Unit-2 Forms of Business Organisation-I

UNIT -2
FORMS OF BUSINESS ORGANISATION-I

2.2 SOLE TRADER ORGANISATION :-

→ Sole trader organisation as one man' business in which an individaul produces Independetitly with his own capital, skill and intelligence and is entitled to receive all the profits and assumes all the risks of ownership.
→ In other words, In this one person is solely responsible for providing the capital for bearing the risk of the enterprise and for the management of the business.

• Main Features :-

(1) One man ownership.
(2) No separation of ownership and management.
(3) No separation entity.
(4) All profits to proprietor
(5) Individual risk.
(6) Unlimited risk.
(7) Less legal formalities.

• Merits/ Advantages :-

(1) Easy formation.
(2) Direct motivation.
(3) Full control
(4) Quick decision.
(5) Flexibility in operations
(6) Secrecy
(7) Personal touch.
(8) Dissolution easy.

• Limitations :-

(1) Limited resources
(2) Limited managerial capability
(3) Not suitable for large scale operation
(4) Unlimited liability
(5) Less stability
(6) No check and control
(7) Loss scope for economies of scale

2.3 PARTNERSHIP FORM OF ORGANISATION :-

→ Partnership is an assocation of two or more persons who have joined together to share the profits of busines carried on by all or any of them acting for all.
→ The persons who own the partnership business are individaully called 'Partners'.
→ All such terms and conditions of partnership are usually mentioned in the partnership agreement or partnership deed.

• Main Features

(1) Plurality of persons.
(2) Contractual relationship.
(3) Profit sharing
(4) Existence of business
(5) Principal-agent relationship
(6) Unlimited liability
(7) Good faith and honesty
(8) Restriction an transfer or share

• Classification of Partners :-

(1) Based on the extent of participation in the functioning of busineess, we can classify partners into :-

(a) Active Partner :-
→ Active partner is directly mean to working partner.

(b) Sleeping Parnter :-
→ A sleeping business partner simply invests his capital.
→ He does not participate in the functioning of the firm.

(2) Based on the sharing of profits, partners may be classified into :-

(a) Nominal Partners:-
→ Nominal parnters neither invests his capital nor participate in the day-to-day working and management of the firm.
→ Scuh partners are not entitled to a share of profits, but they ar liable to other parties for all the acts of the firm.

(b) Partners in Profits :-
→ A partner who shares the profits of the business without beign liable for losses is called a partner in profits

(3) Based on the behaviour and conduct exhibited :-
The partners may to divided into :-

(a) Parnter by estoppel :-
→ A person who behaves in the public in such a fashion as to give an impression that he is one o the partners in a partnership firm is called a partner by estaoppel.

(b) Partners by holding out :-
→ If a particular partner of a firm represents that another person is alos a partner of the firm, and is such a person does not disclaim the partnership relationship even after coming to know about it, such person is called a 'partner by holidng out'.

(4) Basesd an liabilites :-
→ Partners may be classified into two categories :-

(a) Limited Partner :-
→ The liability of such a partner is limited to the extent of the capital contributed by him.

(b) General Partner :-
→ His liability is unlimited and he is entitled of participate in the management of the busineess.

• Partnership Deed :-

→ A partnership deed is an agreement that generally contains the folllwoing particulars :-
(1) Name of the firm.
(2) Name of the partners.
(3) The amount of capital to be contributed by each partner.
(4) Duties, power, and obligations of partners.
(5) The method of retirement of a partner, and the arrangemetn for the payment of the dues of a retired or decensed partner.

• Registration of the firm :-

→ To register the firm, an application with all particulars about the firm and registration fee have to be sent to the Registrar of Firms.

• Merits :-

• Limitations :-

• Joint Hinde Family Firm :-

→ A hindu inherits property from his father, grand father, and great grand father.
→ Threee successive gerneratins in the mail line (son, grandson, and great grandson) inherit the ancestral property
→ The senior most member of the family is called 'karta'
→ If karta death then the next senior member of the family becomes 'karta'.

