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Forms of business organisation


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Organisation commerce, HSC

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Forms of business organisation

  1. 1. Forms of Business organisations
  2. 2. 1) Introduction 2) Sloe Proprietorship 3) Joint Hindu Family 4) Partnership Firm 5) Co – operative society 6) Joint Stock company 7) Basic Factors to Star A Business 8) Distinguish between 9) Exercise Point of discussion
  3. 3. Introduction • It is an institution which is engaged in manufacturing and providing services to the society • “ It is the framework or structure of efficiently conducting industrial and commercial activities to earn profit or with a view to gain it through production and supply of goods and services”
  4. 4. Types of Business organizations Private sector Public sector Sole Trading concern Joint Hindu Family business Partnership Firm Joint Stock Company Co- Operative Societies Departmental Undertakings Statutory Corporations Government Companies
  5. 5. Sole Trading Concern  Proprietor means owner & sole means single  It is owned, managed & Controlled by an individual entrepreneur.  This is one man business or Individual proprietorship or Individual Entrepreneurship  Owner is called as Sole trader & he is one man show  Business is usually operates in local market 1. Retailer 2. Painters 3. Restaurant 4. Beauty parlour 5. Doctor 6. Petrol pumps
  6. 6. JAMES A. SHUBIN “Under the sole proprietorship form of ownership a single individual organizes, has title to and operates the business in his own name.” CHARLES S. TIPPETS “The proprietorship is that form of business organization which is owned, managed and controlled by a single individual who receives all the profits and risks all his property in the success or failure of the enterprise.” D.W.T.STAFFORD “It is a simplest form of business which is owned and controlled by one man.” Definitions
  7. 7. Advances/Merits of Sole Proprietorship Easy formation Benefit of secrecy Direct motivation Quick decisions Lower costs Development Flexibility in operation Limited government control Credit standing Efficiency
  8. 8. Disadvantages / Demerits Limited Managerial ability Limited amount of capital Unlimited liability Not suitable for large scale operation Lack of stability Absence of specialization Unprofessional Decisions
  9. 9. • It is run by the family member & they run the business as family business • Comes into existence by the law of inheritance • Created by the operation of Hindu • It is governed by the Hindu Succession act 1956 • The head of family is called as Karta or Manager & other person is co – parceners • Mitakshara • Dayabhaga Joint Hindu Family business
  10. 10. Definition Meaning: -: -A business, which continues from one generation to another generation is known as joint Hindu family business or firm.  This is special form of business organization, which now exists only in India. And the business is with in the family. • Joint Hindu Family is governed by the Mitaksara Law.
  11. 11. Merits / Advantages Easy to start Prompt Decisions Good relation with employees Flexibility Secrecy Co – parcener’s Liability Good credit standing Continuity and stability
  12. 12. Disadvantages / Demerits Limited Resources Limited managerial skills Unlimited liability of Karta Breaking of joint family Lack of Direct Efforts Restricted Expansion Continuity
  13. 13. Introduction  Because of limited capital & other factors , sole proprietorship may not….  A business owned & managed by more than one person  Share profit & loss equally  Share liability equally  They equally contribute their resources  The owners are called partners & organization is called a firm  It is governed by the Indian partnership act 1932.  The agreement may be oral or written
  14. 14. Definition  Indian Partnership Act 1932 (sec.4) ‘ Partnership is the relation between the persons who have agreed to share the profits of a business carried on by all or any one of them acting for all”  Dr. J. A. Shubin : “ Two or more individuals may form a partnership by making a written or oral agreement that they will jointly assume that they will jointly assume full responsibility for the conduct of a business  Prof. Haney : “ The relation existing between persons competent to make contracts, who agree to carry on a lawful business, in common, with a view to private gain”
  15. 15. Merits / Advantages More financial Resources More manpower Resources Easy formation Simple dissolution Rational decisions Secrecy Personal contacts Division of Risk Flexible organization Managerial skills
  16. 16. Demerits / Disadvantages Unlimited liability Limited resources Disputes Risk of implied authority No separate legal status Attitude problem Lack of Managerial skills No succession Lack of management skills Problem of secrecy
  17. 17. Types of Partners Active partners Nominal partners Minor partners Partners in profits only Limited partners Partner by holding out Secret partner
  18. 18. Co-operative Society
  19. 19.  It is voluntary association of persons who come together to collect small saving of difference people through a society  Adopt principle of self help & mutual help  Each for all & all for each  Provide services to the society & consumer  Minimum of 10 persons are required to form a co-operative society  There is no maximum limit for membership Introduction
  20. 20. Definition • According to International labour organization, “ An association of persons, usually of limited means who have voluntarily joined together to achieve a common economic end through the formation of democratically controlled business organization, making equitable contribution to the capital required and accepting a fair share of risks and benefits of the undertaking.” • According to Indian co-operative societies act, 1912, “Co-operative society is a society which has its objectives for the promotion of economic interests of its members in accordance with co- operative principles.”
  21. 21. Types of Co-operative society  Consumer’s Co-operative society  Credit Co-operative society  Producer’s Co-operative society  Marketing Co-operative society  Farming Co-operative society  Housing Co-operative society
  22. 22. Merits / Advantages
  23. 23. Demerits Lack of capital Rigid government rules Lack of public confidence Lack of motivation Mutual disputes Stability Limited scope of expansion No secrecy
  24. 24.  The industrial revolution took place in 1760 (Machine age )  Due to non availability of ….  capital  Managerial skills  professional specialization  other factors Joint Stock company
  25. 25. Meaning 1) a joint stock company is a separate entity formed by a number of persons contributing a fixed capital in the formation of shares with liability of each share holder being limited to his investment in the company only. 2) The management of the company is done professionally by experts who are not the owners and are controlled by the representatives of the share holders are called the board of directors
  26. 26. Definition • According to Indian Companies act, 1956 Sec. 566. “ A company having a permanent paid up or nominal share capital of fixed amount, divided into shares, also of fixed value, held and transferable as stock, or divided and held partly in one way and partly in the other and formed on the principle of having for its members, only the holders of those shares or that stock and not other persons”. • According to Prof. Haney : “ A joint stock company is a voluntary association of individuals for profit having capital divided into transferable shares, the ownership of which is the condition on membership.”
  27. 27. Private limited company According to sec 3 (I) (iii) of the companies act, 1956 • Restricts the right to transfer its shares • Restrict the number of its members up to 2 to 50 • Ban on inviting to the public to subscribe for any shares in or debentures of the company • Prohibits any invitation or acceptance of deposits from any person • Must have a minimum paid up share capital of one lakh rupees
  28. 28. Public company According to Sec 3 (I) public company means which is not a private company • Has no restriction on the transfer of its shares • There should be a minimum number of members are 7 • Has a minimum paid up share capital of Rs. 5,00,000/- or such higher paid up capital as may be prescribed • Does not prohibit any invitation or acceptance of deposits • Must have a list 3 directors
  29. 29. Merits / Advantages Large capital Democratic management Transferability of shares Limited liability Expert services Relief in taxation Public confidence Scope for growth & expansion
  30. 30. Disadvantages / Demerits Difficulty in formation Delay in decision making Excessive government control High cost of management No personal contact Lack of secrecy No direct efforts reward relationship No secrecy
  31. 31. Factors to be considered for starting business Identification of business opportunity Raw material Technology and equipment Human resources Financial planning Utilities Selection of location Form of business organization
  32. 32. Exercise