Important Questions for Class 11

Business Studies
Chapter - 2 Forms of Business Organization

Very Short Answer Type Questions 1 Mark

1. Who elects B.O.D of Joint Stock Company?

Ans: Shareholders elect the Board of Directors of a Joint Stock Company.

2. In which form of business profits are not shared?

Ans: In a sole proprietorship, the owner is solely responsible for all profits, losses,
assets, and liabilities.

3. Where a business act as an artificial person what act as an official signature

Ans: As a substitute for the company's signature, the common seal with the
company's name engraved on it is utilised.

4. Write the names of systems which govern membership in Joint Hindu

Family business

Ans:
1.The Hindu Undivided Family (HUF) is governed by two schools of Hindu law:
Mitakshara Law (Law of Mitakshara) Except for Bengal and Assam, the
Mitakshara Law extends across India.

2. The Dayabhaga Law applies to Bengalis and Assamese who live in the states of
Bengal and Assam, as well as other regions of the world.

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5. Enumerate the two conditions necessary for formation of Joint Hindu
Family business

Ans:
1. At least two familial members

2. They will inherit ancestral property

6. What is the minimum no. of persons required to form a co-operative

society?
Ans: A minimum of ten people are necessary to form a cooperative (10).

7. Explain the meaning of unlimited liability.

Ans: Unlimited responsibility refers to a firm's indefinite ability to fulfil its debts
or commitments, which extends beyond the firm's owner(s), partners, or
shareholders' investments to their personal assets. An unlimited liability company,
such as a sole proprietorship or a general partnership, assumes this level of risk.

8. Identify a company which has no restriction of on transfer of shares

Ans: There are no restrictions on the transfer of shares in a public business.

9. Name two types of business in which sole proprietorship is very suitable

Ans: Tutorial classes and a small cell phone repair company are excellent
examples of sole proprietorship businesses.

10. Write the name of form of business organisation found only in India
Ans: A joint Hindu family business is a type of business that can only be found in
India.

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11. Name the person who manages a Joint Hindu Family business
Ans: Karta is the person in charge of a Hindu joint family enterprise.

Short Answer Type Questions 2 or 3 Marks

12. Partners in affirm has different roles and liabilities, Identify and explain
the type of partner in a firm from the given examples:

a) Rama is a partner in a business who has no actual interest in business trade

or its profits but she is Paid fee by the firm for lending its name to firm.
Ans: Rama is a nominal partner in a firm who has no genuine interest in the firm's
trade or earnings, but is paid a fee by the firm for providing its name to the firm.

b) In Ram Hari & co. Ltd, Ram & Hari declare Gopal as a partner with
knowing that Gopal remain silent then Gopal will be liable to third parties for
any loss.
Ans: Ram & Hari declare Gopal as a partner in Ram Hari & Co. Ltd, knowing that
if Gopal remains silent, Gopal will be accountable to third parties for any losses.

c) What type of partner is Geeta if she only contribute capital, shar profit and
loss if any?
Ans: Geeta is a sleeping partner if she merely contributes capital and shares profit
and loss if any.

d) What type of patner is Giri in Ram Hari & co. Where he is an outsider but
represent himself as a partner.
Ans: Giri in Ram Hari & co, Where he is an outsider but represent himself as a
partner-Partner by Estoppel

13. Explain the forms: sole proprietorship, H.U.F & Joint stock company on
the basis of following points: Liability, members & Continuity
Ans: The difference between sole proprietorship, H.U.F & Joint stock company is
given below:

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 Basis Sole HUF Joint Stock Company
Proprietorship

Liability Unlimited Liability Karta's culpability is Members' responsibility

boundless, and his is restricted to the
personal property is amount of money they
used to pay off his contribute to a
debts. Coparceners' corporation. Members
liability is restricted can only be requested to
to their part of the contribute to the loss up
risk, which is to the amount of unpaid
precisely defined share that they own.
and precise.

Member Owner is the To start a joint In a public corporation,

member hindu family the minimum number of
business, at least employees is seven, and
two family members the maximum number is
are required. At the unlimited; in a private
time of birth, one firm, the minimum
becomes a member. number of employees is
two, and the maximum
number is 200.

