2. WHAT IS A BUSINESS ORGANISATION?
The term "business organization" refers to how a
business is structured.
It refers to a commercial or industrial enterprise
and the people who constitute it.
3. TYPES OF BUSINESS
ORGANISATIONS
• Sole Proprietorship
• Partnership Firm
• Joint Stock Company
1.) Private Limited
2.) Public Limited
• Co-operative Society
• Government Sector
4. Choosing a Form of Business Organisation
The choice of the form of business is governed by
several interrelated and interdependent factors :-
• The nature of business is the most important
factor
• Scale of operations i.e. volume of business ( large,
medium, small) and size of the market area (local,
national, international)
5. • The degree of control desired by the owner(s)
• Amount of capital required for the establishment
and operation of a business
• The volume of risks and liabilities as well as the
willingness of the owners to bear it
• Comparative tax liability
6. SOLE PROPRIETERSHIP
When the ownership and management of a business are
in control of one individual the form of business is called
sole proprietorship.
7. CHARACTERISTICS
• The business enterprise is
owned by one single individual
(i.e. both profit and risk belong
to him)
• Owner is the Manager
• Owner is the only source of
Capital
• The proprietor and business
enterprise are same in the eyes
of the law.
8. ADVANTAGES
OF
SOLE
PROPREITORSHIP
• Easy formation
• Better Control (Prompt decision making and
Flexibility in Operations)
• Subject to fewer regulations
• Not subject to corporate income tax
• Ownership of all profits
9. DISADVANTAGES OF SOLE
PROPREITORSHIP
• Owner has unlimited
liability
• Difficult to raise
capital
• Business has a limited
life
• Difficult to do
business beyond a
certain size
10. APPLICATN OF SOLE PROPREITORSHIP
• Example of Sole propreitership are:
• Medical shop
• TV/Computer repair shop
• Bicycle/Automobile showroom
• Small engg. Firms etc.
11. PARTNERSHIP FIRM
A Partnership consists of two or more individuals
in business together
According to Indian Partnership Act 1932,
Partnership is defined as, “the relation between two
or more persons who have agreed to share profit of
a business, carried on by all or any of them acting
for all.”
12. CHARACTERISITCS OF PARTNERSHIP
• Minimum 2 number of partners and maximum 20
partners
• The relation between the partners is created in the
form of a contract. Written contract is called
“Partnership Deed”
• The firm means partners, the partners mean the
firm
• The profit is divided in any as ratio as agreed
• No partner can sell/transfer his interest in the firm
to anyone without the consent of other partners
13. Formation :
Partnership can be formed either verbally or by
written agreement. The written agreement is known
as “Partnership Deed”.
14. The Partnership Deed contains :
Ø The terms and conditions relating to the
partnership.
Ø The regulations governing its internal
management.
Ø The rights and duties of the partners.
15. The Partnership Deed should have the following
details :
Ø Name of the firm.
Ø Nature of business.
Ø Date of starting partnership.
Ø Duration of partnership.
Ø Rate of interest on capital invested.
16. Ø Money contributed by each partner.
Ø Allotment of managerial functions among
partners.
Ø Share of profit and loses.
Ø Salary allowed to managing partners.
Ø The basis for the inclusion of any new partners.
Ø The amount which can be withdrawn by each
partner.
17. Ø The aim of partnership.
Ø Accounts of the firm and authority.
Ø Provision for arbitration for settling the disputes
that may arise in future.
18. Types of Partners :
Ø General Partners :
All the partners who participating in the
working of the firm and are responsible to joint with
other partners, for all liabilities, obligations and
defects of the firm are the general partners.
19. Ø Limited Partners :
The liability for debts of the limited partners is
limited to the extend of their contributed capital.
Ø Active or Managing Partners :
Active partners are those who take active part
in the management and formulation of policies.
20. Ø Sleeping and Silent Partners :
They do not take any active part in the business.
They simply contribute their capital in the business
and get their share in the profit of the firm.
Ø Nominal Partners :
They lend their reputed name for the
company’s reputation. They do not invest money and
do not take any active part in the management.
21. Ø Minor Partners :
Minor partners are those whose age is below 18
years and associated with the business. Such partners
can be allowed only with the consent of other
partners. Their liability is limited to their investment.
