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FORMS OF BUSINESS
ORGANISATIONS
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
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.Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
TYPES OF BUSINESS
ORGANISATIONS
• Sole Proprietorship
• Joint Hindu Family Business
• Partnership Firm
• Joint Stock Company
1.) Private Limited
2.) Public Limited
• Co-operative Society
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
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)
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
• 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
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
SOLE PROPRIETERSHIP
When the ownership and management of a business are
in control of one individual the form of business is called
sole proprietorship.
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
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.
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
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
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
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
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
JOINT HINDU FAMILY BUSINESS
• Comes into existence as per
the Hindu Inheritance Act of
India
• This form of business found
only in India
• All members of the Hindu
Undivided Family(HUF) own
the business jointly
• The affairs of the business
are managed by head of the
family called “Karta”. All
other members are called
“Co-parceners” Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
• Membership is restricted only to
members of the Joint family. No
outsider can become the
member
• Karta has unlimited liability
while all other members have
limited liability
• The share of each member keeps
on fluctuating
• Business continues to exist upon
the death of any member or
Karta. Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
ADVANTAGES OF HUFs
• Every co-parsener has an assured
share in profits
• The business has continued
existence
• Decision making is quick as the
powers are with the Karta
• No corporate tax
• People use it mostly for tax
benefits these days
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
DISADVANTAGES OF HUFs
• Absolute power in the hands
of Karta.
• Instability
• Limited Resources can be
raised
• Scope for conflict
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
PARTNERSHIP FIRM
A Partnership consists of two or more
individuals in business together
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
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
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
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
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
DISADVANTAGES OF PARTNERSHIPS
• Unlimited Liability
• Limited Life
• Difficult to raise capital
• Chances of Dispute
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
JOINT STOCK COMPANY
A joint stock company is a voluntary
association of people who contribute
money to carry on business
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
CHARACTERISTICS OF A CORPORATION
• It is considered as a separate legal entity
• It comes into formation after all formalities under
the Indian Companies Act 1956 are completed
• Management and ownership is completely
separate
• Capital is raised through shares which are
transferable
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
ADVANTAGES OF A CORPORATION
• Limited liability of the
shareholders/promoter
• Can easily raise capital
• Have unlimited life
• Ease of transfer of ownership
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
DISADVANTAGES OF A CORPORATION
• Formation is not easy
• Excessive Government Regulation
• Subject to Corporate Tax and Dividend
Tax (Double Taxation)
• Delay in Policy
Decisions
• Control by a Group
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
TWO TYPES OF CORPORATIONS
1. PRIVATE COMPANY
• Closely held by a few people
• Minimum 2 and maximum 50
shareholders
• Stocks cannot be traded on exchanges
and private equity cannot be raised
• Less regulations as compared to
Public Companies
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
2. PUBLIC COMPANY
• Stocks are held by a large
number of people
• Minimum 7 shareholders
and no limit for maximum
• Can be listed on stock
exchange and can go
public
• Have to follow many laws
with regards to the board
composition and AGM.
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
CO-OPERATIVE SOCIETY
It is a voluntary
association of
people or
business to
achieve a an
economic goal
with a social
perspective
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
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
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
ADVANTAGES OF CO-OPERATIVE
• Easy Formation
• Limited Liability
• Stability
• Democratic
Management
• State Assistance
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
DISADVANTAGES OF A CO-OPERATIVE
• Possibility of
conflict
• Long decision
making process
• Not enough capital
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
Madan Kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,

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Formsofbusinessorganisations 131010063541-phpapp02

  • 1. FORMS OF BUSINESS ORGANISATIONS Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 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.Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 3. TYPES OF BUSINESS ORGANISATIONS • Sole Proprietorship • Joint Hindu Family Business • Partnership Firm • Joint Stock Company 1.) Private Limited 2.) Public Limited • Co-operative Society Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 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) Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 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 Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 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. Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 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. Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 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 Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 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 Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 10. JOINT HINDU FAMILY BUSINESS • Comes into existence as per the Hindu Inheritance Act of India • This form of business found only in India • All members of the Hindu Undivided Family(HUF) own the business jointly • The affairs of the business are managed by head of the family called “Karta”. All other members are called “Co-parceners” Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 11. • Membership is restricted only to members of the Joint family. No outsider can become the member • Karta has unlimited liability while all other members have limited liability • The share of each member keeps on fluctuating • Business continues to exist upon the death of any member or Karta. Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 12. ADVANTAGES OF HUFs • Every co-parsener has an assured share in profits • The business has continued existence • Decision making is quick as the powers are with the Karta • No corporate tax • People use it mostly for tax benefits these days Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 13. DISADVANTAGES OF HUFs • Absolute power in the hands of Karta. • Instability • Limited Resources can be raised • Scope for conflict Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 14. PARTNERSHIP FIRM A Partnership consists of two or more individuals in business together Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 15. 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 Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 16. 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 Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 17. DISADVANTAGES OF PARTNERSHIPS • Unlimited Liability • Limited Life • Difficult to raise capital • Chances of Dispute Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 18. JOINT STOCK COMPANY A joint stock company is a voluntary association of people who contribute money to carry on business Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 19. CHARACTERISTICS OF A CORPORATION • It is considered as a separate legal entity • It comes into formation after all formalities under the Indian Companies Act 1956 are completed • Management and ownership is completely separate • Capital is raised through shares which are transferable Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 20. ADVANTAGES OF A CORPORATION • Limited liability of the shareholders/promoter • Can easily raise capital • Have unlimited life • Ease of transfer of ownership Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 21. DISADVANTAGES OF A CORPORATION • Formation is not easy • Excessive Government Regulation • Subject to Corporate Tax and Dividend Tax (Double Taxation) • Delay in Policy Decisions • Control by a Group Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 22. TWO TYPES OF CORPORATIONS 1. PRIVATE COMPANY • Closely held by a few people • Minimum 2 and maximum 50 shareholders • Stocks cannot be traded on exchanges and private equity cannot be raised • Less regulations as compared to Public Companies Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 23. 2. PUBLIC COMPANY • Stocks are held by a large number of people • Minimum 7 shareholders and no limit for maximum • Can be listed on stock exchange and can go public • Have to follow many laws with regards to the board composition and AGM. Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 24. CO-OPERATIVE SOCIETY It is a voluntary association of people or business to achieve a an economic goal with a social perspective Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 25. 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 Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 26. ADVANTAGES OF CO-OPERATIVE • Easy Formation • Limited Liability • Stability • Democratic Management • State Assistance Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,
  • 27. DISADVANTAGES OF A CO-OPERATIVE • Possibility of conflict • Long decision making process • Not enough capital Madan Kumar M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.,