Forms of business organisation

1. BUSINESS STUDIES CHAPTER 2 FORMS OF BUSINESS ORGANISATION Done by Nivesh class XI Oakridge school

2. DIFFERENT TYPES OF ORGANISATION • SOLE PROPRITER SHIP • JOINT HINDU FAMILY BUSINESS • PARTNER SHIP • COOPERATIVE SOCIETY • JOINT STOCK COMPANY

3. SOLE PROPRITER SHIP • This is one of the simplest form of business organisation which is derived from 2 words where “sole” means “one or only” and “propriter” means “owner” where it is managed, controlled only by single operations depends upon the nature of the business. • Features:- • Easy to form as there is no separate legal entity • It is controlled by the owner • Unlimited liability • Sole risk bearer and profit recipient • No separate legal entity • Lack of Business continuity

5. MERITS AND LIMITATIONS OF SOLE PROPRITER SHIP • MERITS- • Quick decision making • Confidentiality of information • Sense of accomplishment • Direct incentive • Ease of formation and closure • LIMITATIONS- • Limited Resources • Unlimited liability • Lack of business continuity • No growth • Lack of management skills

6. JOINT HINDU FAMILY BUSINESS • This is the only organisation found only in India which is practised by Hindu undivided family. • The head of this business is Karta who controls the whole business and rest of the family members are called as Co parceners. • It has 2 systems:- • Dayabhaga- In this system where it exists only in West Bengal where it allows both males and females to be co parceners • Mitakashara- It allows only males to be co parceners where it is found all over India except in West Bengal.

7. FEATURES • Easy to Form • Controlled by Karta • Business Continuity • Unlimited liability for Karta and limited liability For coparceners. *Minor can also be a coparcener

8. MERITS AND LIMITATIONS OF JHF • MERITS- • Good decision making • Limited liability of co parceners • Increased Loyality and cooperation • Business continuity • LIMITATIONS- • Limited Resources • Unlimited liability of Karta • Dominance of Karta • Limited managerial abilities

9. PARTNERSHIP • It is one of the famous form of organisations, according to Indian Partnership Act 1932 it is defined as a relation between persons who had agreed to share their profits and losses in an agreed ratio. • Features- • Ease of Formation • Controlled by partners • Lack of Continuity • Limited Liability • Membership • Mutual understanding

10. MERITS AND DEMERITS OF PARTNERSHIP • MERITS- • Ease of formation. • Balanced decision making • More funds • Sharing of risks • Secrecy • LIMITATIONS- • Unlimited liability • Lack of business continuity • Possibility of conflicts • Lack of public confidence • Limited resources

11. TYPES OF PARTNERSHIPS- • PARTNERSHIP BY DURATION- • Partnership at will • Particular partnership • PARTNERSHIP BY LIABILITY • General partnership • Limited partnership

12. TYPES OF PARTNERS • Active partner • Sleeping or Dormant partner • Secret partner • Nominal partner • Partner by estoppel • Partner by holding out

13. COOPERATIVE SOCIETY • This is one of the famous business organisation where it focuses on welfare of the society and service motives. • This society is mainly established to satisfy the basic needs of common people and protect them from their exploitation. • This society is controlled by cooperative socities act 1912. • AMUL is the best example for this type of society which brought white revolution in India.

14. FEATURES • Voluntary membership • Legal status • Controlled by elected bodies • Limited Liability • Ease of Formation • Service motive

15. Merits and Limitations • MERITS- • Ease of formation • Stable existence • Limited liability • Support from government • Economy in operations • Limitations- • Limited resources • Inefficiency in management • Lack of secrecy • Government control • Differences of opinion

16. TYPES OF COOPERATIVE SOCITIES • CONSUMERS COOPERATIVE SOCIETY • FARMERS COOPERATIVE SOCIETY • MARKETING COOPERATIVE SOCIETY • PRODUCERS COOPERATIVE SOCIETY • HOUSING COOPERATIVE SOCIETY • CREDIT COOPERATIVE SOCIETY

17. JOINT STOCK COMPANY • This is one of the complex form of business organisation while compared to other forms of organisation because it involves many formalities and documents. • In this organisation members are called as shareholders where they raise the funds by allotting the shares among the members depending upon their investment. This is governed by companies act 1956. • In this organisation they can even transfer the shares if necessary and this company is divided into two parts • Public Ltd Company • Private Ltd Company