22. ADVANTAGES OF PARTNERSHIP
• Easy Formation
• Larger Resources
• Sharing Of Risk
• Better Management and
Flexibility of Operation
• No corporate income tax
• Subject to fewer regulations
as compared to companies
23. DISADVANTAGES OF PARTNERSHIPS
• Unlimited Liability
• Limited Life
• Difficult to raise capital
• Chances of Dispute
• Non-Transfer of
Partnership.
• Lack of Public
Confidence.
24. APPLICATN OF PARTNERSHIP
• Example of PARTNERSHIP are:
• C.A. Firms
• Law firms
• Coaching classes
• Small factories etc.
26. Registration : Not Necessary Necessary
Risk :
Individual Owner
bear risk
Risk spread
among partners
Profit :
Owner enjoys
the profit
Profit is shared
among partners
Management :
Owner manage
the business
It is shared by
partners
27. Secrecy :
Owner maintains
the secret
Partners may
reveal secrets
Decisions :
Owner must take
decisions
Partners can
take decisions
Suitability :
Small scale
business
Small and
Medium scale
Division of
labour :
Not possible Possible
28. JOINT STOCK COMPANY
A joint stock company is a voluntary
association of people who contribute
money to carry on business
29. Ø Joint Stock Company
Joint Stock Companies are formed and
registered under the Indian Companies Act, 1956.
The joint stock company is a legal business
owned by the shareholders having limited liability and
managed by an elected “Board of Directors”. The
shares are transferable.
30. Characteristics of Joint Stock Company :
Ø A company is created by registering or
incorporating an association of persons under
the Company Act.
Ø It has a separate legal existence as distinct
from its members.
Ø Artificial personality enabling it to exercise
certain legal powers.
31. Ø Perpetual life and a very stable existence.
Ø It has a common seal on which its name is
engraved and this seal acts as its signature.
Ø There is a complete separation of ownership
from management.
Ø Liability of shareholders is limited.
Ø Lower tax liability.
32. Ø Easy transferability of shares.
Ø There is a wide distribution of risk of loss.
Ø Large membership.
Ø Statutory regulations as provided in the Indian
Company’s Act, 1956.
33. Formation of Joint Stock Company :
The entrepreneurs (promoters) of the company
prepare the following documents :
Ø Memorandum of Association.
Ø Articles of Association.
Ø A List of persons who have consented to be the
Directors of the Company.
34. Ø A declaration by an advocate to the effect that
all the requirements of the Act have been
fulfilled.
Ø Name and address of promoters.
35. Organization Structure :
Share holders
Board of Directors
Auditor Executive Committee Bankers
General Manager
Sales Purchase Accounting Production
deptt. deptt. deptt. deptt.
36. Types of Joint Stock Company :
Ø Private Limited Company
Ø Public Limited Company
37. Private Limited Company :
It can be formed by two or more members. The
maximum number of members is limited to 50. The
company is registered under the Indian Company’s
Act, 1956.
It enjoys a separate legal status, continuity of
life, benefits of limited liability. Large capital raising
power, business secrecy to certain extend.
38. Public Limited Company :
The membership is open to general public. The
minimum number of persons is 07 and no upper limit.
It is subjected to greater control and
supervision of the government which protect the
interest of the shareholders and the members of the
public.
40. Ø Permanent Existence.
Ø Legal Control.
Ø Risk spread out.
Ø Mobilization of Scarce saving.
Ø Accelerated economic growth of the country is
possible through industrialization.
Ø It creates huge employment possibilities.
41. Disadvantages :
Ø Dishonest directors may exploit the
shareholders.
Ø Large Complexities.
Ø It is democratic in theory only.
Ø Delay in Decisions.
Ø Favourisms.
Ø Difficult labour relations.
42. Ø Lack of initiative and personal interest.
Ø Concentration of economic power and wealth in
a few minutes.
Ø Misuse of internal information.
43. Particulars Private Limited Public Limited
Membership :
Open to Private
members.
Open to general
public.
