Different pathways to sale the goodsForms of Business Organisations

1. FORMS OF BUSINESS
ORGANISATIONS

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
Ownership
Private
Enterprises
Public Sector
Enterprises

4. TYPES OF BUSINESS ORGANISATIONS
• PRIVATE SECTOR
 Sole Proprietorship
 Joint Hindu Family Business
 Partnership Firm
 Joint Stock Company
• Private Limited
• Public Limited
 Co-operative Society

5. TYPES OF BUSINESS
ORGANISATIONS
Public Sector
• Departmental Organization
• Corporations
• Government Company

6. Choosing a Form of Business Organization
 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)

7.  Choice of Suitable form of ownership
( A Crucial Decision)
• The form of ownership determines the -
Division of Profits
Extent of liability
Extent of Risk
Division of Power
Control of Owner

8. SOLE PROPRIETERSHIP
When the ownership and management of a business
are in control of one individual the form of
business is called sole proprietorship.

9. SOLE PROPRIETERSHIP
 The most common form of business organization.
 Owned by one person, who performs most roles and owns
everything
 Very few legal requirements for setting it up.
 Owner gets all profits, takes all the losses → called
unlimited liability
 Easiest and least expensive to set up
 Easiest for tax purposes → income recorded under
personal income

10. CHARACTERISTICS
 Oldest form of business organization
 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.

11. CHARACTERISTICS
 Liability of sole proprietor is unlimited
 Sole proprietorship business is free from many
legal formalities subjected to the general law of
the land
 Proprietor makes all decisions pertaining to the
business
 Limited scope of operations.

12. ADVANTAGE OF SOLE PROPREITORSHIP
 Ease in formation
 Discretion in start and
dissolution
 Flexibility
 Free from legal Formality
 Independence of proprietor
 Quick decesions

13. ADVANTAGES OF SOLE PROPREITORSHIP
 Facilitate Coordination
 Personal contacts with customers
 Secrecy
 Perfect Control
 Economy in operation
 Ease to borrow funds
 Direct relation between effort and rewards
 Successors benefited by inherited business
 Social advantage

14. DISADVANTAGES OF SOLE PROPREITORSHIP
 Limited managerial
capacity
 Hasty decisions
 Secrecy
causes
suspicion
 Owner has unlimited
liability
 Limited financial
resources

15. DISADVANTAGES OF SOLE
PROPREITORSHIP
 Loss in absence
 Difficulty in attracting and retaining good
employees
 High morality rate
 Lack of stability
 Unfit for medium and large businesses

16. Is the sole proprietorship the best form
of business ownership ?
 To understand this statement we can divide it into
following two parts
 One man control is the best
 It is the best provided certain conditions are
satisfied.

17. One man control is the best
 Ease in formation
 Discretion in start and end
 Flexibility
 Free from legal formalities
 Quick decisions
 Facilitate coordination
 Personal contacts with customers
 Secrecy
 Perfect control

18. One man control is the best
 Economy of operation
 Easy to borrow funds
 Direct relation between efforts and reward
 Successors benefited by inherited business
 Social advantages

19. Provided certain conditions are
satisfied
 It mean sole proprietorship business suffers from
many limitations or demerits. These are-
 Limited managerial capacity
 Hasty decisions
 Secrecy causes suspicion
 Unlimited liability
 Limited financial resources
 Loss in absence
 Lack of stability
 Unfit for medium and large business

20. JOINT HINDU FAMILY BUSINESS
 A Hindu Undivided Family (HUF) or Joint Hindu
Family (JHF) consist of all persons who lineally
descended from a common ancestor and
includes their wives and unmarried daughters
(Hindu Law).
 When a joint Hindu family carries on a business,
it is called a joint Hindu family firm.
 The members of such firm are not called
partners, but known as coparceners.

21. 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
“Coparceners”

22.  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.

23. ADVANTAGES OF HUFs
 Every coparcener 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

24. DISADVANTAGES OF HUFs
 Absolute power in the
hands of Karta.
 Instability
 Limited Resources
can be raised
 Scope for conflict

25. PARTNERSHIP FIRM
A Partnership consists of
two or more individuals
in business together.

26. Meaning of Partnership
 A partnership is an association of two or more
persons who agree to carry on business for
earning and sharing profit among them.
 According to Indian Partnership Act,
“Partnership is the relation between persons
who have agreed to share the profits of a
business carried on by all or any of them acting
for all.”

