Legal Forms of Business in Sri Lanka

Introduction

A business also called a company, enterprise or firm is a legally recognized organization, designed to provide goods and services to consumers. According to the purpose of the business, ownership of the business and nature of economic contribution of the business; the business can fall into one of the three standard sectors. There are; private sector, public sector and nonprofit sector.

The part of the economy concerned with providing basic government services is called public sector. In most countries the public sector includes such services as the military, public transit, primary education and healthcare. Their aim is to give service to the people and less emphasis is made on profit making. Public cooperation is the widely known type of public sector business entity.

The non-profit sector is derived with organizations that do not distribute their surplus funds to owners or shareholders, but instead use them to help pursue their goals. Examples include charitable organizations, trade unions, and public arts organizations.

In private sector, businesses are financed and controlled by individuals or private institutions, such as companies, stockholders, or investment groups. These businesses run for private profit and they are not controlled by the state or the government. There are many types of business entities defined in the private sector and authorized by the legal systems of various countries. These legal forms of business include;

• Sole Proprietorship

• Partnership (General Partnership, Limited Partnership and Joint Venture)

• Corporation (C Corporation and S Corporation)

• Limited Liability Company (Private and Public)

These legal forms have been derived according to their Source of the capital, Value of capital investment, Nature of ownership, Number of owners, Nature of liability and many other factors.

Each legal form has its own advantages as well as disadvantages. When making a decision about the