Business Studies (Chapter Wise) - Mr. Kailash Gururani
Forms of Business Organization
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 other partner.
The firm cannot file a suit against third party.
The firm cannot file a case against its partner.
COOPERATIVE SOCIETY :
A cooperative society is a voluntary association of persons of moderate means, who unite together to protect and promote their common economic interests.
FEATURES :
Voluntary association - Everyone having a common interest is free to join a cooperate society and can also leave the society after giving proper notice.
Legal status - Its registration is compulsary and it gives it a separate identity.
Limited liability - The liabity of the member is limited to the extend of their capital contribution in the society.
Democratic control - Management and control lies with the managing committee elected by the members by giving vote. Every member has one vote irrespective of the number of shares held by him.
Service motive - The main aim is to serve its members and not to maximize the profit.
State control - They have to abide by the rules and regulation framed by govt. for them.
Distribution of surplus - The profit is distributed on the basis of volume of business transacted by a member and not on the basis of capital contribution of member.
MERITS :
Ease of formation - It can be started with minimum of 10 members. Registration is also easy as it requires very few legal formalities.
Limited liability :- The liability of members is limited to the extend of their capital contribution.
Stable Existence - Due to registration it is a separete legal entity and is not affected by the death, Lunacy or insolvency of any of its member.
Economy in operations - Due to elimination of middleman and voluntary services provided by its members.
Government Support - Govt. provides support by giving loans at lower interest rates, subsides & by charging less taxes.
Social utility :- It promotes personal liberty, social justice and mutual cooperation. They help to prevent concentration of economic power in few hands.
LIMITATIONS
Shortage of capital - It suffers from shortage of capital as it is usually formed by people with limited means.
Inefficient management - Co operative society is managed by elected members who may not be competent and experienced. Moreover it cann’t afford to employ expert and experienced people at high salaries.
Lack of motivation - Members are not inclined to put their best efforts as there is no direct link between efforts and reward.
Lack of Secrecy - Its affairs are openly discussed in its meeting which makes it difficult to maintain secrecy.
Excessive govt. control - it suffers from excessive rules and regulations of the govt. It has to get its accounts audited by the auditor and has to submit a copy of its accounts to register.
Conflict among members - The members are from different sections of society with different view points. Sometimes when sometimes some members become rigid, the result is conflict.
TYPES OF COOPERATIVE SOCIETIES :
Consumers co operative Society - It seeks to eliminate middleman by establishing a direct link with the producers. It purchases goods of daily consumption directly from manufacturer or wholesalers and sells them to the members at reasonable prices.
Producer’s Co operative Society - The main aim is to help small producers who cannot easily collect various items of production and face some problem in marketing. These societies purchase raw materials, tools, equipments and other items in large quantity and provide these things to their members at reasonable price.
Marketing Cooperative Society - It performs various marketing function such as transportation, warehousing, packing, grading, marketing research etc. for the benefit of its members. The production of different members is pooled together and sold by society at good price.
Farmer’s Co operative Society - In such societies, small farmers join together and pool their resources for cultivating their land collectively. Such societies provide better quality seeds, fertilizers, machinery and other modern techniques for use in the cultivation of crops. It provides them opportunity of cultivation on large scale.
Credit co operative Society - Such societies protect the members from exploitation by money lenders. They provide loans to their members at easy terms and reasonably low rate of interest.
Co operative Housing Society - The main aim is to provide houses to people with limited means / income at reasonable price.
JOINT STOCK COMPANY :
Meaning - Joint stock co is a voluntary association of persons having a separate legal existence, perpetual succession and common seal. Its capital is divided into transferable shares.
FEATURES :
Separate Legal Existence - It is created by law and it is a distinct legal entity independent of its members. It can own property, enter into contracts, can file suits in its own name.
Perpetual Existence - Death, insolvency and insanity or change of members has no effect on the life of a co. It can come to an end only through the prescribed legal procedure.
Limited Liability - The liability of every member is limited to the nominal value of the shares bought by him or to the amt. guaranteed by him.
Transferability of shares - Shares of public Co. are easily transferable. But there are certain restrictions on transfer of share of private Co.
Common Seal - It is the official signature of the company and it is affixed on all important documents of company.
Separation of ownership and control - Management of company is in the hands of elected repetitive of shareholders known individually as director and collectively as board of directors.
MERITS :
Limited Liability - Limited liability of shareholders reduces the degree of risk borne by him.
Transfer of Interest - Easy transferability of shares increases the attractiveness of shares for investment.
Perpetual Existence - Existence of a co is not affected by the death, insanity, Insolvency of member or change of membership. Company can be liquidated only as per the provisions of companies Act.
Scope for expansion - A company can collect huge amount of capital from unlimited no. of members who are ready to invest because of limited liability, easy transferability and chances of high return.
Professional management - A company can afford to employ highly qualified experts in different areas of business mgt.
CBSE Business Studies Class XI ( By Mr. Kailash Gururani )
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