Forms of business organization CHAPTER NO.2 [D.S.B.M]

1. FORMS OF BUSINESS
ORGANISATION
CHAPTER 2
PRESENTED BY- MR. AKSHAY M. KASAMBE

2. CONTENTS
INTRODUCTION
TYPES
SALIENT FEATURES
MERITS
DEMERITS
SOLE PROPRIETORSHIP
PARTNERSHIP(GENERAL& LIMITED)
JOINTSTOCKCOMPANY
CO-OPERATIVESOCIETY

3. INTRODUCTION
BUSINESS- Business includes all economic activities
which involve production and distribution of goods and
services with the main purpose of earning profit
BUSINESS ORGANIZATION- When the business is
handled by an individual or a group of persons it is
known as business organization.

4. DIFFERENT TYPES OF ORGANISATION
• SOLE PROPRITER SHIP
• JOINT HINDU FAMILY BUSINESS
• PARTNER SHIP
• COOPERATIVE SOCIETY
• JOINT STOCK COMPANY

5. 1. SOLE PROPRITER SHIP
This is one of the simplest form of business organisation which is derived from 2 words where “sole”
means “one or only” and “propriter” means “owner” where it is managed, controlled only by single
operations depends upon the nature of thebusiness. The shops or stores which you see in your
locality — the grocery store, the vegetable store, the sweets shop, the chemist shop, the paanwala,
the stationery store, the STD/ISD telephone booths etc. come under sole proprietorship.
Salient Features:-
• Single Ownership Unlimited liability
• Flexibility
• No sharing of profits and losses
• Minimum Govt. Regulations
• Complete business secrecy
• Quick Decision Making
• Lack of Businesscontinuity
• Close contact with customer

6. MERITS OF SOLE PROPRITER SHIP
• Quick decision making/Easydecision-making
• No legal formalities
• Confidentiality of information/secrets
(information about business techniques)
• Sense of accomplishment
• Direct incentive
• Ease of formation andclosure
• Noregistration
• No profit sharing
• Easyto windup
• No corporatetaxes
• Capital investment in the business can be
increased or decreased by itself
• Personal contact with customers

7. DEMERITS OF SOLE PROPRITER SHIP
• Limited Resources
• Limited Life
• Loss in absence
• Unlimited liability
• Lack of businesscontinuity
• No growth
• Lack of managementskills
• There are no checks and controls on the sole proprietor

8. 2. JOINT HINDU FAMILY BUSINESS
This is the only organisation found only in India which is practised by Hindu undivided
family.
A business which belongs to a single Hindu family and conduct it as a family business is
called joint Hindu family business.
The head of this business is Karta who controls the whole business and rest of the family
members are called as Co parceners.
The management and control of the family business is generally in hands of the seniormost
male member of the family who is known as the ‘karta’.
No legal formlities are required to convert a business into a joint family business. It
automatically becomes so since on the death karta, his legal male heirs inherit it.
It has 2 systems:-
• Dayabhaga- In this system where it exists only in West Bengal where it allows both males and
females to be co parceners
• Mitakashara- It allows only males to be co parceners where it is found all over India
except in West Bengal.

9. SALIENT FEATURES OF JOINT HINDU FAMILY BUSINESS
• Controlled by Karta
• Unlimited liability for Karta and limited liability For coparceners.
• Only male members of the family can claim in the business firm.
• The existence of the JHF business not affected by the death of karta.
• The share of each member of the family keeps on fluctuating. It increases on the death of any one
of the existing co-parcener and decreases by birth of a new co-parcener.
• The membership of the family business is as a result of status arising from birth in the family. So,
there is no discrimination between any members in the family business.
• The co-parcener can claim for its share or ask for the partition of the business if they are not
satisfied with the functioning of the joint Hindu family firm.
• Easy to Form
• Business Continuity
• Minor can also be a coparcener

10. MERITS OF JOINT HINDU FAMILY BUSINESS
• Good Decision making is quick as the powers are with the Karta
• Karta has full freedom to run business.
• The business can be run smoothly with the help of all the male members of the family.
• Limited liability of coparceners except ‘Karta’.
• Increased Loyality and cooperation
• Every co-parceners has an assured share in profits
• No corporate tax
• Business continuity

11. DEMERITS OF JOINT HINDU FAMILY BUSINESS
• Limited Resources
• Unlimited liability of Karta
• Dominance of Karta
• The continuity of the joint Hindu family business depends upon itself.
• All the members has the right to get share in income and profits of business irrespective of their
involvement in the business.

