Forms of Business organization Chapter -4 Forms of Business organization

Forms of business enterprises Sole proprietor ship Joint Hindu Family Partnership Co-operative organisation Joint stock company

Sole trader Sole trader ship or proprietorship is the oldest forms of business organisation. It is also known as individual proprietorship or single entrepreneurship. It can be started by any one having initiative and aptitude for selling.

Sole proprietorship Definition A sole trader is a person who carries on a business exclusively on his own account and at his own risk.

Features of sole proprietorship Single ownership No separate entity Capital Formation Risk bearing Unlimited liability Management and control Continuity.

Objectives of sole proprietorship concern Self employment Investment of self generated capital Independent decision making Secrecy Economy Personal touch Independent way of life No sharing of profits Easy formation

Formation of sole Trader ship business Formation of sole trader ship concern is a simple process It does not involve any legal formalities It doesn't need partnership deed as in a partnership firm. However permission from municipal corporation is required. Formation of sole trader concern is based on the decision of the sole trader. Before deciding he has to forecaste the demand of goods and plan for the capital required to start his business.

Evaluation of sole trader Merits of sole trader ship; Ease of formation Flexibility Quick decision making Secrecy Direct incentive Sense of accomplishment Personal touch Low overhead costs Minimum government regulations Social important.

Limitations of soletradership Limited capital Uncertain life Unlimited liability Limited managerial ability Unsound business decisions

Suitability of sole Proprietorship Small business requiring modest capital and limited managerial talent as in the case of retail stores. In those lines of business where there is a need for greater personal attention to customers as in tailoring, professional services like medicine and legal. In the production of unstandardised goods like embroidery or artistic things. Where the individual has certain skills with the help of which he wants to earn his livelihood independently. For catering to the demands of local market like perishable products like laundries,grocery stores etc…

Partnership According to the partnership Act ,1932,”A partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all”

Features of partnership Two or more members Agreement Lawful business Risk bearing and sharing of profits Agency relationships Unlimited liability Restriction on transfer of shares Shared decision making and control Continuity Registration