Chapter 2 Flashcards
Types of business organisations
- sole propreitorship
- partnership
- joint stock company
- joint hindu family
- cooperative stores
Define sole propreitorship
A sole propreitor ship is a form of business organisation which
- owned, managed and controlled by an individual
- who is the receipient of all profits and bearer of risks
Features of sole propreitorship - control in the hands of an individual
Since there is only one person working and controlling the business he gets to take all the decisions
Features of sole propreitorship - the sole risk bearer and profit receipient
the propreitor bears all the risks of a certain decision when he takes the decision and bears the outcome wheather it is a loss or profit.
Features of sole propreitorship (6)
- control in the hands of an individual
- the sole risk bearer and profit receipient
- no seperate entity
- lack of business continuity
- easy formation and closure
- unlimitted liability
Features of sole propreitorship - no seperate entity
Business and owner are the same and are not treated as different , so the business debts and profits are also the owners
Features of sole propreitorship - lack of business continuity
There is no law regulating sole propreitorships so a sole propreitorship can be opened anytime and closed anytime and also if the owner goes insane or dies and if there is no one to continue the business then the business will be closed down
Features of sole propreitorship - easy formation and closure
There is no law regulating sole propreitorships so a sole propreitorship can be opened anytime and closed anytime
Features of sole propreitorship - unlimitted liability
Since the owner and the business are treated as one the liabilities of the business is expected to be repaid by the owner if the businesses assets sold off are not enough
Merits of sole propreitorship (5)
- Quick decision making
- confidential information
- Direct incentive
- sense of accomplishment
- ease of formation and closure
Merits of sole propreitorship - Quick decision making
Since the propreitor is the only owner he does not need to consult anyone to take the decisions and thus can make the decisions earlier and faster
Merits of sole propreitorship - confidential information
Like in joint stock company sole propreitors do not need to publish their yearly profit and loss statement and others to the public so they can keep their information confidential to the owner and the accountant
Merits of sole propreitorship - Direct incentive
The owner will get all the profits to himself since he is the only owner
Merits of sole propreitorship - sense of accomplishment
Since the owner takes the decisions while bearing the risks he gets a sense of accomplishment when he gets all the profits to himself
Merits of sole propreitorship - ease of formation and closure
There isnt a law or act to regulate the sole propreitorship firms so anyone can open and close a sole propreitorship firm with ease and minimum requirements
- some cases might require license in case of food shops
Limitations of sole propreitorship (4)
- Limitted resources
- limitted manegerial skill
- limitted life of business concern
- unlimitted liability
Limitations of sole propreitorship - Limitted resources
A sole propreitorship might not have as many resources as a partnership or joint stock company as it is only one person contributing capital and the borrowing capabilities are also limitted
Limitations of sole propreitorship - limitted manegerial skill
since there is only one person taking all the decisions he might not have all the skills like marketing advertising finance and all other aspects
Limitations of sole propreitorship - limitted life of business concern
If something happens to the owner like death or insanity and no one willing to take over his business the business will be closed down
Limitations of sole propreitorship - unlimitted liability
The owner and business are considered same so the owner might have to cover for the losses of the business with his own personal assets
Number of features , merits and de merits of sole propreitorship
Features (6)
Merits (5)
De merits (4)
Define joint hindu family
Joint hindu family is a form of organisation which is governed by the hindu law where in the business is owned and carried on by the members of the hindu undivided family
Points about joint hindu family (7)
- Joint hindu family only exists in india
- It is governed by the hindu law
- basis of membership in the business is by birth into the family
- Three successive generations can be members in the business
- Managaed and controlled and all decisions taken by the oldest member of the family the karta
- kartas liability is unlimitted and the rest have limitted liability
- Members who have equal rights over the ancesstral properties are called the co parseners
Features of joint hindu family (5)
- Formation
- Liability
- control
- continuity
- minor members