Business Organizations: Forms, Characteristics, and Objectives

BBA II
(Sem III)
By
Smita D Dubal
Forms of business organization
:
1. Meaning and definition ,Types of business
2. Characteristics of Business Organization
3. Features of sole proprietorship, Joint Hindu Family &
co-operative society.
4. Features& types of partnership & joint stock company.
5. One person company, Producer Company and non
banking financial company as per companies act 2013.
 
Meaning
Business is any activity which is carried
out to make or earn profit.
Definition
A business (entity) is an organization or any other
entity engaged in commercial, professional, charitable
or industrial activities. It can be a for-profit entity or
a not-for-profit entity and may or may not have a
separate existence from the people/person controlling
it.
A business (activity) is a commercial activity which
involves providing goods or services with a primary
motive of earning profits
The business concept is the fundamental
idea behind the business. The business
model, plan, vision, and mission are
developed based on this concept.
Uber
, for example, was started on the
concept of aggregating taxi drivers and
providing their services on demand under
one brand. Every other business strategy was
developed based on this concept.
The business objective is what makes the
business go on and conduct its activities in a
long run.
According to the traditional concept, business
exists only to earn profits by providing the
goods and services to the customers.
According to the modern concept, the
underlying objective of every business is
customer satisfaction as this is what results in
most profits. If the customer is satisfied,
business excels.
1
. Economic activity          2. Buying and Selling
3. Continuous process           4. Profit Motive
5. Risk and Uncertainties
    Predictable factors are controllable to some
extent, such as:
a) Taxes
b) Change in the volume of expected sales
c) Cost of supplies and equipment
d) Overhead costs
e) Salaries
f) Cost of goods and services offered
Unpredictable factors include
:
a)
Changes in trends and tastes of customers.
b)
Impact of the local economy on customer
base.
c)
 Any unexpected action taken by your
competitors.
The calculation and management of the risk is
vital to ensure the success of a business firm.
Insurance and Risk management helps in
minimizing the risk associated with the
business
6. Creative and Dynamic          
7. Customer satisfaction
8. Social 
Activity                    
9. Optimum utilization
                                                          of resources:
10. 
Government control
Some important acts framed by the government
include:
i. The Competition Act, 2002
ii. Foreign Exchange Management Act, 1999
iii. The Environment Act, 1986
iv. Indian Companies Act, 1956
v. Consumer protection Act
Business Organization is one which performs
commercial activities for earning the profit.
It provides goods & services to customers as per
their needs. These have a well-defined structure
and works according to that. The size of the
business organization differs as per their objectives.
 It aims at achieving a healthy relationship between
employees, tasks, and various resources so that they
can work together to achieve common goals.
Meaning
A business enterprise is an institutional
arrangement to form any business
activity.
It is a one-man business and is owned by a single
person.
There is only one person to manage and run the
business.
It is very easy to set up and requires less cost
among all. It is suitable for small businesses setup.
It avoids the cost of creating a corporation
or partnership.
Here the owner faces unlimited liability. Creditors
can take personal assets of the owner if the
business does not pay debts.
It is the different form of business which exists
only in India.
 It is not legal in the rest of the world. It is run
and governed by the Hindu law.
 The eldest member of the family is head of a
business.
The head of the business is called ‘Karta’. He
manages all the finances of the business.
Family members are the co-partners of
business.
It is a business which is owned by two
or more persons. They together
contribute resources for the business.
The profit of the business is divided by
these partners.
Generally, in partnership, all partners
have unlimited liability.
They all are equally responsible for
business debts
It is a business which is run by a group of persons.
 It is operated by them for their mutual benefit.
These persons are called members of the business.
It may be corporate or in- corporated.
Its members join the business by their own choice.
Membership is open for all who have common
goals.
Minimum 10 members are required for this
business.
Profit of the business is divided among its
members.
It is a business which is owned together by its
shareholders.
Shareholders are the one which buys some stock in
the company.
Profit is provided to them as per their shareholding
These persons join the company as per their choice.
Finance of the company is provided by
shareholders.
These shareholders can transfer their ownership to
another person.
It is a business which sells goods for earning
money.
 It is run by two or more persons together.
The profit is also divided by these persons.
All its members are responsible for its debt and
operation.
There are certain which governs the working of
companies.
Every company has its own mission & objectives.
All its members work hard to achieve these goals.
Efficient Usage Of Resources
Better Communication
Easy Acquiring
Better Administration
Increase Productivity & Job Satisfaction
overall productivity at lower costs.
Better Working Relationship
Sole proprietorship means a business
owned, financed and controlled by a single
person who is recipient of all profit and
bearer of all risks.
It is SUITABLE IN AREAS OF
PERSONALISED SERVICE like beauty
parlor, hair cutting saloons & small scale
activities like retail shops.
Features
 
