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Sole Proprietorship Joint Hindu Family Partnership Cooperative Society

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Sole Proprietorship Joint Hindu Family Partnership Cooperative Society Class 11 Business Studies Chapter 2 Forms of Business Organisation Revision Notes Forms of Business Organisation: Sole Joint Hindu Partnership Proprietorship Family Cooperative Joint Stock society Company Sole Proprietorship : Meaning, Features, Merits and Limitation: ➢ form of business organisation which is owned, managed and controlled ➢ by an individual who ➢ is the recipient of all profits and ➢ bearer of all risks Features Merits Limitation • There is no seperate law • Quick decision making as • Lack of resources to govern sole there is no need to (finance and borrowings) proprietorship consult others is a major drawback in • Owner is personally • Keep business operations the size and growth of liable for payment of its confidential and the business debts i.e. he has maintain secrecy • Death, insanity, unlimited liability • Sole owner of the profit imprisonment, physical • He is solely responsible earned i.e. maximum ailment, bankruptcy for failure as well as incentive for hard work affects the business and profit • Contributes to self can lead to its closure • He has the right to run satisfaction andsense of • An unfavourable decision the business and make accomplishment can create burden on the all decision • No seperate law to owner as his liability is • Business is not seperate govern sole unlimited from owner i.e. business proprietorship i.e it is • Decision making is not • Death, insanity, east to start and close balanced as owner bankruptcy, physical the business at his wish cannot excel in all ailment, imprisonment managerial tasks of sole proprietor will effect the continuity of business Joint Hindu Family ➢ form of organisation wherein the business is owned and carried ➢ by the members of the Hindu Undivided Family (HUF) ➢ basis of membership in the business is birth in a particular family and three successive generations can be members ➢ business is controlled by the head of the family who is the eldest member and is called karta. ➢ members have equal ownership right over the property of an ancestor and they are known as co-parceners. Features Merits Limitations • Business does not • As karta has control • Faces problem of limited require any agreement over the business, capital as business is run as membership is by conflicts among on ancestral property birth. member or interferance which limits expansion • There should be at least in decision making is of business two members in the avoided • Karta has unlimited family and ancestral • Operation of business liability, his personal property to be inherited are not terminated and property is used to by them continuity of business is repay the debts • The liability of all not at stake. • Dominance of karta may members except the • Liability of co-parceners cause conflict amongst karta is limited to their is limited to their share them and may share of co-parcenery and their risk is well breakdown the family property of the defined and precise unit. business. The karta has • As business is run by unlimited liability. family , loyalty and • Karta controls the family cooperation is received business and his from family members decision are binding to all • Business continues even after the death of karta, next eldest becomes karta • Minors are also member of the business Partnership ➢ the relation between persons ➢ who have agreed to share the profit of the business ➢ carried on by all or any one of them acting for all Features Merits Limitation • It is governed by The • Partnership can be formed • The liability of partners is Indian Partnership Act, easily by an agreement both joint and several 1932. Has existence with between partner into a which may prove to be a legal agreement governing place to carrout business drawback for those relationship, sharing of and share risks partners who have greater profit and losses • Partner can oversee personal wealth. • Partners of firm have different function • partnership firms face unlimited liability. partners according to their expertise problems in expansion are jointly liable to repay • the capital is contributed beyond a certain size as the debts and contribute in by no. of partner capital investment is not their proportion of share • Reduces anxiety, burden sufficient to support large • Reward comes in the form and stress on partner as scale operation of profits which are shared risk is reduced by sharing • Lack of continuity ddue to by the partners in an between partner death, retirement, agreed ratio. However, • A partnership firm is not insolvencyor insanity of they also share losses in legally required to publish partner can bring the same ratio its accounts and submit its partnership to end • Partner with mutual reports. Hence it is able to • difficult for any member of consent share maintain confidentiality of the public to ascertain the responsibility of decision information relating to its true financial status of a making and day to day operations. partnership firm. control of activities • Lack of continuity ddue to death, retirement, insolvencyor insanity of partner can bring partnership to end • With minimum 2 partner partnership can be formed . • Business carried by all or any one of the partner acting for all Types of Partner Type Meaning Capital Management Share in profit Liability Contribution or Losses Active Partner Partners who Contributes Participates in Shares Unlimited take actual capital management profit/losses liability part in carrying out business of the firm on behalf of other partners Sleeping Partners who Contributes Does not Shares Unlimited Partner do not take capital participate in profit/losses liability part in day to management day activities of business Secret Partner Partner whose Contributes Participate in Shares Unlimited association capital management profit/losses liability with the firm but secretly is unknown to the general public Nominal Partner who Does not Does not Generally does Unlimited Partner allows the use contributes participate in not Shares liability of his/her capital management profit/losses name by a firm Partner by Partner who Does not Does not Does not Unlimited estoppel with his/her contributes participate in Shares liability own initiative, capital management profit/losses conduct, behavior gives an impression to others that he/she is partner of the firm Partner by Partner who Does not Does not Does not Unlimited holding out knowingly contributes participate in Shares liability allows himself capital management profit/losses or herself to be represented as a partner in the firm Types of Partnership On the basis of duration On the basis of Liablity Partnership at will General Partnership •It can continue as long as the partners •The liability of partners is unlimited and want and is terminated when any partner joint. gives a notice of withdrawal from •The partners enjoy the right to partnership to the firm participate in the management of the firm and their acts are binding on each other as well as on the firm Particular Partnership Limited Partnership •Partnership formed for the •the liability of at least one partner is accomplishment of a particular project unlimited whereas the rest may have say construction of a building or an limited liability activity to be carried on for a specified •The limited partners do not enjoy the time period right of management and their acts do not bind the firm or the other partners. •Registration of such partnership is compulsory. Partnership Deed • The written agreement which specifies the terms and conditions that govern the partnership is called the partnership deed. The partnership deed generally includes the following aspect: • Name of firm • Nature of business and location of business • Duration of business • Investment made by each partner • Distribution of profits and losses • Duties and obligations of the partners • Salaries and withdrawals of the partners • Terms governing admission, retirement and expulsion of a partner • Interest on capital and interest on drawings • Procedure for dissolution of the firm • Preparation of accounts and their auditing • Method of solving disputes Procedure for firm registration: 1. Submission of application in the prescribed form to the Registrar of firms. The application should contain the following particulars: • Name of the firm • Location of the firm • Names of other places where the firm carries on business • The date when each partner joined the firm • Names and addresses of the partners • Duration of partnership This application should be signed by all the partners. 2. Deposit of required fees with the Registrar of Firms. 3. The Registrar after approval will make an entry in the register of firms and will subsequently issue a certificate of registration. The consequences of non-registration of a firm are as follows: (a) A partner of an unregistered firm cannot file a suit against the firm or other partners, (b) The firm cannot file a suit against third parties, and (c) The firm cannot file a case against the partners. Cooperative Society ➢ The cooperative society is a voluntary association of persons, who join together with the motive of welfare of the members. ➢ They are driven by the need to protect their economic interests in the face of possible exploitation at the hands of middlemen obsessed with the desire to earn greater profits ➢ The process of setting up a cooperative society is simple enough and at the most what is required is the consent of at least ten adult persons to form a society ➢ The capital of a society is raised from its members through issue of shares. ➢ The society acquires a distinct legal identity after its registration Features Merits Limitations • The membership of a • The principle of ‘one man • Resources of a cooperative society is one vote’ governs the cooperative society voluntary as person is cooperative society.Each consists of capital free to join a cooperative member is entitled to contributions of the society, and can also equal voting rights. members with limited leave anytime as per his • The liability of members means.
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