Hai commerce learners, I think this session is more better for the beginners, especially students of Higher Secondary (Kerala Syllabus)-Plus One. I tried to cover all the points relating to this particular topic, if I ignore to point out any details about this Chapter, u can inform me directly to my Mail address.
all the best:
The following are the form s of Business organisations in the private sector.
1. Sole Proprietorship
2. Joint Hindu family Business
3. Partnership
4. Co-Operative Society
5. Company
1. Sole trader or sole proprietorship
A business owned, managed and controlled by a single individual is called sole proprietorship organizations. The individual is callled sole trader or sole proprietor.
Features of sole proprietorship
1. Single ownership: single indivcidual is the owner of the businees.
2. Risk bearing: The proprietor is the sole beneficiary of all profits. So he has to bear the entire loss, if any, incurred in the course of business.
3. Unlimited liability.: If the business are not sufficient to meet the liabilities of business, the proprietor's personal assets are sold out to meet such liabilities.
4. Freedom of operation: The proprietor enjoys freedom of operations as there is minimum government regulations.
5. Control.: The proprietor has full control over the affairs of the business as he is the sole owner.
Merits of Sole proprietorship
The following are the merits of sole proprietorship business.
1. Easy to form and close: it is easy to start a sole trading business because of minimum legal formalities.
2. Flexibility of operations : all decisions are taken by a single person. This provides flexibility to the business.
3. Sole beneficiary of profits: the entire profits of the sole trading business is entitled to the proprietor.
4. Suitability for small business: Most of the small businesses are established as Sole proprietorship.
Limitations of sole proprietorship
1. Limited resources: The resources of a sole trader are limited. There is a limit to which a single person can invest.
2. Limited managerial skill : One person may not be expert in each and every function of the business. It limits the prosperity and growth of business.
3. Unlimited liability: The sole trader is personally liable for all business operations.
4. Lack of continuity : The business is dependent on a single individual. His illness insolvency or death causes discontinuity of business.
2. Joint Hindu Family Business
A joint hindu family business refers to a business which is owned by the members of a hindu f amily. It is also called Hindu Undivided Family (HUF) business. The male members of the HUF are called copaeceners. The senior most male member of the family is called karta.
Features of HUF business.
The major features of HUF business are the following.
1. membership by birth: Membership of HUF business is got by the birth and not by agreement.
2. Management: Management of the affairs of the businees is vested with Karta.
3. Liability : The personal property of the Karta can be used for payment of business debts. Ie, the Karta's liability is unlimited. But every other coparcener has limited liability up to his share in the HUF property.
4. No maximum limit: The membership of HUF is not limited.
5. Minor members: By birth itself a male member becomes the member of the HUF.
6. Unaffaected by death: The HUF business exist even after the death of the Karta or other coparcener.
Merits
1. Security and status to members: This business provides members a sense of security and belonging.
2. Continuity: The death or insolvency of the Karta or any other coparcener will not affect the existence of business of HUF.
3. Centralised Management: Management is centralized in the hands of Karta.
4. Unlimited membership: By law membership is limited to male members, but no limits as to the number of members.
5. Limited liability: The coparceners liability is limited, even though that of the Karta is unlimited.
Limitations of HUF Business
1. Unlimited liability : Karta's liability is unlimited. His personal assets are also sold to meet the business debts.
2. Limited financial resources: A JHF (Joint Hindu Family business) has relatively limited financial resources.
3. Limited managerial liability : As all business decisions are taken by the Karta, an incompetent Karta cannot run business.
3. Partnership Businesses
Partnership form of organisation has been developed due to the limitations of sole trading concern. The Indian Partnership Act 1932 defines partnership as, “partnership is the relation between persons who have agreed to share the profitsof a business carried on by all or anyone of the m acting for all”.
Features of Partnership
1. Number of persons: The minimum number of persons required to form a partnership is two. The maximum is ten in a banking firm and twenty in a trading firm.
2. Lawful business : Partnerships can be formed for the purpose of carrying ona business. The business must be lawful.
3. Agreement : For the formation of a partnership, an agreement between partners is essential. The agreement may be either Oral or written.
4. Implied Agency: Every partner of a firm is both an agent as well as a principal.
5. Profit sharing: The profit of the partnership business must be shared by all the partners in an agreed ratio.
6. Unlimited liability: The liability of the partners of a partnership firm is unlimited.
7. Utmost good faith: Every partner must be just and faithful to one another.
8. Collective management: Each partner is entitled to take part in management of the firm. For convenience, the right of management may be given to a particular partner is known as managing partner.