1. Single ownership
2. Control
3. No separate legal entity
 
4. Unlimited liability
5. No legal formalities
6. Sole risk bearer and profit recipient
Merits
 
 
1. Easy to start and close
2. Quick decision making
3. Sense of accomplishment
4. Unlimited liability
5. No legal formalities
.
6. Sole risk bearer and profit recipient
LIMITATIONS
 
1. Limited financial resources
2. Limited Managerial ability
3. Unlimited liability
4. Uncertain life
5. Limited scope for expansion
SUITABILITY
:
Sole trader ship is suitable-
• Where the personal attention to customer is
required as in tailoring, beauty parlor.
• Where goods are unstandardized like artistic
jewellery.
• Where modest capital and limited managerial
skills are required as in case of retail store
• Business where risk is not extensive i.e. lesser
fluctuation in price and demand i.e. stationery
shop.
It is owned by the members of undivided
joint Hindu family and managed by the
eldest member of the family known as
KARTA.
It is governed by the provisions of Hindu
law.
The basis of membership is birth in a
particular family
FEATURES
1. Formation 
2. Membership by birth –
There are two systems which govern membership
Dayabhaga System-
 It prevails in west Bengal and
allows both male and female member to co-parcencers.
Mitakshara System
-
 It prevails all over India except
West Bengal and allows only male members to be
coparceners
3. Liability
4. Continuity 
5. Minor members 
MERITS
1. Effective control
2. Continued business existence
3. Limited liability 
4. Secrecy 
5. Loyalty and Co-operation
LIMITATION
1. Limited capital
2. Unlimited liability of karta 
3. Dominance of karta
4. Hasty decisions
5. Limited managerial skills of karta
Meaning:
 
Partnership is a voluntary association of two
or more persons who agree to carry on some
business jointly and share its profits and
losses
.
FEATURES
1. Two or more persons
2. Agreement
3. Lawful business
4. Decision making & control 
5. Unlimited liability 
6. Mutual Agency 
7. Lack of continuity 
MERITS
1. Ease of formation & closure 
2. Larger financial resources 
3. Balanced Decisions 
4. Sharing of Risks 
5. Secrecy 
LIMITATIONS
1. Limited resources 
2. Unlimited liability
3. Lack of continuity 
4. Lack of public confidence 
TYPES OF PARTNERS
1. General / Active Partner
2. Sleeping or Dormant Partner 
3. Secret Partner 
4. Nominal Partner 
5. Partner by Estoppels
6. Partner by holding out 
7. Minor as a Partner
Types of Partnership
A. Classification on the Basics of
Duration
Partnership at will
Particular Partnership
B. Classification on the basis of Liability
General partnership
Limited Partnership
The written agreement on a stamped paper
which specifies the terms and conditions of
partnership is called the partnership deed.
It generally includes the following aspects –
• Name of the firm
• Location / Address of the firm
• Duration of business.
• Investment made by each partner.
• Profit sharing ratio of the partners
Cont…
   
