Forms of Business Organisation
• Joint Hindu family business
• Cooperative society
• Joint stock company
❖ Sole Proprietorship
2. A sole proprietor has unlimited liability, which implies that the personal assets of the proprietor will be used in case the business assets fall short of the amount required for debt payments.
3. The sole proprietor is the single recipient of all the profits of the business and bears all the risks.
4. He or she takes all the business decisions independently and enjoys total control over the business operations.
5. The sole proprietorship business has no legal identity separate from its owner.
6. It lacks business continuity in the sense that such situations as the death, ailment or bankruptcy of the sole proprietor may cause its closure.
1. Ease of formation and closure of business, as no legal formalities are required for setting up or for closing down the business
2. Complete and independent control over the business, thereby enabling quick decision-making
3. A direct incentive to operate the business efficiency and effectively, being the sole recipient of the profits
4. High confidentiality, as the sole proprietor is not bound by the law to publish the accounts
5. A feeling of satisfaction and self-confidence, as he or she is responsible for the gains in the business
6. High flexibility in operations, because, as the sole owner, he or she can readily adapt to the changes in the business environment
7. Minimum government regulations
1. Limited capital in the form of only the personal savings and borrowings of the proprietor
2. Lack of specialisation in various managerial functions as the proprietor manages the business all alone
3. Risk to the personal assets of the proprietor, as these assets may be used for debt repayments if there is any shortage of funds
4. Risk of closure caused by such situations as the death, ailment or bankruptcy of the sole proprietor or other adverse situations
5. High probability of wrong decisions, because the proprietor is the sole decision-maker
⚬ There is a need to maintain personal relations with the customers
⚬ The demand for the products is highly elastic and open to the market conditions.
⚬ The proprietor wants to earn a living using his or her own skills.
❖ Joint Hindu Family Business
• Controlled by the karta (the eldest member and head of the family) with all the other members (co-partners) enjoying equal ownership rights over the business property
2. It requires a minimum of two members with some ancestral property.
3. The karta, being the head of the joint Hindu family, has unlimited liability over the business, while the other members have limited liability to the extent of their share in the family business.
4. The decisions of the karta are binding on all the members of the family business.
5. A minor also has membership rights in the business—that is, membership in the family business is acquired…
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