Continuity Death, insanity, Company operations It will only be

incarceration, are not halted, and decommissioned after a
physical illness, and business continuity precise procedure known
bankruptcy all have is not jeopardised. as winding up is
an impact on a firm finished. Members may
and can lead to its come and leave, but the
closure. company remains in
existence.

14. Explain the concept of mutual agency in partnership with suitable

example.
Ans: The legal relationship between participants in a partnership in which each has
authorisation powers and the authority to engage the partnership into business
contracts is known as mutual agency. To put it another way, each partnership

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member has the capacity to make business decisions that commit or tie the
partnership as a whole to a business deal with a third party or entity. Even though
the partnership agreement expressly forbids it, a grocery store partner who
purchases a delivery vehicle makes a legally binding contract in the name of the
partnership. On the other hand, if a law firm partner bought a snowmobile for the
firm, such behaviour would be illegal.

15. What is meant by partner by estoppel OR Mr. Singh is in ‘lighting’

business for the post 15 years. To help his friend, Mr Yadav, a beginner he
projected himself as a partner before Mohd. Abdul, a whole sale dealer of
fancy lights. Mohd. Abdul gave Mr. Yadav the stock without asking for
payment and gave him credit limit of one month. Will Mr. Singh be liable to
Md. Abdul if Mr. Yadav does not pay him on time ? Classify Mr. Singh’s role
here along with an explanation
Ans: Partner by Estoppel is a legal term that refers to a legally binding partnership
that can exist even though there is no formal partnership agreement in place. A
person who advertises himself or herself as a partner in a firm through conduct or
words, or enables himself or herself to be represented as such, is accountable for
the credit or loans received by the firm on the basis of such representation. Also
known as partnership presumption. The partner does not contribute to the capital or
administration of the company, yet his responsibility is limitless.

16. What is secret partner

Ans: A secret partner is a person or partner who is not publicly known in a venture
or business. He contributes money to the cause. He's a part of the management
team, but only behind closed doors. He also shares in the profits and losses of the
firm. His, and others', responsibilities are infinite.

17. Write a short note on producer co-operative society

Ans: Producers' Cooperative Societies were formed to safeguard the interests of
small farmers. Producers interested in obtaining inputs for the creation of items to
meet consumer demand are among the members. Profits are divided based on their
contributions to the society's overall pool of products produced or sold.

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18. Explain a co-operative organisation in democratic setup.
Ans: A cooperative society is a voluntary group of people who get together for the
common good of its members. The cooperative society is governed by the premise
of "one man, one vote." Each member has the same number of votes. As a result,
democratic values govern cooperative society.

19. Shiv, Anandi & John were partners John died in a car accident Both Shiv
& Anandi decided to admit his son Ryan who was 16 years old as partner.
Can they do so? Justify.
Ans: Yes, they can admit Ryan as a partner to the partnership firm's advantages
with the permission of the partners. A minor is a person who is under the age of
eighteen. Because a minor is incapable of forming a legally binding contract. He is
unable to become a partner in a firm. A minor can, however, be added to the
advantages of an established partnership business with the agreement of all other
partners. It's unrealistic to expect him to absorb the losses. His responsibility will
be limited to the amount of money he has put into the business. He will be unable
to engage fully in the running of the company.

20. Differentiate between private co. and public company

Ans: Difference between private company and public company are as following:

Basis for Comparison Public Company Private Company

Meaning A publicly traded firm that is a privately held and

owned and exchanged by the traded corporation
general public.

Minimum member 7 2

Maximum Member unlimited 200

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Minimum Director 3 2

Suffix Limited Private limited

Start of Business Following receipt of a Following receipt of

certificate of incorporation and the certificate of
a certificate of company start- incorporation
up,

Statutory Meeting Compulsory Optional

Issue of Prospectus/ Obligatory Not required

Statement in lieu of
Prospectus

Public Subscription Allowed Not allowed

Quorum at AGM 5 members must present in 2 members must

person present in person

Transfer of shares Free Restricted

21. Akriti, Sonam & Supreeti were friends who started a partnership
business. They did not get their firm registered as it was optional. Soon,
Sonam & Supreeti started having conflicts. Sonam wanted to approach a
lawyer. If you were a lawyer than how would you guide her ? OR Mangal,
Sazia & Suqhbeer Singh wish to start a business in partnership. They want to
make a partnership deed, Suggest what aspects of the deed should be included
in it ?
Ans:The term "partnership" refers to a relationship between people who have
agreed to split the profits from a firm that is run by all of them or by one of them
acting on behalf of all of them. Although firm registration is optional, a partnership
deed might be produced to avoid problems between partners. The partnership deed

