BUSINESS STUDIES (CLASS 11 )CHAPTER 2 FORMS OF ORGANISATION

Chapter 2 - Forms Of Business Organization

1. Forms of Business Organisation
There are different forms of business organizations from which a choice has to be made:
· Sole proprietorship
· Joint Hindu family business
· Partnership
· Joint stock Company
· Cooperative Societies

2. Sole Proprietorship

It is a form of organisation which is owned, managed and controlled by an individual who bears all the risk and receives all the profit.

3. Joint Hindu Family Business

It is a form of business which is owned and managed by members of Hindu undivided family, with the possibility of three successive generations as members in the business.

4. Partnership

According to partnership Act 1932, partnership is the relation between persons who have agreed to share the profits of the business carried on by all or any one of them acting for all.

5. Partnership deed

A written document where all the terms and conditions of partnership are mentioned. It generally has following clauses:

· Name of firm
· Nature of firm
· Duration of partnership
· Duties and obligations of partners
· Valuation of assets
· Interest on capital and interest on drawings
· Profit-loss sharing ratio
· Salaries and withdrawals of the partners.
· Preparation of accounts and their auditing.
· Procedure for dissolution of firm
· Method of solving disputes.

6. Cooperative Society - This is a voluntary association of people to overlook the welfare of the members. This type of organization oversees the economic interests of the members and to avoid the exploitation by the middleman. This society can enter into contracts; they can sue and be sued. The liability of the members of the society is limited to how much they contribute to the capital. The principle of one man one vote exits as each member has equal voting rights.

7. Joint Stock Company - This type of organization is a creation of the law and is independent of its members. The company acquires a separate legal entity, and the law doesn't have the business and the owners as one. The formation of the company is time-consuming, expensive and very complicated. the shareholders are liable to the extent of unpaid shares paid by them. The Companies Act, 2013 defines, "A company as an artificial person having a separate legal entity, perpetual succession and a common seal."

8.    Types of Companies 

Private Company
· A company must have minimum 2 or maximum 200 members.
· Right to transfer shares is restricted.
· Funds cannot be generated from the general public.
· Uses 'Private Limited' after the company name.

Public Company
· Minimum 7 members with no limit on maximum members.
· Free to transfer shares.
· Issue shares to the general public.
· Uses 'Public Limited' after the company name.