• Terms relating to salaries, drawing, interest
on capital and interest on drawing of
partners.
• Duties & obligations of partners.
• Terms governing admission, retirement &
expulsion of a partner, preparation on of
accounts     & their auditing.
• Method of solving dispute
Registration is not compulsory it is optional.
But it is always beneficial to get the firm
registered. The consequences of non-
registration of a firm are as follows:
 A partner of an unregistered firm cannot file
suit against the firm or the partner.
The firm cannot file a suit against third party.
The firm cannot file a case against its partner.
A co-operative society is a voluntary
association of persons of moderate means
who unite together to protect & promote
their common economic interests.
FEATURES
1. Voluntary association
2. Legal status
3. Limited liability
4. Democratic control
5. Service motive
6. Bound by govt.’s rules
7. Distribution of surplus
MERITS
1. Excise of formation
2. Producer’s Co-operative Society 
3. Marketing Co-operative Society 
4. Farmer’s Co-operative Society 
5. Credit co-operative Society 
6. Co-operative Housing Society 
Joint stock company is a voluntary
association of persons for profit, having
a capital  divided into transferable shares,
the ownership of which is the condition of
membership.
FEATURES
1. Incorporated association 
2. Separate Legal Existence 
3. Perpetual Existence 
4. Limited Liability 
5. Separation of ownership and control 
MERITS
1. Limited Liability 
2. Transfer of Interest 
3. Perpetual Existence 
4. Scope for expansion 
5. Professional management 
LIMITATIONS
1. Legal formalities 
2. Lack of secrecy 
3. Lack of Motivation 
4. Delay in decision making 
5. Oligarchic management 
On the basis of ownership, companies can
be divided into two categories
Private & Public.
       Private  Co.
It has minimum 2 and
maximum 50 members.
It cannot invite general
public to buy its shares
and debentures.
There are certain
restrictions on transfer
of its shares.
It can commence
business after
incorporation.
           Public Co.
It has minimum 7 and
maximum unlimited.
It invites general public to
buy its shares and
debentures.
Its shares are freely
transferable.
It can commence business
after obtaining certificate of
commencement of
business.
        Private  Co.
It has to write Private
Ltd. After its name
Ex- Tata Sons, Citi
Bank, Hyundai Motor
India.
In its minimum
capital required is
one lakh.
              Public Co.
It has to write only
limited after its name
Ex- Reliance
Industries Ltd.,
Wipro Ltd. ,
Raymond’s Ltd.
In its minimum
capital required is
five lakhs.
Formation of a company means bringing a
company into existence and starting its
business. The steps involved in the formation of
a company are:
(i) Promotion
(ii) Incorporation
(iii)Capital subscription
(iv) Commencement of business.
A private company has to undergo only first two
steps but a public company has to undergo all
the four stages.
Promotion means conceiving a business
opportunity and taking an initiative to form a
company.
Step in Promotion:
1. Identification of Business Opportunity 
production of new product or service.
2. Feasibility Studies
detailed studies of technical, Financial,
Economic feasibility of a business.
Cont…
3. Name Approval
4. Fixing up signatories to the Memorandum of
Association
5. Appointment of professional:
 Promoters
appoint merchant bankers, auditors 
5.
Appointment of professional:
 Promoters
appoint merchant bankers, auditors etc.
6. Preparation of necessary documents:
 The
promoters prepare certain legal documents such as
memorandum of Association, Articles of
Association which have to be submitted to the
Registrar of the companies. etc.
Incorporation means registration of the company as body
corporate under the companies Act 1956 and receiving
certificate of Incorporation.
Steps for Incorporation
1. Application for incorporation: 
Promoters make an
application for the incorporation of the company to the
Registrar of companies.
2. Filing of necessary documents: 
Promoters files the
following documents:
     (i) Memorandum of Association.
(ii) Articles of Association.
(iii) Statement of Authorized Capital
.
   (iv) Consent of proposed director.
(v) Agreement with proposed managing director.
(vi) Statutory declaration 
3. Payment of
fees:
 Along with filing of above documents,
registration fee has to be deposited which depends
on amount of the authorized capital.
4. Registration:
 The Registrar verifies all the
document submitted. If he is satisfied then he
enters the name of the company in his Register.
5. Certificate of Incorporation:
 After entering the
name of the company in the register. The Registrar
issues a Certificate of Incorporation. This is called
the birth certificate of the company
A public company can raise funds from the public by
issuing shares and Debentures. For this it has to
issue prospectus and undergo various other
formalities:
Step required for raising funds from public
:
1. SEBI Approval:
 SEBI regulates the capital market
of India. A public company is required to take
approval from SEBI.
… Cont
2. Filing of Prospectus:
 Prospectus means any
documents which invites offers from the public to
purchase share and Debenture of the company.
3. Appointment of bankers, brokers,
underwriters:
 Banker of the company receive the
application money. Brokers encourage the public
to apply for the shares, underwriters are the person
who undertake to buy the shares if these are not
subscribed by the public. They receive a
commission for underwriting.
4. Minimum subscription:
 According to the SEBI
guide lines minimum subscription is 90% of the
issue amount. If minimum subscription is not
received then the allotment cannot be made and the
application money must be returned to the
applicants within 30 days.
5. Application to Stock Exchange:
 It is necessary for
a public company to list their shares in the stock
exchange therefore the promoters apply in stock
exchange to list company shares.
6. Allotment of Shares:
 Allotment of shares means
acceptance of share applied. Allotment letters are
issued to the shareholders. The name and address of
the shareholders submitted to the Registrar.
To commence business a public company has to obtain a
certificate of commencement of Business. For this the
following documents have to be filled with the
registrar of companies.
 1. A declaration that 90% of the issued amount has
been subscribed.
2. A declaration that all directors have paid in cash in
respect of allotment of shares made to them.
3. A statutory declaration that the above requirements
have been completed and must be signed by the
director of company.
Important documents used in the formation of company:
1. Memorandum of Association 
– It is the principal
document of a company. No company can be registered
without a memorandum of association and that is why it is
sometimes called a life giving document.
Contents of Memorandum of Association:
1. Name clauses 
– This clause contains the name of the
company
2. Situation clauses 
– This clause contains the name of the
state in which the registered office of the company is to be
situated.
3. Object clause 
– This clause defines the objective with
which the company is formed.
4. Liability Clauses 
– This clause limits the liability of the
members to the amount unpaid on the shares held by them.
5. Capital clause 
– This clause specifies the maximum capital
which the company will be authorized to raise tough the
issue of shares called authorized capital.
Important documents used in the formation of company
2
. Articles of Association
:
The articles of Association are the rules for the internal
management of the affairs of a company the articles defines the
duties, rights and powers of the officers and the board of
directors.
Contents of the Article:
1. The amount of share capital and different classes of shares.
2. Rights of each class of shareholders.
3. Procedure for making allotment of shares.
4. Procedure for issuing share certificates.
5. Procedure for forfeiture and reissue of forfeited shares.
