 FORMS OF COMBINATIONS

CHART OF FORMS OF BUSINESS

1. SIMPLE ASSOCIATION
Here are some examples of simple association
 TRADE ASSOCIATION
A trade association is a voluntary association of traders and businessmen producing similar
goods or services to protect and promote their common interests through collective efforts. It
is non-profit organization. It does not enter into any business transactions.
 CHAMBER OF COMMERCE
Chamber of commerce is also formed to protect and promote common interest of the
business community. But Chamber of commerce differ from trade association in that it does
not only confine to the interest of a particular trade or industry, but it stands for the business
community in a particular region or country.

 INFORMAL AGREEMENT
An informal agreement is a combination formed by the by business in order to achieve some
common purpose. It may be formed for the purpose of regulating production and prices,
dividing the markets, determining the terms of credit allowed to the customer etc.

2. FEDERATION
A federation is a combination of competing businesses that join together for a
specific purpose and ensure stability through settlement of disputers. A federation is
more secure form of combination. It has the following two types.
  Pool
Pool is a horizontal type of combination intended to regulate the market price by collective
agreement on factors that influence the price. It is a federal union of competing units
handling the same business created and operated in accordance with a specific agreement
for mutual benefit. It has four sub types.
1 Output pool 3 Market pool
2 Traffic pool 4 Income and profit pool

 Cartel
A cartel is a form of combination in which independent business firms in an industry agree to
regulate their output, to fix sales quotas and to control sales contracts and prices. A cartel is
a voluntary association formed with the objective of eliminating competition and to secure
monopoly in the market. It has six types
1 Price-Fixing Cartel 4 Zone Cartel
2 Term Fixing Cartel 5 Quota Fixing Cartel
3 Customer Cartel 6 Syndicate

3. Consolidation
A consolidation has the following two types
 Partial consolidation
It includes trust community of interest and holding company.
1 Trust
A trust is formed by temporary consolidation of business without losing their
individual identities. The shareholders of combining business transfer a controlling
number of shares to a board of trustees. It has a spread of legal existence.
2 Community of interest
In community of interest, the shares of several companies are held by a group of
common shareholders or directors. It helps to keep the companies under common
management and control.
3 Holding company
A holding company holds a majority of voting shares in a subsidiary company or
prossesses the power to nominate the majority of the directors. The subsidiary
company retains its separate entity.
 Complete Consolidation
It has the following two types.
1 Amalgamation
An amalgamation is a form of business combination in which two or more companies
combine to form a new company. The old companies sell their assets and liabilities
to the new company.
2 Merger
If one company absorb another company, it is called merger. In a merger, the
absorbing company retains its separate entity while the absorbed company loses its
separate entity.