• Impoartant features of the joint hindu family firm are :-

(1) Business is managed by the senior member of the family called karta
(2) Other members cannot question the authority of the karta.
(3) Karta has the power to borrow funds for the business.
(4) The death of any member of the family does not dissolve the business or the family.

2.4 COMPANY FORM OF ORGANISATION :-

→ A company is a legal entity formed by a group of individaul to engage in and operate a business enterprise in a commercial or indurstrail capacity.
→ In case of joint stock company, captial is contributed by not or two persons but by a number of persons called share - holders.

• Main Features :-

(1) Incorporation
(2) Artificial person.
(3) Separate legal entity
(4) Comman seal
(5) Separation of ownership and management
(6) Number of members
(7) Limited liability
(8) Transferability of shares.

• Classification of companies :-

(1) On the basis of the made of incorporation, we can classify companies inot three categories :-

(a) Satutory Company :-
→ A company established by a special act of the parliment or state legislature is called 'Statutory Company'.
→ Example, Reserve Bank of India, Life Insurance Corporation of India.

(b) Registered Company :-
→ A company which is incorporated through registration with the Registrar of Companies is called 'Registered Company'.
→ All companies established under the private sector belongs to this category.

(c) Chartered Company :-
→ A company which is incorporated under a special Royal charter granted by the monarch is called a 'charatered company'.
→ Example, British East India Company.
→ In India this type of company does not exist now because there is no monarchy.

(2) Based on the type of liability, companies may be classified into three categories:-

(a) Unlimited Companies :-
→ A company in which the liability of the members is unlimited, is called 'Unlimited Company'.

(b) Companines Limitied by Guarnatee :-
→ Such compaines are not formed for the purpose of profit.
→ They are formed to promote, art, culture, religion, trade, sport etc.
→ Charitable organisation, come under this category.

(3) On the basis of ownership, compaines may be classified into :-

(a) Private Limited Company :-
→ Restricts the right to transfer its shares.
→ Limits the number of its members.

(b) Public Limited Company :-
→ The right of the shareholder to transfer hsi shares is not restricted.
→ The minimum number of shareholders is 7 and maximum number is unlimited.
→ In invite public to subscribe for its sharess and debentures.

(c) Government Company :-
→ A company in which not less than 51 per cent of the paid up share capital is held by the central goverment.

(4) On the basis of the jurisdiction of the functioning :-

(a) National Company :-
→ When the operations of a company are confined within its is registered

(b) Multinational Company :-
→ When the opeations of a company are extended beyond the boundaries of th country in which it is registers.

• Merits :-

• Limitations :-

2.5 COOPERATIVE FORM OF ORGANISATION :-

→ The Cooperative organisation is a 'voluntary' assocation of persons who are not financially strong and cannot stand on their ow legs.
→ The basis objective of such on organisation is self-help and mutual help.

• Main Features :-

(1) Voluntary assocation
(2) Autonomy and satbility
(3) Democratic management
(4) Capital
(5) Government control

Ads Area

ECO-1| Unit-2 (FORMS OF BUSINESS ORGANISATION-I) IGNOU Notes Material

UNIT -2 FORMS OF BUSINESS ORGANISATION-I

2.2 SOLE TRADER ORGANISATION :-

• Main Features :-

• Merits/ Advantages :-

• Limitations :-

2.3 PARTNERSHIP FORM OF ORGANISATION :-

• Main Features

• Classification of Partners :-

• Partnership Deed :-

• Registration of the firm :-

• Merits :-

• Limitations :-

• Joint Hinde Family Firm :-

• Impoartant features of the joint hindu family firm are :-

2.4 COMPANY FORM OF ORGANISATION :-

• Main Features :-

• Classification of companies :-

• Merits :-

• Limitations :-

2.5 COOPERATIVE FORM OF ORGANISATION :-

• Main Features :-

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