9. Restriction of Transfer of Interest: No partner can transfer his share to an outsider without the consent of all the other partners.
10. No separate legal existence: a partnership is not a legal entity. It does not enjoy any legal status.
Kinds of partners.
There are different kinds of partners. They are:
1. Active or working partner: Active partner is one who not only contributes capital but also takes active part in the business.
2. Sleeping or dormant partner: he provides funds to the firm. He is not active in business.
3. Nominal partner : He only lends his name and reputation for the benefit of the firm. He does not get any share in the firm's profit but he is liable to the outsiders for the debts of the firm.
4. Partner in profit only: A person who becomes a partner on the specific understanding tha that he will get a share in the profits of the firm but will not share any loss is called a partner in profit only.
5. Partner by estoppel: he is a person who has not contributed any capital to the firm. He does not take any part in the management of the firm.
6. Secret partner: In reality he is a partner but he does not want to be known as a partner to the outsiders.
7. Partner by holding out: he is not actually a partner. But knowingly he permits himself to be a partner of the firm by his activities.
8. Limited partner: If the liability of a partner is limited to the extent of his capital in the firm he is called a limited partner.
9. Minor partner : A minor does not have the capacity to be a full fledged partner. He can be admitted to the benefits of a partnership.
Kinds of partnership
I. On the basis of liability, partnership can be divided into two. They are 1. general partnership and 2. Limited Partnership.
1. General partnership: Here the liability of all the partners is unlimited. All partnership firms in India are organised in this form only.
2. Limited partnership: Here the liability of certain partners is limited to the amount of capital contributed. A limited partnership should have at least one unlimited partner.
II. On the basis of duration of the firm, Partnership may be, 1. Partnership-at-will and 2. Particular partnership.
1. Partnership-at-will: when partnership is formed to conduct business for an indefinite period, it is called partnership-at-will.
2. Particular partnership: When a partnership is formed to conduct a particular business for a specified period it is called a particular partnership.
Formation of Partnership firm
A partnership can be formed by any two or more persons who enter into an agreement to carry on business with a view to sharing profit. This agreement may be oral or in written. To avoid misunderstanding in future, it desirable to have a written agreement, concerning the working of the firm., signed by all the partners is called Partnership Deed or Partnership agreement.
Contents of Partnership Deed
Partnership Deed usually contains the following:
1. names and addresses of the partners.
2. Name of the firm.
3. Nature of the business.
4. Date of commencement of Partnership.
5. The principal place of business.
6. Capital contribution by each partner.
7. Duration of each partnership, if any.
8. The profit sharing ratio.
9. Amount of salary or commission, if any payable to partners.
10. Rules regarding operation of bank account.
Registration of a Partnership firm.
Registration of a partnership firm is not compulsory in India. Registration of a firm is a simple process.
Limitations of an Unregistered Partnership Firm
An unregistered firm suffers from certain drawbacks or limitations. Following are some of them:
1. It cannot sure any partner or partners of the firm.
2. Partners of an unregistered firm cannot sue the firm nor they can sue against each other as partners.
3. Third parties cannot recover their dues from an unregistered firm through the court of law.
Advantages of a Partnership firm
1. Large financial resources: When compared to the sole trading concern a partnership firm can raise more capital.
2. Easy formation: Formation of a partnership firm is very compulsory.
3. Flexibility: the operation of the partnership firm is flexible. The nature and place of business can be changed easily whenever the partners desire.
4. Easy to borrow money: As the partners are jointly and severally liable for the debts, banks and money lenders will lend money to the firm.
5. Easy dissolution: A partnership firm can be dissolved easly at any time without undergoing any legal formalities.
Disadvantages of a Partnership firm
1. Limited finance: Modern business needs large amount of capital. Capital may be inadequate for big business.
2. Uncertain future: Instability is the greatest disadvantage of a firm Death, insolvency, insanity etc., of on e of the partners may lead to the dissolution of the business.
3. Unlimited liability: Partners are liable for the debts of the firm to an unlimited extent.
4. Non-transferability of interest: A partner is not permitted to transfer his capital or interest in the firm to outsiders without the consent of all other partners.
5. No public confidence: The activities of a firm are not legally controlled .
3. Co-operative Organisation
Meaning
Co-Operative society is an organisation which is operated jointly by its members.
to be continued.......
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