NIOS Business Studies Std X Ch 3 Sole proprietorship

1. Ch 3 : Sole Proprietorship

2. Sole Proprietorship
• Sole means SINGLE
• Sole proprietorship means,
A single person
Owns Manages and Controls
THE BUSINESS

3. Main features of Sole Proprietorship
a) Easy Formation- (Easy to form) -
Minimum LEGAL and other FORMALITIES.
b) Single Ownership
Single person owns all assets and bears all risks.

4. c) No sharing of PROFIT or LOSS
Profit and loss goes only to the owner.
d) One man’s capital
money for the business comes from THE OWNER

5. f) Unlimited Liability
In case of loss, business assets and personal properties of the owner is
used to pay liabilities.(responsibilities)
e) One man’s CONTROL
OWNER takes decisions alone.
Bank took Vijay Mallya's cars

6. Main Features:
– Easy formation
– Single Ownership
– No sharing Profit or Loss
– One man’s capital
– One man’s control
– Unlimited Liability

7. Advantages of Sole Proprietorship
a) Easy to form and wind up(close)
Minimum legal formalities and less capital
needed.
b) Direct motivation
Hard work leads to more profits.
c) Quick decision and prompt action
Owner takes decision alone.

8. Advantages of Sole Proprietorship
d) Better Control
Since one man manages everything
e) Maintenance of Business secrets
Maintenance of Business secrets
Owner manages everything, so he keeps the plans to himself.
f) Close personal relation
Owner has close contact with customers and employees.
g) Provides self employment
Owner is self employed and creates jobs for others
Increases employment so reduces unemployment and poverty.

9. Disadvantages of Sole Proprietorship
A. Limited Capital : Only owner gives capital for
business.
B. Limited Size : Single person manages
business
C. Unlimited Liability : In case of loss personal
properties of owner is used pay
liabilities.
D. Lack of continuity : Comes to an end when owner
dies.
E. Lack of managerial expertise :
Owner may not be expert in all
areas of business.

10. 1. Ease of formation
2. Single Ownership
3. No sharing of profit or loss
4. One man’s capital
5. One man’s control
6. Unlimited Liability
a. Owner takes decision alone
b. Money for business comes from one owner
c. Minimum Legal formalities
d. In case of loss personal properties sold to pay
e. Profit and loss goes to owner
f. Single person owns all assets and bears all
risks.
Match the following:

11. Test yourself….
1. Sole means __________.
2. Sole Partnership means a single person ___ ____and
_____the business.
3. Give 5 features of sole proprietorship.
4. Give 5 advantages of sole proprietorship?
5. Give 4 disadvantages of sole proprietorship?

12. Partnership

13. Partnership
• It is a
relationship
with two or
more
persons.
• They join
hands to form
a business
organisation,
• The main
objective is
to earn
profit.

14. Features of Partnership
1. Members :
Banking :Minimum 2 Maximum 10
other businesses :Minimum 2 Maximum 20

15. 2. Agreement:
-Capital given by each partner
-Profit loss sharing ratio
-Salary/commission payable to
each partner
-Time of Business
-Nature and place of business
-Name and Address of partners
-Duties and powers of partners
-Other details

16. Features of Partnership
6.Duties and Powers of
partners
7. Nature and place of
Business
8. Other details
2. Agreement :
4. Time of Business
5. Name and Address of
partners and the firm2. Profit and loss sharing ratios
1. Capital given by each partner
3.Salary or commissions payable
to partners

17. 3. Lawful business: as per law
4. Sharing of Profit : as per agreement
5. Unlimited Liabilities: In case of loss, personal properties
of partners can be used to pay liability.
6. Voluntary registration: Not compulsory but better to do
it.

18. Features of Partnership
7. Principal agent relationship:
When a partner deals with other parties in business,
The partner acts a s an agent of his other partners
Then the his other partners become the principal.