12. PARTNERSHIP
• It is one of the famous form of organisations, according to Indian Partnership Act 1932 it is
defined as a relation between persons who had agreed to share their profits and losses in an agreed
ratio.
Sailent Features-
• Two or more persons
• Carry on the basis of an agreement between concerned persons.
• Profit distributed among the partners in the agreed ratio.
• Partner cannot transfer his share to an outsider without the conset of other partners.
• Ease of Formation
• Controlled by partners
• Lack of Continuity
• Limited Liability
• Mutual understanding

13. MERITS OF PARTNERSHIP
• Ease of formation.
• More funds
• Sharing of risks
• Secrecy
• Business expand by extending the partnership
• Balanced decision making
• A partnership firm has a longer existence because it is not dependent on any one person.

14. DEMERITS OF PARTNERSHIP
• It is difficult to maintain mutual understanding.
• A dishonest or incompetent partner may create difficulties in business.
• Partner want to withdraw his capital from the firm will not able to do.
• There is a lack of stability in the business.
• Lack of publicconfidence
• Unlimited liability
• Lack of businesscontinuity
• Possibility of conflicts

15. TYPES OF PARTNERS
• Active partner
• Sleeping or Dormant partner
• Nominal partner
• Partner in profit only
• Secret partner
• Minor partner
• Partner by estoppel

16. TYPES OF PARTNERSHIP
• PARTNERSHIP BY LIABILITY-
• General partnership
• Limited partnership
• PARTNERSHIPBY DURATION-
• Partnership at will
• Particular partnership

17. COOPERATIVE SOCIETY
• This is one of the famous business organisation where it focuses on welfare of the society and
servicemotives.
• This society is mainly established to satisfy the basic needs of common
people and protect them from their exploitation.
• This society is controlled by cooperative socities act 1912.
• AMUL is the best example for this type of society which brought white revolution in India.

18. SALIENT FEATURES OF COOPERATIVE SOCIETY
• Voluntary membership
• Legal status
• Controlled by elected bodies
• Limited Liability
• Life of society is not affected by the death, insolvency or conviction of a member.
• Ease of Formation
• The membership of cooperative society is open to everybody.
• Service motive

19. MERITS OF COOPERATIVE SOCIETY
• Ease of formation
• Stable existence
• Limited liability
• Support from government
• Economy in operations

20. DEMERITS OF COOPERATIVE SOCIETY
• Limited resources
• Inefficiency in management
• Lack of motivation
• Lack of secrecy
• Government control
• Differences of opinion

21. TYPES OF COOPERATIVE SOCIETY
Consumers cooperative society
Farmers cooperative society
Marketing cooperative society
Producers cooperative society
Housing cooperative society
Credit cooperative society

22. JOINT STOCK COMPANY
• This is one of the complex form of business organisation while compared to other forms of
organisation because it involves many formalities and documents.
• In this organisation members are called as shareholders where they raise the funds by allotting
the shares among the members depending upon their investment. This is governed by companies
act 1956.
• In this organisation they can even transfer the shares if necessary and this company is divided into
two parts
• Public Ltd Company
• Private Ltd Company

23. SALIENT FEATURES OF JOINT STOCK COMPANY
• Artificial person
• Controlled by board of directors
• The members or shareholders are the owners
• Separate legal entity
• Transfer of interest
• Complexity in Formation
• Business Continuity
• Risk bearing

24. MERITS OF JOINT STOCK COMPANY
• Limited liability
• Large resources
• Transfer of interest
• Scope for expansion
• Perpetual existence
• Professional management

25. DEMERITS OF JOINT STOCK COMPANY
• Formation of company is costly
• Complexity of formation
• Numerous rules and regulations
• Delay decision making
• Company not managed by proprietors it is managed by directors and paid official.
• Secrecy of the business affairs cannot maintained.
• Conflict in interest