6. Rules regarding casting of votes and proxy voting
7. Procedure for selection and removal of directors
8. Dividend declaration and payment related rules
9. Procedure for capital readjustment
10. Procedure regarding winding up of the company.
CHOICE OF FORM OF BUSINESS ORGANISATION
The following factors are important for taking decision about
form of organization:
1. Cost and ease in setting up the organization:
 Sole
proprietorship is least expensive and can be formed without
any legal formalities to be fulfilled. Company is also
expensive with lot of legal formalities.
2. Capital consideration:
 Business requiring less amount of
finance prefer sole proprietorship & partnership form,
where as business activities requiring huge financial
resonances prefer company form.
3. Nature of business:
 If the work requires personal
attention such as tailoring unit, cutting saloon, it is
generally setup as a sole proprietorship. Unit engaged in
large scale manufacturing are more likely to be organized in
company form.
4. Degree of control desired:
 A person who desires
full and exclusive control over business prefers
proprietorship rather than partnership or company
because control has to be shared in these cases.
5. Liability or Degree of Risk:
 Projects which are
not very risky can be organized in the form of sole
proprietorship partnership whereas the risky
ventures should be done in company form of
organization because the liability of shareholders
is limited.
One Person Company concept led to the
recognition of a completely new way of starting
businesses that accorded flexibility which a
company form of entity can offer, while also
providing the protection of limited liability that
sole proprietorship or partnerships  lacked.
Definition
Section 2(62) of Companies Act defines
a one-person company as a company that has only
one person as to its member. Furthermore,
members of a company are nothing but
subscribers to its memorandum of association, or
its shareholders. So, an OPC is effectively a
company that has only one shareholder as its
member.
Difference between OPCs and Sole Proprietorships
A sole proprietorship form of business might seem very similar
to one-person companies because they both involve a single
person owning the business, but they’re actually exist some
differences between them.
The main difference between the two is the nature of
the 
liabilities
 they carry. Since an OPC is a separate legal
entity distinguished from its promoter, it has its own assets
and liabilities. The promoter is not personally liable to repay
the debts of the company.
On the other hand, sole proprietorships and their proprietors
are the same persons. So, the law allows attachment and sale
of promoter’s own assets in case of non-fulfilment of the
business’ liabilities.
Features of  One Person Company
i.
Private company
Section 3(1)(c) of the Companies
Act says that a single person can form a company for
any lawful purpose. It further describes OPCs as
private companies.
ii.
Single-member
OPCs can have only one member
or shareholder, unlike other private companies.
iii.
Nominee
:
 A unique feature of OPCs that separates
it from other kinds of companies is that the sole
member of the company has to mention a nominee
while registering the company.
iv.
No perpetual succession
:
 Since there is
only one member in an OPC, his death will result in
the nominee choosing or rejecting to become its sole
member. This does not happen in other companies as
they follow the concept of perpetual succession.
v.
Minimum one director
:
 OPCs need to have
minimum one person (the member) as director. They
can have a maximum of 15 directors.
vi.
No minimum paid-up share capital
:
 Companies
Act, 2013 has not prescribed any amount as minimum
paid-up capital for OPCs.
vii.
Special privileges
:
 OPCs enjoy several privileges and
exemptions under the Companies Act that other
kinds of companies do not possess.
Formation of One Person Companies
A single person can form an OPC by subscribing his name
to the memorandum of association and fulfilling other
requirements prescribed by the Companies Act, 2013.
Such memorandum must state details of a nominee who
shall become the company’s sole member in case the
original member dies or becomes incapable of entering
into contractual relations.
This memorandum and the nominee’s consent to his
nomination should be filed to the Registrar of Companies
along with an application of registration.
 Such nominee can withdraw his name at any point in
time by submission of requisite applications to the
Registrar. His nomination can also later be canceled by
the member.
Membership in One Person Companies
Only natural persons who are Indian citizens and
residents are eligible to form a one-person company in
India.
The same condition applies to nominees of OPCs.
Further, such a natural person cannot be a member or
nominee of more than one OPC at any point in time.
It is important to note that only natural persons can
become members of OPCs.
This does not happen in the case of companies wherein
companies themselves can own shares and be members.
Further, the law prohibits minors from being members
or nominees of OPCs.
Conversion of OPCs into other Companies
Rules regulating the formation of one-person
companies expressly restrict the conversion of
OPCs into Section 8 companies, i.e. companies that
have charitable objectives.
OPCs also cannot voluntarily convert into other
kinds of companies until the expiry of two years
from the date of their incorporation
.
A producer company can be defined as a legally
recognized body of farmers/ agriculturists with the
aim to improve the standard of their living, and
ensure a good status of their available support,
incomes and profitability.
Under Companies Act 1956, a Producer Company
can be formed by 10 individuals (or more) or 2
institutions (or more) or by a combination of both
(10 individuals and 2 institutions) having their
business objective
Their business objective as one of the following:
Procurement
Production
Harvesting
Grading
Pooling
Handling
Marketing
Selling, or
Export
The main objective of the producer company is to facilitate
the formation of co-operative business as companies and
to make it possible to convert existing co-operative
business into companies.
The objects given under section 581B are as follows:
“The objects of the Producer Company shall relate to
all or any of the following matters, namely: (as given
in the law)
Production, harvesting, procurement, grading, pooling,
handling, marketing, selling, export of
primary production of the Members or import of goods or
services for their benefit, provided that the Producer
Company may carry on any of the activities specified in
this clause either by itself or through other institution.
Processing including preserving, drying, distilling,
brewing, vinting, canning, and packaging of the
produce of its Members
Manufacture, sale or supply of machinery,
equipment or consumables mainly to its Members.
Providing education on the mutual assistance
principles, to its Members and others.
Rendering technical services, consultancy services,
training, research and development and all other
activities for the promotion of the interests of its
Members.
Generation, transmission, and distribution of
power, revitalization of land and water resources,
their use, conservation and communication
relatable to primary produce.
Insurance of producers or their primary produce.
Promoting techniques of mutuality and mutual
assistance.
Welfare measures or facilities for the benefit of
Members as may be decided by the Board.
Pre-Incorporation Checklist
Any 10 or more producers (Individuals) can join together to
form a production company but there is no upper limit on
the number of members.
Or, any 2 or more producer institutions can form a
producer company.
A minimum capital of Rs. 500,000 is required to
incorporate a producer company.
There should be minimum 5 directors (maximum of 15) in
a producer company.
It can never be converted into a public company however it
can be converted into a multi-state co-operative society.
 
