Forms of Business organisations

1) Introduction

2) Sloe Proprietorship

3) Joint Hindu Family

4) Partnership Firm

5) Co – operative society

6) Joint Stock company

7) Basic Factors to Star A Business

8) Distinguish between

9) Exercise

Point of discussion

Introduction

• It is an institution which is engaged in manufacturing and providing

services to the society

• “ It is the framework or structure of efficiently conducting industrial and

commercial activities to earn profit or with a view to gain it through

production and supply of goods and services”

Types of Business organizations

Private sector Public sector

Sole Trading concern

Joint Hindu Family business

Partnership Firm

Joint Stock Company

Co- Operative Societies

Departmental Undertakings

Statutory Corporations

Government Companies

Sole Trading Concern

Proprietor means owner & sole means single

It is owned, managed & Controlled by an individual entrepreneur.

This is one man business or Individual proprietorship or Individual Entrepreneurship

Owner is called as Sole trader & he is one man show

Business is usually operates in local market

1. Retailer

2. Painters

3. Restaurant

4. Beauty parlour

5. Doctor

6. Petrol pumps

JAMES A. SHUBIN

“Under the sole proprietorship form of ownership a single individual organizes, has

title to and operates the business in his own name.”

CHARLES S. TIPPETS

“The proprietorship is that form of business organization which is owned, managed and

controlled by a single individual who receives all the profits and risks all his property

in the success or failure of the enterprise.”

D.W.T.STAFFORD

“It is a simplest form of business which is owned and controlled by one man.”

Definitions

Advances/Merits of Sole ProprietorshipEasy formation

Benefit of secrecy

Direct motivation

Quick decisions

Lower costs

Development

Flexibility in operation

Limited government control

Credit standing

Efficiency

Disadvantages / Demerits

Limited Managerial ability

Limited amount of capital

Unlimited liability

Not suitable for large scale operation

Lack of stability

Absence of specialization

Unprofessional Decisions

• It is run by the family member & they run the business as family business

• Comes into existence by the law of inheritance

• Created by the operation of Hindu

• It is governed by the Hindu Succession act 1956

• The head of family is called as Karta or Manager & other person is co – parceners

• Mitakshara

• Dayabhaga

Joint Hindu Family business

Definition

Meaning: -: -A business, which continues from one generation to another generation

is known as joint Hindu family business or firm.

This is special form of business organization, which now exists only in India. And

the business is with in the family.

• Joint Hindu Family is governed by the Mitaksara Law.

Merits / Advantages Easy to start

Prompt Decisions

Good relation with employees

Flexibility

Secrecy

Co – parcener’s Liability

Good credit standing

Continuity and stability

Disadvantages / Demerits

Limited Resources

Limited managerial skills

Unlimited liability of Karta

Breaking of joint family

Lack of Direct Efforts

Restricted Expansion

Continuity

Introduction

Because of limited capital & other factors , sole proprietorship may not….

A business owned & managed by more than one person

Share profit & loss equally

Share liability equally

They equally contribute their resources

The owners are called partners & organization is called a firm

It is governed by the Indian partnership act 1932.

The agreement may be oral or written

Definition

Indian Partnership Act 1932 (sec.4)‘ Partnership is the relation between the persons who have agreed to

share the profits of a business carried on by all or any one of them acting for all”

Dr. J. A. Shubin : “ Two or more individuals may form a partnership by making a

written or oral agreement that they will jointly assume that they will jointly assume full responsibility for the conduct of a business

Prof. Haney : “ The relation existing between persons competent to make

contracts, who agree to carry on a lawful business, in common, with a view to private gain”

Merits / Advantages

More financial Resources

More manpower Resources

Easy formation

Simple dissolution

Rational decisions

Secrecy

Personal contacts

Division of Risk

Flexible organization

Managerial skills

Demerits / Disadvantages

Unlimited liability

Limited resources

Disputes

Risk of implied authority

No separate legal status

Attitude problem

Lack of Managerial skills

No succession

Lack of management skills

Problem of secrecy

Types of Partners

Active partners

Nominal partners

Minor partners

Partners in profits only

Limited partners

Partner by holding out

Secret partner

Co-operative Society

It is voluntary association of persons who come together to collect small saving

of difference people through a society

Adopt principle of self help & mutual help

Each for all & all for each

Provide services to the society & consumer

Minimum of 10 persons are required to form a co-operative society

There is no maximum limit for membership

Introduction

Definition

• According to International labour organization,

“ An association of persons, usually of limited means who have voluntarily

joined together to achieve a common economic end through the formation

of democratically controlled business organization, making equitable

contribution to the capital required and accepting a fair share of risks and

benefits of the undertaking.”

• According to Indian co-operative societies act, 1912,

“Co-operative society is a society which has its objectives for the

promotion of economic interests of its members in accordance with co-

operative principles.”

Types of Co-operative society

Consumer’s Co-operative society

Credit Co-operative society

Producer’s Co-operative society

Marketing Co-operative society

Farming Co-operative society

Housing Co-operative society

Merits / Advantages

Demerits

Lack of capital

Rigid government rules

Lack of public confidence

Lack of motivation

Mutual disputes

Stability

Limited scope of expansion

No secrecy

The industrial revolution took place in 1760 (Machine age )

Due to non availability of ….

capital

Managerial skills

professional specialization

other factors

Joint Stock company

Meaning

1) a joint stock company is a separate entity formed by a number of

persons contributing a fixed capital in the formation of shares with

liability of each share holder being limited to his investment in the

company only.

2) The management of the company is done professionally by experts

who are not the owners and are controlled by the representatives of the

share holders are called the board of directors

Definition

• According to Indian Companies act, 1956 Sec. 566.“ A company having a permanent paid up or nominal share capital of fixed amount, divided into shares, also of fixed value, held and transferable as stock, or divided and held partly in one way and partly in the other and formed on the principle of having for its members, only the holders of those shares or that stock and not other persons”.

• According to Prof. Haney : “ A joint stock company is a voluntary association of individuals for profit having capital divided into transferable shares, the ownership of which is the condition on membership.”

Private limited company

According to sec 3 (I) (iii) of the companies act, 1956

• Restricts the right to transfer its shares

• Restrict the number of its members up to 2 to 50

• Ban on inviting to the public to subscribe for any shares in or

debentures of the company

• Prohibits any invitation or acceptance of deposits from any person

• Must have a minimum paid up share capital of one lakh rupees

Public company

According to Sec 3 (I) public company means which is not a

private company

• Has no restriction on the transfer of its shares

• There should be a minimum number of members are 7

• Has a minimum paid up share capital of Rs. 5,00,000/- or

such higher paid up capital as may be prescribed

• Does not prohibit any invitation or acceptance of deposits

• Must have a list 3 directors

Merits / Advantages

Large capital

Democratic management

Transferability of shares

Limited liability

Expert services

Relief in taxation

Public confidence

Scope for growth & expansion

Disadvantages / Demerits

Difficulty in formation

Delay in decision making

Excessive government control

High cost of management

No personal contact

Lack of secrecy

No direct efforts reward relationship

No secrecy

Factors to be considered for starting business

Identification of business opportunity

Raw material

Technology and equipment

Human resources

Financial planning

Utilities

Selection of location

Form of business organization

Exercise