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is a written agreement that contains the rules and conditions that govern the
partnership.:

A partnership deed generally has the following elements:

• Firm name

• Nature of company and location of operation

• Duration of business
• Each partner's investment

• Profit and loss distribution

• The partners' responsibilities and obligations

• The partners' salaries and withdrawals

• The terms regulating a partner's admission, retirement, and expulsion

22. Explain limitations of Joint Stock Company

Ans: The following are the restrictions:

• When ownership as well as management are separated, there is a lack of effort

and personal commitment on the part of the company's executives.

• A company's information is periodically given to the Registrar of Companies, and

therefore information is available to the general public. This restricts a company's
operational flexibility and wastes a significant amount of time, effort, and money.

• Communication and acceptance of various ideas to top, middle, and lower level
management may cause delays in not just making choices but also carrying them
out.
• The Board of Directors is made up of the company's owners, the shareholders.

23. Which form of business is suitable for following types of business and why
?

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(a) Beauty Parlour
Ans: Sole Proprietorship for a Beauty Salon. Created and operated in a simple and
cost-effective manner. On his or her personal tax return, the owner declares profit
or loss.

(b) Coaching Centre for science students

Ans: Partnership with a science coaching centre. It's easy to make and run, and it's
cheap. On their personal tax returns, partners record their share of profit or loss.

(c) Hotel
Ans: Joint Stock Companies in the Hotel Industry The limitation on their owners'
personal liability for company debts and court judgements against the firm is the
major aspect of LLCs and corporations that attracts small enterprises. Another
issue to consider is income taxes: you can establish up an LLC or a corporation to
take advantage of lower tax rates. Furthermore, an LLC or corporation may be able
to offer a variety of fringe benefits to its employees (including the owners) and
deduct the cost as a business expense.

(d) Shopping mall

Ans: JSCs (joint stock companies) are shopping malls. Owners' personal liability
for commercial debts is limited .

(e) Restaurant
Ans: Sole proprietorship of a restaurant. Created and operated in a simple and cost-
effective manner. On his or her personal tax return, the owner declares profit or
loss.

(f) Small repair business

Ans: Sole Proprietorship for a small repair business. Created and operated in a
simple and cost-effective manner. On his or her personal tax return, the owner
declares profit or loss.

Long Answer Type Questions 5 or 6 Marks

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24. In what type of business, individuals associate voluntarily for profit,
having capital dividend into transferable shares, the ownership of which is the
condition of membership? Explain with features
Ans: A joint stock company is a voluntary group of people founded for the purpose
of carrying out profit-making business activities. It has a different legal position
from its members and a capital structure that is divided into transferable shares. A
corporation is a legal entity that possesses its own legal identity, perpetual
succession, and common seal. The shareholders are the company's owners, and the
Board of Directors is the company's top management body, which is elected by the
shareholders.
The company's capital is divided into smaller units called "shares," which can be
freely transferred from one shareholder to another (except in a private company).
The following are the characteristics of a joint stock company:

• A corporation is a fictitious person. It is a legal creation that exists independently

of its members.

• A corporation acquires its own legal personality. The business and its owners are
not considered one and the same by the law.

• Starting a business is a time-consuming, expensive, and difficult process. It is

necessary for businesses to be incorporated.
• It will only be decommissioned after a specialised procedure known as winding
up is finished. Members may come and leave, but the company remains in
existence.

• A company's affairs are managed and controlled by the Board of Directors, which
appoints top management for corporate operations.
• A company may or may not have a common seal.

• The risk of a company's losses is shared by all shareholders.

25. If registration is optional, why do partnership firms willingly go through

this legal formality? Explain the reason with procedure to get them registered.

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Ans: The registration of a partnership firm is optional. However, it is preferable to
have a formal agreement to avoid problems between partners. The following are
the implications of a firm's failure to register:

i. A partner in an unregistered firm cannot sue the firm or other partners;

ii. The firm cannot sue third parties; and

iii. The firm cannot bring a case against the partners.