Registration Procedure
The process of registering a Producer Company is similar to that
of a Private Limited Company.
  Digital Signature (DSC) and Director Identification Number
(DIN) must be obtained first for the proposed first Directors of
the company.
Once, Digital Signature (DSC) and Director Identification
Number (DIN) are obtained, an application for name reservation
is to be filed with the relevant Registrar of Companies (ROC).
There is a requirement under the Act that the name of a producer
company must end with the words “Producer Limited Company”.
Once, the suggested name is approved by the Registrar of
Companies (ROC), an application for incorporation is to be filed
in the prescribed format for the incorporation of the Producer
Company.
Once the Registrar is satisfied with the application and the
required documents filed for incorporation of Producer Company,
he will approve the same and issue Certificate of Incorporation.
Benefits for Producer Companies
following are the benefits enjoyed by a Producer Company
:-
The members of the producer company initially will
receive the value for the produce pooled and supplied as
determined by the directors. This amount will be given
out later in the form of cash/ kind/ equity shares.
The members of the producer company will be entitled
to get bonus shares in the same proportion to the shares
held by them.
The surplus (after providing provision for payment of
limited return and reserves) may be given as patronage
bonus* to the members of the producer company.
Loans and Investments
As mentioned above the Producer Company consist of
individuals who are primary producers, and thus, are in
need of financial support from time to time. Hence, a
special provision under the companies acts 1956 was passed
for giving loans to producer members. A Producer
Company can provide financial assistance to its members
through:-
Credit facility
 : This is available to any member for a
period not exceeding six months (such facility must be in
connection with the business of the Company).
Loans and advances
:
 These are provided to the producer
member against security, repayable within a period not
exceeding seven years from the date of disbursement of
such loans or advances.
NABARD Loan
:
 NABARD provides support and financial
assistance to meet the needs of Producer Companies. In
2011, NABARD set up a Rs. 50 crore Producer Organization
Development Fund (PODF), out of its operating surplus
.
A Non – Banking Financial Corporation is a company
incorporated under the Companies Act 2013 or 1956.
According to section 45-I (c) of the RBI Act, a Non –
Banking Company carrying on the business of a financial
institution will be an NBFC.
It further states that the NBFC must be engaged in the
business of Loans and Advances, Acquisition of stocks,
equities, debt etc issued by the government or any local
authority or other marketable securities.
 A non-banking institution which is a company and has
principal business of receiving deposits under any scheme
or arrangement by any mode, is also a non-banking
financial company (Residuary non-banking company).
The NBFC business does not include business
whose principal business is the following:
– Agricultural Activity
– Industrial Activity
– Purchase or sale of any goods excluding
securities
– Sale/purchase/construction of any immovable
property
– Providing of any services
The NBFCs are categorised on the basis of liabilities and
activity.
Are all NBFCs required to be registered with RBI?
The following NBFCs are not required to obtain any
registration with the Reserve Bank of India under the idea
that they are regulated by other regulators:
1.
Core Investment Companies – (assets are less than 100
crore or public funds not taken)
2.
Merchant Banking Companies
3.
Companies which are engaged in the business of stock-
broking
4.
Housing Finance Companies
5.
Companies engaged in the business of Venture Capital.
6.
Insurance companies holding a certificate of registration
issued by IRDA.
7.
Chit Fund Companies as defined in the Sec 2 clause (b)
of the Chit Fund Act, 1982
8.
Nidhi Companies as notified under Section 620(A) of
the Companies Act 1956
How do you incorporate an NBFC?
The procedure to incorporate an NBFC is:
1.
A company should first be registered under the
Companies Act 2013 or should already be registered
under Companies Act 1956 as either a Private Limited
or a Public Limited Company.
2.
The minimum net owned funds of the Company
should be Rs. 2 Crore.
3.
1/3rd of the Directors must possess finance experience.
4.
The CIBIL records of the Company should be clean.
5.
The company must have a detailed business plan for
five years.
6.
The company must comply with the requirements for
capital compliances and FEMA.
7.
After all of the above conditions have been satisfied
the online application on the website of RBI should be
filled and submitted along with the requisite
documents.
8.
A CARN Number will be generated.
9.
A Hard copy of the application also has to be sent to
the regional branch of the Reserve Bank of India.
10.
After the application is properly scrutinized, the
License will be given to the Company.
What are the guidelines that an NBFC must follow?
Once the Company gets a valid license it has to adhere to
the following guidelines:
1.
They cannot receive deposits which are payable on
demand.
2.
The public Deposits which the company can take
should be for a minimum time period of 12 months and
a maximum time period of 60 months.
3.
The interest charged by the Company cannot be more
than the ceiling prescribed by the Reserve Bank of
India from time to time.
4.
The repayment of any amount so taken by the
Company will not be guaranteed by the Reserve Bank
of India.
5.
All the information about the company as well as any
change in the composition of the Company has to be
furnished to the Reserve Bank of India.
6.
The deposits taken by the Public will be unsecured.
7.
     The Company has to submit its audited balance
sheet every year.
8.
A statutory return on the deposits taken by the
company has to be furnished in the form NBS – 1
every year.
9.
A Quarterly Return on the liquid assets of the
company has to be furnished.
10.
A certificate from the auditors had to be taken
stating that the company is in a position to pay
back all the deposits or money taken from the
Public.
11.
A half-yearly Asset Liability Management (ALM)
return has to be given by the company which has a
Public Deposit of Rs. 20 Crore and above or has
assets worth Rs. 100 Crore and above.
12.
The credit rating has to be taken every 6 months
and submitted to the RBI.
13.
A minimum level of 15% of the Public Deposits
has to be maintained by the Company in Liquid
Assets.
Slide Note
Embed
Share

