class -11 /business studies /chapter -2/form of business organisation/full chapter /one shot

class -11 /business studies /chapter -2/form of business organisation/full chapter /one shot notes Chapter 2: Forms of Business Organisation 1. Sole Proprietorship Meaning A business owned, managed, and controlled by one person. Features Single owner Easy to start and close Unlimited liability Sole risk bearer Full control No separate legal entity Merits Quick decision-making Secrecy maintained Direct motivation Low cost of formation Limitations Limited resources Unlimited liability Limited managerial ability Limited life Examples Local grocery shop Tailor shop Beauty salon 2. Joint Hindu Family Business (JHFB) Meaning A business owned and operated by members of a Hindu Undivided Family (HUF). Features Membership by birth Controlled by Karta (head of family) Governed by Hindu Succession Act Limited liability of members except Karta Continuity of business Merits Stability Quick decisions Member loyalty Limited liability for members Limitations Limited capital Karta's unlimited liability Dominance of Karta Limited managerial skills Important Term Karta – The eldest member who manages the business. 3. Partnership Meaning Partnership is an association of two or more persons who agree to carry on a business and share profits and losses. Definition According to 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 one of them acting for all. Features Minimum 2 partners Agreement between partners Sharing of profits and losses Mutual agency Unlimited liability Lawful business Types of Partners On the Basis of Liability Active Partner Sleeping (Dormant) Partner Secret Partner Nominal Partner Partner by Estoppel Partner by Holding Out Merits More capital Better management Shared risk Flexibility Limitations Unlimited liability Possibility of conflicts Limited resources Lack of continuity Partnership Deed A written agreement containing: Name of firm Capital contribution Profit-sharing ratio Duties of partners Salary/commission Rules for admission and retirement 4. Cooperative Society Meaning A voluntary association formed to promote the economic interests of its members. Motto "Each for all and all for each." Features Voluntary membership Separate legal entity Democratic management Service motive Limited liability Registration compulsory Merits Equality in voting Limited liability Stable existence Government support Limitations Limited resources Lack of secrecy Government control Inefficient management Types of Cooperative Societies Consumers' Cooperative Society Producers' Cooperative Society Marketing Cooperative Society Farmers' Cooperative Society Credit Cooperative Society Cooperative Housing Society 5. Company Meaning A company is an artificial person created by law with a separate legal existence. Features Separate legal entity Perpetual succession Limited liability Common seal Transferability of shares Artificial person Types of Companies A. Private Company Features Minimum 2 members Maximum 200 members Restricts transfer of shares Cannot invite public for subscription Merits Less legal formalities Greater control Secrecy Limitations Limited capital Restricted growth B. Public Company Features Minimum 7 members No maximum limit Shares freely transferable Can invite public to subscribe shares Merits Huge capital Better growth opportunities Limited liability Limitations Complex formation Lack of secrecy More regulations 6. Choice of Form of Business Organisation Factors affecting choice: Cost and ease of formation Liability Continuity Capital requirements Control Management ability Government regulations Flexibility Degree of risk Expansion plans Quick Comparison Table Basis Sole Proprietorship Partnership Cooperative Society Company Owners 1 2 or more Members Shareholders Liability Unlimited Unlimited Limited Limited Legal Status No separate entity No separate entity Separate entity Separate entity Continuity Uncertain Uncertain Stable Perpetual Formation Very easy Easy Moderate Difficult Capital Limited More Moderate Large