27. CHARACTERISITCS OF PARTNERSHIP
 Minimum 2 number of partners and maximum 20 partners. All
of must be competent to contract.
 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

28. CHARACTERISITCS OF PARTNERSHIP
 The relation of partnership arises from a valid
agreement.
 The liability of partners is unlimited.
 T
o constitute a partnership, there must be a
relation of mutual agency between the partners.
 A firm does not have separate legal existence from its
partners. Firm is not a person in the eye of law.
 The registration of partnership is not compulsory
in India.

29. Test of Partnership
 There must be an agreement between two or
more persons.
 There must be a business of partnership.
 The partners must have agreed to share the
profits of the business.
 The business must be carried on by all or any
one

30. ADVANTAGES OF PARTNERSHIP
 Easy Formation
 Larger Resources
 Greater Management Talent
 Flexibility of Operation
 Prompt Decision
 Balanced decisions
 Sharing Of Risk and liability
 Personal care and
supervision of business

31. ADVANTAGES OF PARTNERSHIP
 Secrecy
 Direct relation between work and reward
 More possibility of growth and expansion
 Protection of minority interest
 Easy dissolution

32. DISADVANTAGES OF PARTNERSHIPS
 Unlimited Liability
 Limited resources
 Limited managerial skill
 Fear of Dispute
 Instability
 Non- transferability of
interest
 Lack of public interest
 Risk of mutual agency
relations

33. Partnership Deed
 When the contract of partnership is made in
writing, it takes the form of a document. Thus,
the document which contains the terms of
contracts of partnership is called the deed of
partnership.
 It must contain all the important terms of
partnership agreed by the partners.

34. Contents of deed
 Name of the firm
 Name of the partners
 Nature and place of business
 Date of commencement of partnership
 Duration of the partnership/ firm.
 Capital employed or to be employed by each
partner.
 Profit and loss sharing ratio
 Interest on capital
 Limit of drawing and interest on it
 Interest on loans by and to partners
 Salary or commission, if payable, to the partners

35. COMPANY
 According to companies act 1956, “Company”
means a company formed and registered under
this act or an existing company formed and
registered under any of the previous companies
law.
 According to Prof. Haney, “ A company is an
artificial person created by law, having separate
entity with a perpetual succession and common
seal.”

36. CHARACTERISITCS OF COMPANY
 Registered voluntary association/ body corporate
 Members/ Subscriber
 Artificial person
 Separate legal entity
 Perpetual succession
 Common seal
 Limited liability

37. CHARACTERISITCS OF COMPANY
 Share Capital
 Transferable shares
 Separate property
 Capacity to sue and be sued
 Management team
 Governance by majority
 Nationality
 Not a citizen and has no fundamental rights

38. ADVANTAGES OF COMPANY
Limited Liability
Huge financial resources
Perpetual existence or stability
Transferability of shares
Sound management
Diffusion of risk
Economy in operation

39. ADVANTAGES OF COMPANY
Democratic management
Scope of expansion and growth
Public confidence
Encourages capitalization
Social advantages

40. DISADVANTAGES OF COMPANY
 Difficulty in formation
 Regulation and Control
 Oligarchy of directors
 Neglect of minority interests
 Lack of Secrecy

41. DISADVANTAGES OF COMPANY
 Delay in decisions
 Lack of motivations
 Tax Burden
 Difficulty in winding up
 Insider trading

42. MEANING OF A CORPORATION
 The term ‘Co-operation’ has been derived by adding a prefix
‘Co’ with the word ‘operation’. ‘Co’ means together and
‘operation’ means work. Therefore the literal meaning of the
term co- operation is to work together.
 Co-operation means working together for a common good of
all.

43. CO-OPERATIVE SOCIETY
It is a voluntary
association of people
or business to
achieve a an
economic goal with a
social perspective

44. DEFINITION OF A CORPORATION
 A Co-operative society or organization is one which has been
voluntarily formed by some persons for the promotion of their
common economic interest.
 According to the Indian Co-operative Societies Act, 1912, A
Co-operative society is “a society which has its object as the
promotion of economic interests of its members in
accordance with co- operative principles.”