Limits to
membership :
Minimum 2
Maximum 50
Minimum 7
Maximum no
limit
Comparison between Private and Public
Limited Companies
44. Election of
Directors :
Not required Required
Resale of
shares :
Not possible Possible
Audit of
Accounts :
No legal
provision
Legal provision
Minimum
capital :
Min. Paid up
share capital of
1 Lack
Min. Paid up
share capital of
5 Lack
45. Name :
End with “Private
Limited”
End with only
“Limited”
Number of
Directors :
Minimum 2 Minimum 3
Legal control : Less More strict
Remuneration
of Directors :
Less
11% of net
profits
46. CO-OPERATIVE SOCIETY
It is a voluntary
association of
people or
business to
achieve a an
economic goal
with a social
perspective
47. CHARECTERISTICS OF CO-OPERATIVE
• Voluntary association
• Minimum membership requirement is 10
and there is no maximum limit
• Registration of Co-operative is must
under the “Co-operative Societies Act” is
a must. After the registration it enjoys
certain privileges of a Joint Stock
Company
48. ADVANTAGES OF CO-OPERATIVE
• Easy Formation
• Limited Liability
• Stability
• Democratic
Management
• State Assistance
49. DISADVANTAGES OF A CO-OPERATIVE
• Possibility of
conflict
• Long decision
making process
• Not enough capital
51. Ø Consumers Co-operative Society :
The consumers living in a particular area
combine together. Each contributes a small capital.
A store is opened in which articles of common
use are stocked and sold at reasonable prices. Such
stores are found in colleges and schools.
52. Advantages :
Ø Much capital is not needed.
Ø The management is simple and honorary.
Ø There is legal control and inspection.
53. Disadvantages :
Ø They offer very little selection for consumers.
Ø The honorary office bearers do not take much
pains, they are sometimes dishonest.
54. Ø Housing Co-operative Society :
These are formed for the purpose of getting
plots or constructing house for the needy persons.
Government provides great facilities for this purpose.
55. Ø Credit Co-operative Society :
Its object is to finance the poor cultivators by
providing loans at low rate of interest for the
development of land, purchase of agricultural
machinery, fertilizers etc.
56. Advantages :
Ø It protects the interest of the weaker section of
the community as under :
• Provide better methods and tools of
production to small manufacturers and
craftsmen.
• Help the farmers in farming and marketing
their products efficiently.
57. • Provide financial assistance at moderate rate
of interest.
• Opening of super bazaar types of stores
gives relief to the weaker section of the
society.
58. Disadvantages :
Ø Lack of Co-ordination.
Ø Chances of undue advantages.
Ø Favourism.
Ø Limited Capital.
Ø Inefficient Management.
Ø Political influence.
59. A commercial or Industrial undertaking owned &
managed by the Government with a view to maximize
social welfare is called as Public Sector Enterprise.
It has to play a key role to accomplish quick
industrialization and rising standard of living of the
people through developing key and basic industries.
60. Objectives :
Ø Equitable distribution of wealth and income.
Ø Balanced economic development through
dispersal of industrial location.
Ø Adequate employment opportunities.
Ø Speedy agricultural and industrial development
without the growth of monopolies.
Ø Self-sufficient of the nation in modern technology.
61. Types of Public Sector:
Ø Government Departmental Organization
Ø Public Corporation
Ø Govt. Company
62. Government Departmental Organization:
Ø It is primarily used for provision of essential services
such as railways, defense industries, postal services,
broadcasting etc.
Ø Such organization function under the control of a
minister incharge of the department
63. Public Corporation:
Ø It is a corporate body created by the parliment or
assembly, A specialact defines its power, functions
and jurisdiction.
Ø It is wholly owned by the Gov.
Ø Example of such organization are Life Insurance
Corporation of Indi, State Transport Corporation etc.
64. Government Company:
Ø It is a campany in which 51% or more of the share
capital is owned by th Gov.
ØMajority of directors of Gov. Company are
nominated by Gov.
ØExample of Gov. Companies are BHEL, SAIL, ONGC,
HPCL, SBI, etc.
65. Advantages :
Ø Profits go to the Govt. and are utilized for the
benefit of the society.
Ø Purity of supply is guaranteed.
Ø Govt. has ample funds and can borrow more, if
needed, in the money market at low rates.
Ø The best talent is attracted towards Govt.
service.
66. Ø Govt. can afford to wait long for an enterprise to
yield profit.
Ø Consumer’s interests are properly safeguarded.
Ø Govt. enterprise is subjected to greater control.
67. Disadvantages :
Ø Govt. officer behaves like a big boss and a
respectable citizen receives no courtesy.
Ø Govt. servants do not work hard because here
promotion is by seniority and not by merit.
Ø Frequent transfers of Govt. servants are harmful
to the success of the enterprise.
68. Ø The Govt. business is all routine and there is
little initiative. So economic progress is slow.
Ø There are no shareholders to question the
directors in the annual meeting.
Ø Due to Gov. Control usually important decisions get
delayed.