The partnership deed is a written agreement that contains the rules and conditions
that govern the partnership.

The following elements are usually included in a partnership deed:

• Name of firm

• Nature of business and location of business

• Duration of business
• Investment made by each partner

• Profit and loss distribution

• Partners' duties and obligations

• Salaries and withdrawals of partners

• Terms governing admission, retirement, and expulsion of a partner

• Interest on capital and interest on drawings
• Procedure for dissolution of a partnership

Firm registration procedure:

1. Submit an application to the Registrar of Firms in the specified form. The

following information should be included in the application:

• the firm's name

• its location

• the names of other locations where the firm does business

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• the date each partner joined the firm
• the partners' names and addresses

• the duration of the relationship All of the partners should sign this application.

2. Make a fee deposit with the Registrar of Firms.

3. Following approval, the Registrar will enter the firm into the register of firms
and provide a certificate of registration.

26. Who have equal ownership right over the property of an ancestor?
Highlight with its essential characteristics
Ans: A Joint Hindu Family is a type of organisation in which the members of the
Hindu Undivided Family own and operate the business (HUF). Membership in the
company is based on birth in a certain family, and three generations can be
members. The eldest member of the family, known as karta, is in charge of the
family's company. Co-parceners are members of a Joint Hindu Family Business
who have equal ownership rights over an ancestor's property.
The following are the characteristics of a joint Hindu family business:
• There is no need for an agreement because membership is by birth.

• All members, excluding the karta, are only liable for their part of the business's
co-parcenery property. The liability of the karta is limitless.

• The family business is controlled by Karta, and his decisions are binding on
everybody. • The business continues even after Karta's death, as the next eldest son
becomes Karta.

27. Why cooperative forms of organisation are formed? Explain various types
of cooperative societies
Ans: A cooperative society is a voluntary group of people who get together for the
common good of its members. They are driven by a desire to protect their
economic interests against potential abuse by middlemen who are just out to make
more money. The procedure of forming a cooperative organisation is

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straightforward, and all that is required is the approval of at least ten adult
individuals. The capital of a society is raised by issuing shares to its members.
Following its registration, the society gains an unique legal identity.

Consumer Cooperative Societies are one type of cooperative society.

 It was established to safeguard the interests of consumers.
 The society aims to eliminate middlemen in order to achieve operational
efficiencies. It buys goods in bulk directly from wholesalers and sells them
to members.

 Profits are distributed based on either capital contributions to the society or

individual member purchases.

 Producers' Cooperative Societies are a type of producer cooperative

society.
 It was created to protect the interests of small farmers.

 Producers seeking inputs for the creation of commodities to meet

consumer wants make up the members.
 Profits are dispersed based on their contributions to the total pool of
goods produced or sold by the society.

 Marketing Cooperative Societies This organisation was founded to

assist small producers in selling their goods.
 The members are producers who want to get fair pricing for their goods.

 It combines the production of individual members and engages in marketing

operations such as shipping, storage, packaging, and so on in order to sell
the items at the highest possible price. Profits are distributed according on
how much each participant contributed.

 Farmers' Cooperative Societies are founded to defend farmers' interests

by offering superior inputs at a fair cost.

 Members are farmers who want to take up farming activities together.

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  The goal is to reap the benefits of large-scale farming while increasing
production. Improves yield and returns to farmers while also addressing the
issues that come with farming on fragmented land holdings.

 Cooperative Credit Societies: It was founded to provide members with

quick credit on affordable terms.
 The members are those who are looking for financial assistance in the
form of loans.

 The goal of such organisations is to safeguard members from being

exploited by lenders who charge exorbitant interest rates on loans.

 Cooperative Housing Societies are a type of cooperative housing

organisation.
 It was created to assist low-income people in building dwellings at an
affordable cost.

 People who want to get a cheaper place to live make up the members
of these societies.
 The goal is to solve the members' housing concerns by building
houses and allowing them to pay in instalments.

28. Dhirubhai Chaurasiya operates a textile business. His family is joint and
has a lot of ancestral property. All the 15 family members are a part of this
business. He is the eldest male member in the family so he heads the business.
He is liable to all the creditors of the business as he is the decision maker.
Dhirubhai’s grandson has just born a few days ago and he is also the member
of the business.
(a) Which form of business is being undertaken by Dhirubhai Chaurasiya ?
Ans: Dhirubhai Chaurasiya is involved in a joint Hindu family business.