45. CHARACTERISTICS OF A CO-OPERATIVE
ORGANIZATION
 Voluntary organization
 Must be registered
 Separate legal entity and artificial person
 Liability is limited
 Perpetual existence
 Every member has to buy at least one share
 Non-transferable shares

46. CHARACTERISTICS OF A CO-OPERATIVE
ORGANIZATION
Each member of a co-operative society has a
right to one vote
Managed on Democrative principles
Certain proportion of profit is of co-operative
society is distributed among its member
Works for promotion of economic interest of
its member
Primary object is to serve its members
Based on principles equality, justice and
mutual benefit

47. CO-OPERATIVE PRINCIPLES
Principle of voluntary and open membership
Principle of democratic member control
Principle of member’s economic participation
Principle of autonomy and independence
Principle of co-operation among co-
operatives
Principle of concern for community

48. ADVANTAGES OF A CO-OPERATIVE ORGANISATION
 Organisational Advantages
 Easy formation
 Small amount of investment
 Equal voting rights
 Democratic management
 Stability
 Easy to wind up

49. ADVANTAGES OF A CO-OPERATIVE ORGANISATION
 Economic Advantages
 Economic management
 Tax advantages
 Ploughing back the profits
 Government aid
 Equitable distribution of
profits
 Limited liability

50. ADVANTAGES OF A CO-OPERATIVE ORGANISATION
 Social Advantages
 Spirit of mutual help and brotherhood
 Uplift standard of living of weaker sections
of society
 Promotes equal distribution of income and
wealth in the society
 Relief from exploitation
 decentralisation of economic power
 Changes in society by peaceful means
 Promotes maximum social welfare

51. Public Enterprises
 Public enterprises (PE) refers to an enterprise which is
owned and controlled by the Government or public
authority.
 A public enterprise refers to an industrial, commercial or
service enterprise which is owned and controlled by the
Government or by public authority/ Government
organisation for providing goods and services to the public.

52. CHARECTERISTICS OF PUBLIC
ENTERPRISES
 Established with some special objectives
(economic objectives, social objectives, political
objectives etc.)
 Service motive is prime motive
 PE accountable to the public
 Subject to audit rules of the Government
 Required to prepare annual return of working &
place the same before the Lok Sabha.
 Monopoly position in certain economic activities
such as railways, mining, petro-products etc

53. ROLE & IMPORTANCE OF PUBLIC
ENTERPRISES
 Infrastructure Development
 Strong Industrial Base
 Planned Development
 Balanced regional development
 Employment
 Promotes capital formation or investment
 Export promotion

54. ROLE & IMPORTANCE OF PUBLIC
ENTERPRISES
 Import Substitution
 Contribution to the GDP
 Contribution to Exchequer
 Research and Development
 Help reduce disparities of income and wealth/
concentration of economic power
 Protection of consumer interests

55. Forms of Organization
Departmental
organisations
Government
Company
Public
Corporations

56. Departmental Organisation
 Departmental form of organisation is the oldest form of
organising public enterprises.
 Under this form of organisation, an enterprise is put
under the control of a department.
 Such department is headed by the concerned minister.
 For Example - Railway is a public enterprises which is
under the control of Railway department and is headed
by Railway Minister.

57. Public / Statutory Organisation
 A public or statutory corporation is a body
corporate incorporated under a special Act or
State Legislature.
 According to Morrison, “In public corporation, we
are seeking a combination of public ownership,
public accountability and business management
for public ends.”

58. Government Company
 According to the Companies Act 1956, a
Government company means any company in
which not less than fifty-one per cent of the paid-
up share capital is held by the following -
 By the central Government
 By any State Government or Governments
 Partly by the Central Government and Partly by
one or more State Governments
 A Government company is one in which not less
than 51% of the paid-up capital is held by the
Central or/ and State government.

59. 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

60. 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.

61. 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

62. ADVANTAGES OF CO-OPERATIVE
Easy Formation
Limited Liability
Stability
Democratic
Management
State Assistance

63. DISADVANTAGES OF A CO-OPERATIVE
Possibility of
conflict
Long decision
making process
Not enough capital

64. JOINT STOCK COMPANY
A joint stock company is a voluntary
association of people who contribute
money to carry on business