Business organizations play a crucial role in the economy. They encompass various forms such as sole proprietorship, partnership, company, etc., each with its own set of characteristics and objectives. Businesses operate with the primary motive of earning profit, while also focusing on customer satisfaction and continuous improvement. Risk and uncertainties are inherent in business activities, but certain factors can be controlled. Understanding the concept and importance of different forms of business organizations is essential for aspiring entrepreneurs and business professionals.

  • Business Organizations
  • Characteristics
  • Objectives
  • Sole Proprietorship
  • Partnerships

Uploaded on Sep 20, 2024 | 0 Views


Download Presentation

Please find below an Image/Link to download the presentation.

The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.

E N D

Presentation Transcript


  1. Unit I Forms of Business Organizations BBA II (Sem III) By Smita D Dubal

  2. Contents Forms of business organization: 1. Meaning and definition ,Types of business 2. Characteristics of Business Organization 3. Features of sole proprietorship, Joint Hindu Family & co-operative society. 4. Features& types of partnership & joint stock company. 5. One person company, Producer Company and non banking financial company as per companies act 2013.

  3. Business Meaning Business is any activity which is carried out to make or earn profit.

  4. Business Definition A business (entity) is an organization or any other entity engaged in commercial, professional, charitable or industrial activities. It can be a for-profit entity or a not-for-profit entity and may or may not have a separate existence from the people/person controlling it. A business (activity) is a commercial activity which involves providing goods or services with a primary motive of earning profits

  5. Concept Of Business The business concept is the fundamental idea behind the business. The business model, plan, vision, and mission are developed based on this concept. Uber, for example, was started on the concept of aggregating taxi drivers and providing their services on demand under one brand. Every other business strategy was developed based on this concept.

