancy needs
of SMEs and new entrepreneurs. Services include preparing project profiles and feasibility
studies, undertaking industrial potential surveys, identifying potential entrepreneurs and
provision of technical and management assistance to them, undertake market research
and surveys for specific products, carrying out energy audit and energy conservatism
assignment, project supervision, taking up assignments on a turnkey basis, undertaking
export consultancy for EOU
End of Unit-II