forms of business organization
DESCRIPTION
Different forms of organizationTRANSCRIPT
Forms of Business Organization
Legal Aspects of Business
Unit I
Forms of Business Organizations
Sole Trader
Partnership
Hindu Undivided Family
Joint Stock Company
Cooperatives
Government in BusinessDepartmental
Public Corporation
Government Companies
Sole Trader
Oldest form of Organization
Features : One man Ownership and Control
Capital Contribution
Unlimited Liability
Enjoyment of Entire Profit
No separate Legal Entity
Sole Trader
MeritsEasy Formation
Flexibility
Quick Decision
DemeritsLimited Capital
Lack of Specialization
Partnership Firm
Acc. to Sec. 4 of Indian Partnership Act, 1932, “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 Firm
Features :
Agreement
Sharing of Profits
Unlimited Liability
No separate Legal Entity
Non-Transferability of Interest
Registration
Agency Relationship
Partnership Firm
MeritsFlexibility
More Credit Standing
Quicker and Better Decisions
Sharing of Risk
DemeritsUnlimited Liability
Hindu Undivided Family
Unique in India
Based on Hindu Law
Head of family : ‘Karta’
Members : ‘Coparceners’
System is declining as the current concept is Nuclear Families.
Joint Stock Company
Haney : “A company is an incorporated association; It is an artificial person created by law, having separate identity, with a perpetual succession and a common seal.”
Joint Stock Company
FeaturesSeparate Legal Entity
Perpetual Succession
Common Seal
Limited Liability
Easy Transferability of Shares
Professionalism of Management
Economies of Large Scale
Joint Stock Company
MeritsAvailability of Credit
Easy Expansion
DemeritsSeparation of Ownership and Control
Not Flexible
Neglecting Minority Interest
Delay in Decision Making
Cooperative SocietyPrinciples :
Voluntary OrganizationEqualityDemocratic Management (1 person- 1 vote)Pooling of ResourcesSpirit of serviceMembership : min. 25 & max. no limitRegistration Compulsory (Cooperative Societies Act, 1912)Separate Legal EntityLimited Liability
Cooperative Society
MeritsEasy Formation
Limited Liability
Social Benefit
DemeritsInefficient Management
Limited Capital
Non Transferability of Interest
Government in BusinessObjectives
Helping all round industrialization
Developing Basic Industries
Establishing Enterprises requiring heavy investment
To provide Necessities
To run Monopoly sectors
For Balanced Economic growth
Making Full Employment
To Increase Government Resources
Forms
Department of the Government
Separate Corporation
Joint Stock Company
Departmental Organization
Eg. Railways, Post & Telegraph, DefenseFeatures
Wholly dependant on GovernmentManagement in Govt hands (Minister is responsible & answer to Parliament)Financed through BudgetLegal Immunity (action not taken without Government permission)Employees are civil servants
Departmental Organization
MeritsComplete Govt Control
Source of income for Government
Secrecy
DemeritsExcessive Govt Interference
Delay and Red-tapism
Inefficiency
Tax Burden on Public
Political Changes
Public CorporationAutonomous body created by a special statute of a State or Central Government.Features :
Separate Legal EntityPerpetual ExistenceGovernment Investments whollyManagement (Board of Directors)Service MotiveAccountability (to Parliament)Employees not civil servants
Public Corporation
ExamplesLife Insurance Corporation of India
Provident Fund
Employees State Insurance Corporation
Food Corporation of India
Public Corporation
MeritsInternal Autonomy (Free from Govt.)
Protect Public Welfare
DemeritsDifficulty in making changes
Misuse of powers
Inefficient
Lack of Interest (Ownership & Control in different hands)
Government Companies
Company in which not less than 51% of shares are held by Central or State Government and registered under Companies Act, 1956.Started in fields where investment is heavy and also take over private sick unitsEg. Air India, Tamil Nadu Newsprint and Papers Ltd., BSNL
Government Companies
MeritsParticipation with public
Technical know-how
Flexibility (like a Company)
DemeritsReturn on Investment is low
Operational Efficiency