  6. Objective Of The Business The business objective is what makes the business go on and conduct its activities in a long run. According to the traditional concept, business exists only to earn profits by providing the goods and services to the customers. According to the modern concept, the underlying objective of every business is customer satisfaction as this is what results in most profits. If the customer is satisfied, business excels.

  7. Important Characteristics of a Business 1. Economic activity 2. Buying and Selling Buying and Selling Business 3. Continuous process 4. Profit Motive Continuous process Profit Motive

  8. Important Characteristics of a Business 5. Risk and Uncertainties Predictable factors are controllable to some extent, such as: a) Taxes b) Change in the volume of expected sales c) Cost of supplies and equipment d) Overhead costs e) Salaries f) Cost of goods and services offered

  9. Important Characteristics of a Business Unpredictable factors include: a) Changes in trends and tastes of customers. b) Impact of the local economy on customer base. c) Any unexpected action taken by your competitors. The calculation and management of the risk is vital to ensure the success of a business firm. Insurance and Risk management helps in minimizing the risk associated with the business

  10. Important Characteristics of a Business 6. Creative and Dynamic 7. Customer satisfaction Creative and Dynamic Customer satisfaction 8. Social Activity 9. Optimum utilization of resources: Social Activity Optimum utilisation of resources

  11. Important Characteristics of a Business 10. Government control Some important acts framed by the government include: i. The Competition Act, 2002 ii. Foreign Exchange Management Act, 1999 iii. The Environment Act, 1986 iv. Indian Companies Act, 1956 v. Consumer protection Act

  12. Business Organisation Business Organization is one which performs commercial activities for earning the profit. It provides goods & services to customers as per their needs. These have a well-defined structure and works according to that. The size of the business organization differs as per their objectives. It aims at achieving a healthy relationship between employees, tasks, and various resources so that they can work together to achieve common goals.

  13. Forms of Business Organisation Meaning A business enterprise is an institutional arrangement to form any business activity.

  14. Sole Proprietorship Sole Proprietorship It is a one-man business and is owned by a single person. There is only one person to manage and run the business. It is very easy to set up and requires less cost among all. It is suitable for small businesses setup. It avoids the cost of creating a corporation or partnership. Here the owner faces unlimited liability. Creditors can take personal assets of the owner if the business does not pay debts.

  15. Joint Hindu Family Business It is the different form of business which exists only in India. It is not legal in the rest of the world. It is run and governed by the Hindu law. The eldest member of the family is head of a business. The head of the business is called Karta . He manages all the finances of the business. Family members are the co-partners of business.

  16. Partnership It is a business which is owned by two or more persons. They together contribute resources for the business. The profit of the business is divided by these partners. Generally, in partnership, all partners have unlimited liability. They all are equally responsible for business debts

  17. Co-Operative Society It is a business which is run by a group of persons. It is operated by them for their mutual benefit. These persons are called members of the business. It may be corporate or in- corporated. Its members join the business by their own choice. Membership is open for all who have common goals. Minimum 10 members are required for this business. Profit of the business is divided among its members.

  18. Joint-Stock Company It is a business which is owned together by its shareholders. Shareholders are the one which buys some stock in the company. Profit is provided to them as per their shareholding These persons join the company as per their choice. Finance of the company is provided by shareholders. These shareholders can transfer their ownership to another person.

  19. Company It is a business which sells goods for earning money. It is run by two or more persons together. The profit is also divided by these persons. All its members are responsible for its debt and operation. There are certain which governs the working of companies. Every company has its own mission & objectives. All its members work hard to achieve these goals.

  20. Characteristics of Business Characteristics of Business Organisation Organisation Efficient Usage Of Resources Better Communication Easy Acquiring Better Administration Increase Productivity & Job Satisfaction overall productivity at lower costs. Better Working Relationship

  21. Sole Proprietorship Sole proprietorship means a business owned, financed and controlled by a single person who is recipient of all profit and bearer of all risks. It is SUITABLE IN AREAS OF PERSONALISED SERVICE like beauty parlor, hair cutting saloons & small scale activities like retail shops.

  22. Sole Proprietorship Features 1. Single ownership 2. Control 3. No separate legal entity 4. Unlimited liability 5. No legal formalities 6. Sole risk bearer and profit recipient

  23. Sole Proprietorship Merits 1. Easy to start and close 2. Quick decision making 3. Sense of accomplishment 4. Unlimited liability 5. No legal formalities. 6. Sole risk bearer and profit recipient

  24. Sole Proprietorship LIMITATIONS 1. Limited financial resources 2. Limited Managerial ability 3. Unlimited liability 4. Uncertain life 5. Limited scope for expansion

  25. Sole Proprietorship SUITABILITY: Sole trader ship is suitable- Where the personal attention to customer is required as in tailoring, beauty parlor. Where goods are unstandardized like artistic jewellery. Where modest capital and limited managerial skills are required as in case of retail store Business where risk is not extensive i.e. lesser fluctuation in price and demand i.e. stationery shop.

