Maharashtra Board Class 11 Cooperation Chapter 2 Comparative Study of Different Forms of Business Organization PDF Download

Comparative Study of Different Forms of Business Organization

2.1 Introduction

In business sector we find various forms of business organization. Business organization conducts business at small scale, medium scale and large scale. The business brings together production, manufacturing, buying and selling and customers together for business development.

The main purpose of any business organization is to supply goods and services to the society.

Business is such type of organization which conducts industrial or trade activities, produces, supplies goods and earn profits.

The various types of business organization did not come into existence together. It came into existence as per the need of the society.

In the beginning sole trading concern came into existence, for development of business and to increase capital partnership came into existence. And joint stock company came into existence for collecting huge capital and use of modern technology for large scale production and services.

To provide basic services to the society co-operative society came into existence.

In this topic we are going to study various forms of business organization, features and their comparative study.

Forms of Business Organization:

Sole Trading Concern

Partnership Firm

Joint Stock Company

Co-operative Society

Teacher's Note

In India, many small shops and businesses are sole trading concerns. For example, a vegetable seller in your local market who owns and manages his shop alone is a sole trader.

Exam Trick

Remember: Sole Trading = One person = One man show. Think of your local kirana shop owner who does everything alone.

Points to Remember

Business brings production, buying and selling together.

Different forms of business came based on society's needs.

There are four main forms of business organization.

Each form has its own features and benefits.

2.2 Sole Trading Concern

2.2.1 Meaning and Definition

Meaning:

When one person starts business investing alone, manage and conduct all activities alone, enjoys profit and suffer losses alone such business is known as Sole Trading Concern. But he needs permission of Local Authorities for starting the business.

Definition:

The sole proprietorship, is an informal type of business owned by one person and it is a type of business unit where one person is solely responsible for providing the capital, bearing the risk of the enterprises and the management of the business. - Prof. James Lundy

In business when one person invest capital, manage and control the business alone and is responsible for profit or loss of business such business is known as Sole trading concern. - Dr. John Shubin

Teacher's Note

Your uncle who owns a small tea shop and runs it by himself is a sole trader. He makes all decisions and keeps all profits.

Exam Trick

Remember: Sole = Only One. One person owns, manages, and gets all profit or loss. Like you running your own lemonade stand.

Points to Remember

One person starts and controls the business alone.

The owner needs permission from local authorities.

The owner gets all profit and suffers all losses.

It is informal and easy to start.

2.2.2 Features of Sole Trading Concern

1. Easy Formation: The formation of Sole trading concern is easy. As there is no separate legal act for sole trading concern, therefore, no legal process has to be completed to start sole trading business. The sole trading business can be started by obtaining license and permission from local government and by following the general law of the country.

2. Ownership of Business: In Sole trading concern, the sole trader is sole owner of his business. Hence, he is the sole owner of all assets and properties of a business.

3. Own Capital: Sole trader alone contributes capital for business. The sole trader can collect capital from his friends, relatives and also by obtaining loan from banks and financial institution.

4. Management: Sole trader is the sole owner of business. He himself has to look after the working and management of his business. He takes all the decisions of the business alone. Sole trading is one man show.

5. Unlimited Liability: The liability of a sole trader is unlimited in sole trading concern and in case of heavy losses his private or personal property can be charged to compensate the business losses.

6. Business Secrecy: Secrecy plays the most important role in the sole trading concern. In sole trading concern maximum secrecy is maintained. As sole trader alone knows all the secrets of the business organization so maximum secrecy is maintained in Sole trading concern.

7. No Sharing of Profit and Loss: A sole trader alone enjoys all profits of the sole trading business and bears all the losses and risks involved in business. There is no sharing of profits and losses in Sole trading concern.

8. Cordial Relations with Customers: As sole trader deals directly with his customers and employees. He knows likes, dislikes and requirements of his customers. He listens the grievances of the customers and try to solve them. Hence, he has good (cordial) relations with his customers.

9. Prompt Decision: The sole trader is the alone owner of the business therefore according to the change in market conditions, consumers demand and choice, discount in the price according to the season, he can take quick decision.

10. Self-employment Source: In today's world unemployment is increasing. For self-employment sole trading concern is very popular. In some businesses, sole trader's skills are important. Sole trader starts such sole trading business and provides services. Hence, sole trading concern is source of self-employment.

Teacher's Note

A tailor who stitches clothes in your neighborhood is a sole trader. He owns the business, makes decisions, and keeps all profits.

Exam Trick

Remember the 10 features with: Easy, Own, Manage, Unlimited liability, Secret, No sharing, Direct customer contact, Quick decision, Self employment. This spells E-O-M-U-S-N-D-Q-S!

Points to Remember

Formation is easy and no legal process is needed.

Owner has unlimited liability - personal property can be taken if business fails.

Owner keeps all secrets and all profits.

Owner makes quick decisions without asking anyone.

It is good for self-employment and skilled workers.

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