19. 8. Continuity of business:
Firm ends if a partner:
- dies
- becomes bankrupt
- becomes mad
- decides

20. Advantages of a Partnership
A. Easy to Form
B. Availability of large resources :
C. Balanced Decision
D. Sharing of losses
BASE

21. Disadvantages of Partnership
• Limited capital :(max no, only 20 people, so capital is
limited)
• Unlimited Liability : In case of loss, the personal properties of
the partners are used to pay liabilities
• Uncertain life: :Firm ends if one partner dies, goes
bankrupt, mad or decides to end
partnership.
• Non transferability of Shares: Shares cannot be transferred to
outsiders without asking other partners.

22. Effect of Non-registration
• Firm cannot take any action in a court of law against
any other party for settlement or adjustment of
claims.
• In case of dispute among partners, firm cannot take
action in a court of law for settlement of claims

24. Limited Liability Partnership (LLP)
• Features:
1. LLP shall be a separate legal entity.
LLP will have a perpetual succession.
(perpetual succession is the continuation of a
corporation's or other organization's existence
despite the death, bankruptcy, insanity, change in
membership or an exit from the business of any
owner or member, or any transfer of stock,etc.)

25. FEATURES..
2. Agreement
If there is an agreement between LLP and the
partners,
the rights and the duties of the partners will be
as per the agreement.
If there is no agreement,
the rights and duties are as per the LLP Act 2008

26. 3. In case of Loss -
In case of loss, the assets of the LLP are used to pay
the liability.
The liability of the partners are limited to their
contributions.
4. Members-
The LLP shall have at least two partners and
also have two designated Partners.
At least one of the designated partners should be
resident in India.

27. Designated Partner shall be:
Responsible for the doing of all acts, matters and things as are
required to be done by the limited liability partnership including
filing of any document, return, statement and the like report
pursuant to the provisions of this Act and as may be specified in
the limited liability partnership agreement.

28. Joint Hindu Family Business

29. Joint Hindu Family Business refers to a business which is owned by the
members of a joint Hindu family.
It is formed under Hindu family Law
and is governed by the law of succession.
It’s a form of business in which
the family possesses
some inherited property.
The Karta – The eldest member of the family.
The coparceners –The other male members

30. Characteristics of a Joint Hindu Family
a. Membership by birth : Male child
b. Management : Eldest member of the family – the Karta- manages
the business.
c. Liability : the Karta has unlimited liability
d. No maximum limit : No limit to the number of coparceners.
Membership limited to three successive
generations.
e. Minor members : A male child at the time of birth becomes a
coparcener.
f. Unaffected by death : Business continues even after the death of a
coparcener.

31. • Fill in the blanks by choosing a suitable word(s) :
• (i) HUF stands for
____________________________________
• (ii) ___________ successive generations can simultaneously
inherit
• the ancestral property.
• (iii) Members of Joint Hindu Undivided family are known as
• __________
• (iv) Oldest member of the Joint Hindu Undivided family is
known as
• ______
• (v) _________ has unlimited liability.

32. i. The sole proprietor may not be able to raise adequate __________
for the expansion of business.
ii. The life of the business depends on the life of the _____________ .
iii. Due to limited financial resources and limitation of the expertise of
the owner, the business may lack professional _____________ .
iv. The business is suitable for simple business where ________ skill is
required.
v. Sole proprietorship best caters the needs of customers where the
market for the product is __________ and __________________ .

33. i. Himanshi is running a business in sole-proprietorship. Due to loss in business she decided to
wind up her business. On the day of winding up the assets are worth Rs. 5 lakhs and liabilities
(all creditors) are worth Rs. 10 lakhs. Himanshi has her personal property of Rs. 600000. How
much do you think the creditors will get at the time of winding up of business?
(a) Rs. 5 Lakhs (b) Rs. 10 lakhs
(c) Rs. 7 lakhs (d) Rs. 11 lakhs.
ii. Limitations of sole Proprietorship do not include.
(a) Limited Capital (b) Lack of Continuity
(c) Unlimited size (d) Lack of Managerial Expertise.
iii. Indian Partnership Firms are governed by Indian Partnership act
(a) 1932 (b) 1956
(c) 2008 (d) 1912
iv. Characteristics of JHF do not include
(a) Membership by birth (b) Unlimited Liability of Karta
(c) Unaffected by death (d) Youngest Member of family is Karta.
v. Members of Joint Hindu Family are known as:
(a) Partners (b) Members
(c) Coparceners (d) Owners