(b) Identify the features of this form of business based on the information
given.
Ans: The following are the features of a joint Hindu family company based on the
previous information:

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• As 15 family members are involved in the business and have a lot of ancestral
property, there should be at least two individuals in the family and ancestral
property to be inherited by them.

• Except for the karta, all members' responsibility is restricted to their share of co-
parcenery property. The karta has unrestricted liability to all business creditors
since he is the decision maker.

(c) Textile business is part of which type of industry according to you ?

Ans: Textile business is part of Agro based industries.

29. 'Reva Chemicals' is a partnership firm. Sona and Mona one two partners
in this firm. It is recorded in the Partnership Deed that Sona's liability is
unlimited, whereas Mona's is limited. Sona wants to set up the Anti-Pollution
plant in his factory, but Mona does not let him do so. Almost all the
transactions of this firm are done through the internet. The firm Sells its
goods to other Business units only. The firm gets its Research and
Development work done by another firm, who is a specialist of such work.
i. Describe the type of partnership.
Ans: It's a limited partnership in which at least one partner's liability is limitless,
but the others may have limited liability. Limited partners have no management
powers and are unaffected by the firm's or other partners' activities. A partnership
of this nature must be registered.

ii. identify the two values being overlooked.

Ans: The following are the two ideals that are being overlooked:

• Government rules are being broken;

• The social responsibility clause is not being followed.

iii. Name the type-business being done by the firm

Ans: It is a B2B (Business to Business) transaction. Short for business-to-business
electronic commerce, B2B e-commerce (sometimes written as e-Commerce,
eCommerce, or similar variants) is the sale of items or services between businesses
over the internet using an online sales portal. In general, it is utilised to help

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businesses become more efficient. Instead of manually processing orders over the
phone or by e-mail, ecommerce allows orders to be processed digitally.

30. Ravi, Pradeep, Satyender and Dharmender are partners in a partnership

firm. Ravi and Satyender take active part in the operation of business whereas
Pradeep has contributed in Capital but do not take part in day to day
activities of the business. Dharmender is a nominal partner. All four make
partnership for a specified time period and also make written agreement to
govern the partnership but they does not get the firm registered.
a. What is meant by nominal partner?
Ans: A nominal partner is one who permits a firm to use his or her name. He
neither contributes to the capital nor participates in the administration of the
company. He usually does not share profits or losses, and his liability is infinite.

b. Which type of partnership is there between the partners in above?

Ans: The partners have formed a general partnership. In a general partnership, the
partners' responsibility is limitless and joint. The partners have the right to
participate in the firm's management, and their actions are binding on both the
partners and the firm.

c. What is written agreement between the partners called?

Ans: The partnership deed is a written agreement between the partners. The
partnership deed is a written agreement that contains the rules and conditions that
govern the partnership.

d. What type of partners Pradeep and Ravi are?

Ans: Ravi is a hands-on partner. Active partners are individuals who actively
participate in the firm's business on behalf of their fellow partners. They invest
money and participate in the operation of the company. He shares in the
partnership's profit and loss. His legal responsibility is limitless.

Pradeep is my sleeping companion. Sleeping partners are those who do not

participate in the day-to-day operations of the company. They invest capital but do
not participate in the management of the company. He shares in the partnership's
profit and loss. His legal responsibility is limitless.

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e. Give two merits of getting firm registered.
Ans: The following are two advantages of registering a business:

• An unregistered firm's partner cannot sue the firm or other partners;

• The firm cannot sue third parties.

31. Explain different types of Partnership on the basis of duration and

liability?
Ans: Types of Partnership are as follows:

On the basis of duration: It can endure as long as the partners want it to, and it
will terminate when one of them gives written notice of his or her intention to
leave the relationship. A partnership created for the aim of completing a specified
project, such as the construction of a structure or the performance of a time-limited
activity.

On the basis of Liability: Partners have unlimited and joint liability; they have the
right to participate in the firm's management, and their acts bind them as well as
the firm.
The limited partners have no authority over the firm or the other partners, and their
acts have no legal consequences for the firm or the other partners. It is necessary to
register such a partnership.

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