TYPES OF BUSINESS ORGANISATIONS

SOLE PROPRIETORSHIPPARTNERSHIP

MADE BY:Chhavi BansalManasvi ShrivastavXI-F

Sole proprietorship refers to a form of business organization which is owned, managed and controlled by an individual who is the recipient of all profits and bearer of all risks.

FEATURESEasy

formation and

closure

Unlimited

liability

Sole risk bearer

and profit recipient

No separate entity

Absolute

control

Lack of business

continuity

MERITS Quick

decision making

Confidentiality of informati

on

Direct incentive

Sense of accomplishment

Ease of

formation and

closure

LIMITATIONS

Limited Resourc

es

Limited life of a busine

ss concer

n

Unlimited

liability

Limited managerial

skills

OPTIONS FOR A SOLE PROPRIETOR

Example of a Sole Proprietor

This storyboard shows that Jill started a lemonade shop according to her wish and hired a few people. She received all the profits alone but when the shop caught fire, the whole responsibility of rebuilding it came upon her.

Rebuilding the shop was easy but the shop closed down with the unexpected death of Jill as there was no one else to take care of the shop.

According to The Indian Partnership Act, 1932, “Partnership is the relation between 2 persons who have agreed to share the profit of the business carried on by all or any one of them acing for all.”

Partnership

FEATURESEqual

Risk

bearing

Joint decision

making

Continuity is ensured

Minimum

members required-

2

Maximum members

in banking-10

Maximum

members in other

business-10

Mutual

Agency

MERITSBalanced decision making Ease of

formation and closure

More funds

Sharing of

risks Secrecy

LIMITATIONS

Limited Resourc

es

Possibility

of confli

cts

Unlimited

liability

Lack of continuity

Lack of public confidentiality

TYPES OF PARTNERS

1. Active partner

Contributes capital

Participates in management of

firm

Shares profits and losses

Unlimited liability

Takes part in carrying out business on

others behalf

1. Sleeping or dormant partner

Contributes capital

Does not Participate in management of

firm

Shares profits and losses

Unlimited liability

1. Nominal partner

Does not Contribute

capital

Does not Participate in management of

firm

Does not Share profits and

losses

Unlimited liability

Allows the use of his name by a

firm

1. Secret partner

Contributes capital

Participates in management of

firm

Shares profits and losses

Unlimited liability

His association is not known to the

general public

1. Partner by estoppelDoes not

Contribute capital

Does not Participate in management of

firm

Does not Share profits and

losses

Unlimited liability

Gives impression that he is a partner of firm through his behaviour

1. Partner by holding outDoes not

Contribute capital

Does not Participate in management of

firm

Does not Share profits and

losses

Unlimited liability

Allows himself to be represented as a

partner but is not a partner

Status of a MinorWhen he attains majority,

he decides whether he would like to become a

partner in the firm.

Can be admitted to benefits of a partnership

firm with the mutual consent of all other

partners.

Liability is limited to the extent of capital contributed by him.

Not eligible to take part in active

management

Cannot become a partner in any firm as is

incompetent to enter into a valid contract with

others.

TYPES OF PARTNERSHIPSPartnership

duration liability

Partnership at will

Particular partnership

Limited partnership

General partnership

Classification on the basis of duration

Exists at the will of partners Formed for the accomplishment of a particular project.

Terminates when any partner gives a notice of withdrawal.

Dissolved when project is finished.

Partnership at will Particular partnership

Last block and over!

Together forever!

Classification on the basis of liability

Liability of partners is limited and joint.

Liability of at least 1 partner is unlimited and the rest have limited liability.

Partners participate in firm and there is mutual agency.

Registration is optional.

Partners don’t participate in firm and there is no mutual agency.Registration is compulsory.

General partnership Limited partnership

EXISTING PARTNERSHIPS

Partnership deedThe written agreement which specifies the terms and conditions that govern the partnership is called a partnership deed.

Contents of a partnership deed

Name of the firm

Nature and location of business

Duration of

business

Investment made by

each partner

Distribution of

profits and losses

Duties and obligation

s of the partners

Salaries and withdrawal

of the partners

Terms governing admission, retirement

and expulsion of

a partner

Interest on capital

and drawings

Procedure for

dissolution of firm

Preparation and

auditing of accounts

Methods of solving disputes

Registration of a firm means the entering of firm’s name, along with the relevant prescribed particulars, I the register of firm kept with the Registrar of Firms.

In case a firm is not registered, it is deprived of

many benefits:

A partner of an unregistered firm cannot file a suit

against the firm or other partners.

The firm cannot file a case against third parties.

The firm cannot file a case against

the partners.

Procedure for registration-Name of the firm

-Location of the firm

-names of other places where firm carries on business

-The date when each partner joined the firm

-Names and addresses of the partners

-Duration of partnership

1.Submission of application in the prescribed form to the Registrar

of firms. The application should

include:

2. Deposit of required fees with the Registrar of firms.

3. The Registrar after approval will make an entry in the register of firms and will subsequently issue certificate of registration.

Thank you