Different forms of business organizing

1. FORMS OF BUSINESS
ORGANIZATION
BSC AGRI 2
PAE
UNIT 2

3. Various Forms of business organization:-
• Individual or single or sole proprietorship
• Partnership
• Hindu Undivided Family ( HUF )
• Corporation
• Co-operative Societies

4. Sole proprietorship :-
• Meaning :- A Sole proprietorship or one man’s
business organization owned and managed by
a single person. He is entitled to receive all the
profit and bears all risk of ownership.
• A sole proprietorship is a business established,
owned, and controlled by a single person.
• The Sole proprietorship is the most prominent
of the five forms of ownership.

5. Sole Proprietorship Features:-

6. Sole Proprietorship Advantages:-
5.
5. The business itself pays no income
tax the owner pays income tax as an
individual.

7. Sole Proprietorship Disadvantages:-
• Unlimited liability :-
• Limited Financial Resources :-
• All Decisions:-
• Owner is the only person who can arrange
financing and capitalization.
• Limited growth
• Limited life span

8. Partnership

9. Partnership Meaning :-

10. Features of Partnership :-
• Two or more members : At least two members are required to start a
partnership business. But the number of members should not exceed 10
in case of “banking business” and 20 in case of “other business.
• Lawful business : The partners should always carry on any kind of
lawful business, they cannot indulge in illegal business like
smuggling, black marketing, etc..
• No separate legal existence : Partnership firms are no legal entities
as opposed to companies, who have their separate legal
existence, partnerships are not recognized in law at their own,
they are recognized by their partners
• Eligibility of partners : Since individuals join hands to become
partners, it is necessary that they must be “competent” to enter
into a partnership. Thus, minors, lunatics and insolvent people
are not eligible to become partners. However, a minor can be
admitted to the benefits of partnership i.e., he can have a share
in the profits only.

11. Conti…
• Sharing of profits : The main objective of every
partnership firm is to make and share the profits
of the business. Suppose, there are two partners
in the business and they earn a profit of
Rs.20,000. They may share the profits equally
i.e., Rs.10,000 each or in any other agreed
proportion.
• Unlimited liability : The biggest disadvantage of
partnership is that the liability of partners in a
partnership is unlimited. Suppose, the firm has
to make payment of Rs.30,000/- to the creditors.
The partners are able to arrange for only

12. Conti…
• Voluntary registration : Though the Partnership
Act provides for registration but had not made it
mandatory to register a partnership firm.
• Restriction on transfer of interest : No partner
can sell or transfer his share or part in the firm
to any one without the consent of the other
partners. For example, A, B, and C are three
partners .If “A” wants to sell his share to “D” as
his health problems prevent him from working,
he cannot do so until B and C both agree.
• Continuity of business : A partnership firm

13. Types/Forms of Partnership:-
• General / Active Partner : The partners who
actively participate in the day-to-day
operations of the business are known as active
partners. They contribute the capital and are
also entitled to share the profits & losses of the
business.
• Limited Partner : Those partners who do not
participate in the day-to-day activities of the
partnership firm are known as dormant or
“sleeping partners”. They only contribute

14. Conti…
• Nominal / Outside Partners : These partners
are persons, who hold a particular goodwill as
to their character or work and to allows the
firm to use this goodwill by showing them as
the partner in their firm.
• Minor as a Partner : Legally only a person
who is or above the age of 18 can become a
partner in the firm but in special cases, a
minor can also be admitted as partner with
certain conditions. A minor can only share the
profit of the business.

17. Source
• 1. Elementary economic theory - K.K. Dewett
and J.D. Verma
• 2. International Economics - B. Mishra
• 3. Fundamentals of Agricultural Economics -
A.N. Sadhu and A. Singh
• 4. Economics - Paul A. Samelson and W.D.
Nordhans (Pearson Publications)