18. Features • Artificial person • Separate legal entity • Transfer of interest • Complexity in Formation • Controlled by board of directors • Business Continuity • Perpetual Succession • Risk bearing

19. MERITS AND LIMITATIONS OF COMPANY • MERITS- • Limited liability • Transfer of interest • Scope for expansion • Perpetual existence • Professional management • LIMITATIONS- • Complexity of formation • Numerous rules and regulations • Delay decision making • Impersonal work environment • Oligarchic management • Conflict in interest

20. PUBLIC LIMITED AND PRIVATE LIMITED COMPANY • PUBLIC LIMITED COMPANY • It requires minimum 7 members and unlimited on maximum strength • It can raise the funds by allotting shares • Has minimum paid capital of 5 lakhs • It is not probihited from issuing shares • It must maintain index and prospectus • It can start its operations only after getting Certificate Of Incorporation. • PRIVATE LIMITED COMPANY • It requires minimum 2 members and maximum 50 members • It has only limited thus it cannot raise the funds • Has minimum paid capital of 7 lakhs • It is probihited from issuing the share • It can start its operations after getting Certificate Of Incorporation

21. CHOICE OF FORM OF ORGANISATION • CHOICE OF FORM OF ORGANISATION DEPENDS UPON THE TYPE OF BUSINESS AND THE FOLLOWING FACTORS MUST BE CONSIDERED • COST AND EASE OF SETTINGS OF THE BUSINESS • MANAGEMENT ABILITY • DEGREE OF CONTROL • LIABILITY • CONTINUITY • CAPITAL CONSIDERATION • NATURE OF BUSINESS

22. 7.FORMATION OF A COMPANY

23. INTRODUCTION As we had learnt in earlier chapter forms of business organisation that formation of a company is a complex process which involves various formalities and procedures. Formation of a company involves several formalities and requires many documents. Private company can start its production after finishing two stages and public company must finish all 4 stages.

24. STAGES OF FORMATION OF A COMPANY • PROMOTION • INCORPORATION • CAPITAL SUBSCRIPTION • COMMENCMENT

25. PROMOTION • This is the first and very important stage in formation of company. In this stage it involves conceiving a business opportunity which is more profitable. Promoter plays a very important role in promotion a person, group of persons or a company which proceeds to form a company are called promoters.

26. FUNCTIONS OF A PROMOTER *Identifying a business opportunity *Feasibility study – a. Technological feasibility b. Financial feasibility c. Economic feasibility *Name approval *Fixing up signatories to memorandum of association *Appointment of professionals *Preparation of necessary documents

27. NECCESARY DOCUMENTS REQUIRED • Memorandum of association a. The name clause b. Registered office clause c. Capital clause d. Liability clause e. Objects clause • The main objects • Other objects f. Association clause

28. • Articles of association • Consent of proposed directors • Agreement • Statutory declaration • Registration fee

29. INCORPORATION • This is the second stage in company formation in this stage promoter applies for certificate of incorporation by submitting all documents as per law. • The documents are:- • Memorandum of association • Articles of association • Consent • Agreement • Exact office address • Statutory declaration • Payment of fees

30. EFFECT OF CERTIFICATE OF INCORORATION • After getting certificate of incorporation a private company can legally start its production activities. • This certificate is very important because it acts as a birth certificate to the enterprise. • If there are any mistakes or forgeries in this certificates still they are considered to be valid. • Example:- a. If a company applied for this certificate on jan 6th and if they received it on jan 8th but it is written 6th on it that date is only is considerd b. If any member of a company forged the signature still it is considered to be valid.

31. CAPITAL SUBSCRIPTION • For public company they need to cross two more stages to start their company in those stages this is the first stage. • In this process:- a. SEBI approval b. Filling of prospectus c. Appointment of brokers, bankers and under writers d. Minimum subscription e. Application to stock exchange f. Allotment of shares

32. COMMENCEMENT • This is the final step in the formation of company where private company can start its production after finishing this stage. • In this stage:- a. A declaration that every director has paid in cash and shares are allotted as per minimum subscription b. A declaration that every director has paid in cash c. A declaration that no director is liable to the company d. A statutory declaration stating that all necessary documents are arranged as per law.

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Forms of business organisation

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