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FORMS OF BUSINESSBUSINESSA business is an organization engaged in the trade of goods, services, or both to consumers.MAIN OBJECTIVE OF STARTING A BUSINESS: To earn profitEstablished either by one person or by a groupA business started by only one person is called sole proprietorship.The business started by a group of persons can be either a Joint Hindu Family Partnership Joint Stock Company Co-operative form of organizationPublic Sector Undertakings

DIFFERENT FORMS OF BUSINESSThere are various forms of business organization:

Sole ProprietorshipJoint Hindu Family FirmPartnership FirmJoint Stock CompanyCo-operative Society

SOLE PROPRIETORSHIPOne mans businessOwned and managed by a single personTo receive all the profits and bears all risk of ownership.

FEATURES:

Liability of the owner of the business is unlimited.No legal formalities are necessaryThe proprietor has complete freedom of action.

ADVANTAGESEase of formationMotivationFreedom of ActionSocial UtilityFlexibilityPersonal TouchBusiness SecrecyQuick Decision

DISADVANTAGESLimited resourcesNo Economies of Large ScaleUnlimited LiabilityLack of ContinuityLimited Managerial Ability

EXAMPLESAccommodation, food services, and drinking placesAgriculture, forestry, hunting, and fishingArts, entertainment, and recreationConstructionEducational servicesHealth care and social assistanceReal estate and rental and leasingReligious, grant making, civic, professional, and similar organizationsRetail tradeTransportation and warehousingUtilitiesWholesale trade

EXAMPLESRay Croc mortgaged his home to take over a small fast food location, McDonald's Corporation.

Sam Walton purchased a Ben-Franklin store that later grew into WalMart.

James Cash Penney bought out his partner in 1912 and becamesole proprietorof his store, JC Penney.

JOINT HINDU FAMILY BUSINESSHindu joint family owns the business jointlyOnly the male member of the family upto three successive generation become members.They are called Co-parcenersThe senior most co-parcener is called the karta

FEATURESComes into existence by Hindu Law

No outside membership. Male members up to three successive generations of a family own the business jointly.

The senior most co-parcener, known as KARTA has the implied authority to run the business.

Even if the co-parceners have equal share, it fluctuates with every birth and death of a male in the family.

The liability of the members are limited to the extent of their share but the liability of the karta is unlimited.

ADVANTAGESAssured share in profitsSharing of knowledge and experience among membersCo-operative effortsUnlimited liability of the kartaContinued existenceDISADVANTAGESLimited resourcesLack of motivation among members Scope for misuse of power by kartaScope for conflict and instability

EXAMPLESAzim Premji (Wipro)Sunil Mittal (Bharti)Shiv Nadar (HCL) Dilip Sanghvi (Sun Pharma)Birla KM (Hindalco, Grasim)Bajaj Rahul (Bajaj Auto)Hamied Y K (Cipla)Brij Mohanlal Munjal (Hero Moto Corp ) Sashi Ruai (Essar Group)Anji Reddy (Dr Reddys Labs)PARTNERSHIPTwo or more enter into contractual agreementAccordance to governing statutes of the concerned country to share the profits of the business carried on by all Each member of such an organisation is known as a partner.FEATURESMinimum membership 2. Maximum membership 10 for banking business, 20 for other typesRegistration is voluntaryContractual RelationshipPrincipal-Agent Relationship among partnersLiability, joint and several to an unlimited extentRelationship of Trust and Faith between partnersMinors, lunatics, insolvent persons are not eligible to become partnersRestricted Transferability of SharesADVANTAGESEasy formationLarger resourcesFlexibility in operationBurden of risk shared among partnersBetter public relation

DISADVANTAGESInstability of the firmLimited resources due to restriction on maximum membership Unlimited liabilityScope for friction and quarrelJOINT STOCK COMPANYThe companies in India are governed by the Indian Companies Act, 1956. A company is defined as an artificial person created by law, having separate legal entity, with perpetual succession and a common seal. It is formed for increasing the capital of the business.Voluntary association of persons who generally contribute capital to carry on a particular type of businessPersons who contribute capital become members of the companyThe total capital of a joint stock company is called share capital and it is divided into a number of units called shares.

FEATURESArtificial PersonSeparate legal EntityCommon SealPerpetual ExistenceLimited liability of MembersTransferability of SharesMinimum membership- 2 for Private limited company 7 for public limited companyMaximum membership - 50 for Private limited company Unlimited for Public limited companyADVANTAGESLimited liabilityContinuity of existenceBenefits of large scale operationProfessional managementContribution to the society through creation of employment, promoting ancillary industries etc. Research and DevelopmentDISADVANTAGESCompliance with several laws and fulfillment of a number of legal formalities during formationManagement and control by a groupShares are subject to manipulation and speculation Government interferenceScope of misuse of resource powerEXAMPLESTOP JOINT STOCK COMPANIES IN INDIA:Reliance Industries Limited (RIL),Tata Iron and Steel Company Limited (TISCO) Steel Authority of India Limited (SAIL)Maruti Udyog Limited (MUL)TOP JOINT STOCK COMPANIES IN THE WORLD:General ElectricRoyal Dutch ShellToyota MotorsExxon MobilHSBC HoldingsAT&TWal-MartCO-OPERATIVE SOCIETYFormed to provide services to its members and to the society in general.Individuals, producers, consumers, farmers etc. who are in need and wish to protect themselves can go for co-operatives. FEATURESIt is a corporate body that enjoys certain privileges like a joint stock company.Its primary objective is to render services to its members in particular and society in general.Its management is most democratic in nature as compared to other forms of business organizations.Its major finance is raised through government loans, grants, subsidies and outside donations.Members get return on capital at a fixed rate of dividend from the profit as per the Societies Act.

ADVANTAGESFormation relatively easy than a Joint Stock Company.Democratic managementAssistance from the governmentElimination of middlemens profitFairly stable life

DISADVANTAGESLimited capitalLack of managerial talentLack of motivationLack of secrecyDependence on the governmentEXAMPLESAavinAdarsh Co-operative BankAmulAnyonya Co-operative Bank LimitedIndian Coffee HouseIndian Farmers Fertiliser Cooperative LimitedPUBLIC SECTOR In India, a government-owned corporation is termed as a Public Sector Undertaking (PSU). This term is used to refer to companies in which the government (either the federal Union Government or the many state or territorial governments, or both) own a majority (51 percent or more) of the company equity. There are 251 PSU companies in India as of 2012.FEATURESPublic Sector Undertakings (PSUs) can be classified as Public Sector Enterprises (PSEs), Central Public Sector Enterprises (CPSEs) and Public Sector Banks (PSBs).PSEs are run by government in order to optimally use national resources for nation building activities. They are owned at both central and state level. Some are partially owned with share capital raised from public.CPSEs are fully owned by Central Government. They include organisations that formed for national security and interest such as arms and ammunitions, atomic energy, railways etc.All nationalised banks come under PSBs.

AdvantagesLarge InvestmentNational InterestNon-Profit MotiveProfessionally managedGovernment InterferenceRural developmentEmployment opportunities to poorRegional DevelopmentDisadvantagesNon-enterprisingNo competitionProfits shrinkPoor ManagementEmployees lack commitmentBureaucracy and Red-tapismCorruption

ExamplesAir IndiaBSNLBHELCoal India LimitedINDIAN OILFCIBPHPSteel authority of IndiaONGCALL NATIONALISED BANKS