Quick Revision Notes & Formula Sheet

Class: 11th
Subject: Business Studies
Chapter: Forms of Business Organisations

1. Introduction to Forms of Business Organisations

A Business Organisation is an enterprise established for the purpose of earning profit. Choosing the right form of business organisation is crucial for every entrepreneur.

Key Factors for Selecting a Form of Organisation:

Ease of Formation (स्थापना में आसानी): Cost and legal formalities involved.
Liability (दायित्व): Extent of owners' personal financial risk.
Continuity (निरंतरता): Impact of death, insolvency, or retirement of the owner.
Management Control (प्रबंधकीय नियंत्रण): Decision-making power and autonomy.
Capital/Finance (पूंजी): Requirement of funds for business operations.
Degree of Secrecy (गोपनीयता): Ability to keep business matters confidential.

2. Sole Proprietorship (एकल स्वामित्व)

A business owned, managed, and controlled by a single individual who bears all the risks and receives all the profits.

Key Features:
- Single ownership.
- Formation and closure are easy with minimal legal formalities.
- Unlimited Liability: Personal assets can be used to pay off business debts if assets fall short.
- Sole risk bearer and sole profit recipient.
- Lack of business continuity (death/insolvency of the owner may end the business).
- High level of secrecy.

3. Joint Hindu Family (JHF) Business (संयुक्त हिंदू परिवार व्यवसाय)

A form of business unique to India, owned and operated by the members of a Hindu Undivided Family (HUF). It is governed by Hindu Law.

Key Features:
- Membership: Minimum 2 members required; no maximum limit. Governed by two schools: Dayabhaga (West Bengal) and Mitakshara (Rest of India).
- Karta: The eldest male member who manages the business and has unlimited liability.
- Coparceners: Other family members whose liability is limited to the extent of their share in the family property.
- Continuity: Continues to exist even after the death of the Karta; the next eldest member takes over.
- Minor Members: Can be a member by birth.

4. Partnership (साझेदारी)

An association of two or more persons who agree to carry on a business together and share profits and losses. Governed by the Indian Partnership Act, 1932.

Key Features:
- Formation: Created by an agreement (Partnership Deed). Minimum 2 members; Maximum 50 members (as per Companies Rule, 2014).
- Liability: Unlimited and joint & several liability for all partners.
- Risk Bearing: Profits and losses are shared in an agreed ratio.
- Decision Making & Control: Shared jointly by partners.
- Agency Relationship: Every partner is an agent of the other partners as well as the principal.

Main Contents of a Partnership Deed (साझेदारी संलेख):

Name of the firm.
Names and addresses of partners.
Nature and location of business.
Capital contribution of each partner.
Profit and loss sharing ratio.
Interest on capital, drawings, and loans.
Salaries and commission payable to partners.
Rules regarding retirement, dissolution, and settlement of disputes.

Types of Partners:

Active/Managing Partner: Contributes capital and takes active part in management.
Sleeping/Dormant Partner: Contributes capital, does not take active part in management.
Secret Partner: Associated with the firm but his identity is kept secret from the general public.
Nominal Partner: Allows the use of his/her name by the firm; does not contribute capital or take part in management.
Partner by Estoppel: Considered a partner through his/her own conduct or behavior.
Partner by Holding Out: Becomes liable because he/she does not deny being a partner when represented as one.

5. Cooperative Society (सहकारी समिति)

A voluntary association of persons formed with the motive of welfare and mutual help of its members. Governed by the Cooperative Societies Act, 1912.

Key Features:
- Voluntary Membership: Open to all; minimum 10 adult members; no maximum limit.
- Legal Status: Compulsory registration creates a separate legal entity distinct from its members.
- Limited Liability: Liability of members is limited to the extent of their capital contribution/shares.
- Control: Democratic setup — "One Man, One Vote" principle regardless of capital contributed.
- Service Motive: Primary focus is mutual help, not profit maximization.

6. Joint Stock Company (संयुक्त पूंजी कंपनी)

An artificial person created by law, having a separate legal entity, perpetual succession, and a common seal. Governed by the Companies Act, 2013.

Key Features:
- Incorporated Association: Must be registered under the Companies Act.
- Separate Legal Entity: Distinct from its members.
- Perpetual Succession: "Members may come and members may go, but the company goes on forever."
- Limited Liability: Shareholders' liability is limited to the unpaid value of shares held by them.
- Common Seal: Acts as the official signature of the company (now optional under amendments).
- Transferability of Shares: Shares of a public company are freely transferable.
- Separation of Ownership and Management: Owners (shareholders) do not manage day-to-day operations; professional directors are elected.

Types of Companies:

Private Company (निजी कंपनी):
- Minimum members: 2 | Maximum members: 200.
- Restricts the right to transfer its shares.
- Prohibited from inviting the public to subscribe to its securities.
- Must use the word 'Private Limited' (Pvt. Ltd.) at the end.
Public Company (सार्वजनिक कंपनी):
- Minimum members: 7 | Maximum members: No limit.
- No restriction on the transfer of shares.
- Can invite the general public to subscribe to shares/debentures.
- Must use the word 'Limited' (Ltd.) at the end.

Quick Comparison Table

Basis	Sole Proprietorship	Partnership	Joint Stock Company
Formation	Easiest (Minimal legal formalities)	Easy (Partnership Deed needed)	Difficult (Complex legal process)
Liability	Unlimited	Unlimited	Limited
Continuity	Unstable (Ends with owner)	Unstable (Affected by death/dispute)	Stable (Perpetual succession)
Membership	Only 1 person	Min: 2, Max: 50	Pvt: Min 2, Max 200<br>Public: Min 7, Max Infinite
Capital	Limited	Limited	Large amount (via shares)
Management	Sole proprietor	Partners jointly	Board of Directors

Forms of Business Organisations

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