Forms Of Business Organization
Every business entity has to select the form of business organization. Form of business organization depends on various factors like the degree of control, capital availability, size of the business organization etc.
FORMS OF BUSINESS ORGANISATION
(i) Sole Proprietorship
(ii) Hindu Undivided Family Business.
(v) Statutory Bodies and Corporations.
(vi) Co-Operatives, Societies and Trusts.
(vii) Limited Liability Partnership.
Sole Proprietorship is the oldest and the simplest form of business organization. Seprate Legal entity does not exist in sole proprietorship which means that person who owns the business and is personally responsible for its debts. Name of the business does not create any separate legal entity other than the owner of the business.
CHARACTERISTICS OF SOLE PROPRIETORSHIP:
• Single ownership
• No sharing of profit and loss
• One man’s capital
• One man’s control
• Less legal formalities
ADVANTAGES of SOLE PROPRIETORSHIP:
• Easy to form and wind up
• Direct motivation
• Quick decision and prompt action
• Better control
• Maintenance of business secrets
• Close personal relation
• Flexibility in operation
• Encourages self employment
DISADVANTAGES OF SOLE PROPRIETORSHIP:
• Limited capital
• Unlimited liability
• Lack of continuity
• Limited size
• Lack of managerial expertise
HINDU UNDIVIDED FAMILY (HUF)
Hindu Undivided Family is collective group of all persons lineally descended from a common ancestor and joint in property, food and worship. The HUF business is a form of organization which is found only in India. Affairs of HUF business are managed by the head of the family, who is known as the ‘KARTA’
CHARACTERISTICS OF HINDU UNDIVIDED FAMILY -
• It is governed by Hindu Law. It cannot enter into partnership agreement with others.
• There is no membership other than the members of the joint family All co-parceners have equal share in the profits of the business
• The management of a HUF is in the hands of the senior most family member who is known as the KARTA
• The liability of each member of the HUF is limited to the extent of his share in the business.
• The individual share of each co-parcener keeps on fluctuating
Partnership is an association of two or more individuals who agree to share the profits of a business which is managed and carried on either by all or by any, some of them acting for all. Each member of group is individually known as ‘partner’ and collectively the members are known as a ‘partnership firm’.
Company is an artificial person with perpetual succession, limited liability and common seal. It is a voluntary association formed by its members for earning profits. The common stock contributed is denoted in money and is the capital of the company.
These online MCQ mock tests and MCQ questions includes all main concepts of the chapter (Forms Of Business Organization) in CS Foundation Business Environment and Entrepreneurship computer based MCQ Exam.