Forms of Business

Organisations

TAMIN)
Contents
 Forms of Business Organisation

 Sole proprietor ship

 Joint Hindu Family
Business
 Partnership
 Joint stock company
 Co-operative organisation
 Sole Proprietorship

A business owned and managed by one

individual; the business and the owner are
one and the same in the eyes of the law
A sole trader is a person who carries on a business
exclusively on his own account and at his own
risk.
 Sole Proprietorship
Advantages
 Simple to create

 Least costly form

 Profit incentive

 Total decision-making

 No special legal
restrictions
 Easy to discontinue
 Sole Proprietorship
Disadvantages
 Unlimited personal

liability
 Limited skills and

abilities
 Feelings of isolation

 Limited access to capital

 Lack of continuity of

business
 Joint Hindu Family Business
-According to Mitakshara School of Hindu law, the
property which is inherited by a Hindu from his Father,
Grandfather and great grandfather is ancestral property.

-A business which belongs to a single Hindu family and

conduct it as a family business is called joint Hindu family
business.

-No legal formalities are required to convert a business into

a joint family business. Only ‘Karta’ has right to mange the
family business.
 Advantages
Karta has full freedom
Business is like insurance cover for

children
Business can run my male members

Except Karta limited liability to family

members.
No effect of death of family member
 Disadvantages
Recourses are limited
Young members are disappointed

Continuity is depends upon the family

itself
Members can be irresponsible and lazy
 Partnership
-An association of two or more
people who co-own a business
for the purpose of making a
profit.

According to the partnership

Act ,1932,”A partnership is the
relation between persons who
have agreed to share the profits
of a business carried on by all or
any of them acting for all”
 Partnership
Advantages
 Easy to establish

 Complementary skills

 Division of profits

 Larger pool of capital

 Ability to attract limited partners

 Little governmental regulation

 Flexibility

 Taxation
 Partnership
Disadvantages
 Unlimited liability of at least
one
 Difficulty in disposing of
interest
 Lack of continuity
 Potential for personality and
authority conflicts
 Partners bound by law of
agency
 Kinds of Partnerships
Two major types of partnerships:
General Partnership: (most common type) all partners are responsible for

management and the financial responsibilities of the partnership.

Limited Partnership: at least one partner is not active in the day to day running of

the business. They have limited liability.

Articles of Partnership: contract between partners spelling out the rules of

partnership.
Dividing profit
Dividing responsibility
Admitting new partners
Buying out partners
 Joint stock company
-A company is governed by the Company Act 1956
and it has to follow various provisions of the act.

-A joint stock company is organised to carry on a

business on a large scale because its capital
requirements and risk obligations are too burdensome.
 Advantages
Able to collect large amount of capital.
Attract wide range of investors

Effective management

Shares transferred without difficulties

Management is on democratic principle

Limited liability to members

Risk of member is reduced

 Disadvantages
Formation of company is costly
Company can not take prompt decision –time

lag in meeting
Malpractices

Company is managed by directors not

proprietors
 Cooperative society
Cooperative organization is a voluntary association of
person who are financially strong. They come together
with an aim not to get profits but to overcome destability
arising out of want of adequate financial resources.

A separate legal entity apart from its owners which

receives the right to exist from the state in which in
which it is incorporated
 Domestic
 Foreign
 Alien
 Publicly held
 Closely held
 Corporations
Certificate of Incorporation
 Name
 Statement of purpose
 Time horizon
 Names and addresses of incorporators
 Place of business
 Capital stock authorization’
 Capital required at time of incorporation
 Provisions for preemptive rights
 Restrictions on transfering shares
 Names and addresses of officers
 By-laws
 Cooperative society
Advantages
 Limited liability of
stockholders
 Ability to attract
capital
 Ability to continue
indefinitely
 Transferable
ownership
Thank you