Professional Documents
Culture Documents
Forms of Business Org
Forms of Business Org
ORGANIZATION
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CONTENTS
• Sole Proprietorship
• Partnership
• Joint Stock Company
• Co-operative Society
• Public Sector Enterprises
• Joint Sector
SOLE PROPRIETORSHIP
A sole proprietorship is a business owned and operated by one individual .
The shops or stores which you see in your locality — the grocery store, the vegetable store, the
sweets shop, the chemist shop, the paanwala, the stationery store, the STD/ISD telephone booths
etc. come under sole proprietorship.
Advantages
• Easy to start
• No registration
• No profit sharing
• Easy decision-making
• Easy to windup
• Secrets (information about business techniques)
• No corporate taxes
Disadvantages
• Unlimited liability
• Employee benefits i-e Medical insurance
premiums not deductible(taxes)
• Raising funds
• Limited Life
• Loss in absence
Suitability of SP
For business where capital required is small
and risk involvement is not heavy, this type
of firm is suitable.
Demerits
Lack of Autonomy in practice
Unresponsive to consumer interests
Difficulty in changing the act
Government companies
Merits:
Easy to Form
Flexibility of raising Capital
Operational Flexibility: No bureacracy,prompt
decisions.
Facilitates Private Participation
Demerits:
Lack of Accountability
Absence of Real Autonomy
lack of Professional skills
Government companies
Definition
A govt company is a company in which 51% of
the paid up share capital is central/state govt.
Features:
Formation- as per provisions of The
companies act,1956.
Management and Control- Board of Directors
appointed by govt and elected by
shareholders
Finance: Can raise funds from govt or public
Factors Governing Choice of Form of
Business Organisation
The choice of the form of business is governed by
several interrelated and interdependent factors :-
The nature of business is the most important factor.
Businesses providing direct services like tailors,
restaurants and professional services like doctors,
lawyers are generally organised as proprietary
concerns. While, businesses requiring pooling of skills
and funds like accounting firms are better organised as
partnerships. Manufacturing organisations of large size
are more commonly set up as private and public
companies.
Factors Governing Choice of Form of
Business Organisation
Scale of operations i.e. volume of business ( large,
medium, small) and size of the market area (local, national,
international) served are the key factors. Large scale
enterprises catering to national and international markets
can be organised more successfully as private or public
companies. Small and medium scale firms are generally set
up as partnerships and proprietorship. Similarly, where the
area of operations is wide spread (national or international),
company ownership is appropriate. But if the area of
operations is confined to a particular locality, partnership or
proprietorship will be a more suitable choice.
Factors Governing Choice of Form of
Business Organisation
The degree of control desired by the owner(s). A person who
desires direct control of business, prefers proprietorship, because
a company involves separation of ownership and management.
Amount of capital required for the establishment and operation of
a business. A partnership may be converted into a company when
it grows beyond the capacity and resources of a few persons.
The volume of risks and liabilities as well as the willingness of the
owners to bear it, is also an important consideration.
Comparative tax liability.