  26. JOINT HINDU FAMILY BUSINESS It is owned by the members of undivided joint Hindu family and managed by the eldest member of the family known as KARTA. It is governed by the provisions of Hindu law. The basis of membership is birth in a particular family

  27. JOINT HINDU FAMILY BUSINESS FEATURES 1. Formation 2. Membership by birth There are two systems which govern membership Dayabhaga System- It prevails in west Bengal and allows both male and female member to co-parcencers. Mitakshara System- It prevails all over India except West Bengal and allows only male members to be coparceners 3. Liability 4. Continuity 5. Minor members

  28. JOINT HINDU FAMILY BUSINESS MERITS 1. Effective control 2. Continued business existence 3. Limited liability 4. Secrecy 5. Loyalty and Co-operation

  29. JOINT HINDU FAMILY BUSINESS LIMITATION 1. Limited capital 2. Unlimited liability of karta 3. Dominance of karta 4. Hasty decisions 5. Limited managerial skills of karta

  30. PARTNERSHIP Meaning: Partnership is a voluntary association of two or more persons who agree to carry on some business jointly and share its profits and losses.

  31. PARTNERSHIP FEATURES 1. Two or more persons 2. Agreement 3. Lawful business 4. Decision making & control 5. Unlimited liability 6. Mutual Agency 7. Lack of continuity

  32. PARTNERSHIP MERITS 1. Ease of formation & closure 2. Larger financial resources 3. Balanced Decisions 4. Sharing of Risks 5. Secrecy

  33. PARTNERSHIP LIMITATIONS 1. Limited resources 2. Unlimited liability 3. Lack of continuity 4. Lack of public confidence

  34. PARTNERSHIP TYPES OF PARTNERS 1. General / Active Partner 2. Sleeping or Dormant Partner 3. Secret Partner 4. Nominal Partner 5. Partner by Estoppels 6. Partner by holding out 7. Minor as a Partner

  35. PARTNERSHIP Types of Partnership A. Classification on the Basics of Duration Partnership at will Particular Partnership B. Classification on the basis of Liability General partnership Limited Partnership

  36. PARTNERSHIP DEED The written agreement on a stamped paper which specifies the terms and conditions of partnership is called the partnership deed. It generally includes the following aspects Name of the firm Location / Address of the firm Duration of business. Investment made by each partner. Profit sharing ratio of the partners Cont

  37. .Cont Terms relating to salaries, drawing, interest on capital and interest on drawing of partners. Duties & obligations of partners. Terms governing admission, retirement & expulsion of a partner, preparation on of accounts & their auditing. Method of solving dispute

  38. REGISTRATION OF PARTNERSHIP Registration is not compulsory it is optional. But it is always beneficial to get the firm registered. The consequences of non- registration of a firm are as follows: A partner of an unregistered firm cannot file suit against the firm or the partner. The firm cannot file a suit against third party. The firm cannot file a case against its partner.

  39. Co-operative Society A co-operative society is a voluntary association of persons of moderate means who unite together to protect & promote their common economic interests.

  40. Co-operative Society FEATURES 1. Voluntary association 2. Legal status 3. Limited liability 4. Democratic control 5. Service motive 6. Bound by govt. s rules 7. Distribution of surplus

  41. Co-operative Society MERITS 1. Excise of formation 2. Producer s Co-operative Society 3. Marketing Co-operative Society 4. Farmer s Co-operative Society 5. Credit co-operative Society 6. Co-operative Housing Society

  42. JOINT STOCK COMPANY Joint stock company is a voluntary association of persons for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership.

  43. JOINT STOCK COMPANY FEATURES 1. Incorporated association 2. Separate Legal Existence 3. Perpetual Existence 4. Limited Liability 5. Separation of ownership and control

  44. JOINT STOCK COMPANY MERITS 1. Limited Liability 2. Transfer of Interest 3. Perpetual Existence 4. Scope for expansion 5. Professional management

  45. JOINT STOCK COMPANY LIMITATIONS 1. Legal formalities 2. Lack of secrecy 3. Lack of Motivation 4. Delay in decision making 5. Oligarchic management

  46. TYPES OF COMPANIES On the basis of ownership, companies can be divided into two categories Private & Public.

  47. Private Co. It has minimum 2 and maximum 50 members. It cannot invite general public to buy its shares and debentures. There are certain restrictions on transfer of its shares. It can commence business after incorporation. Public Co. It has minimum 7 and maximum unlimited. It invites general public to buy its shares and debentures. Its shares are freely transferable. It can commence business after obtaining certificate of commencement of business.

More Related Content

giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#