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7/28/2019 Fundamentals of Business and Organization
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FUNDAMENTALS OF BUSINESS
AND ORGANIZATION
I BBA
RKM VIVEKANANDA COLLEGE(Evening)
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Contents
Introduction to business & organization
Classification of Industries & Trade
Sole proprietorship Partnership
Joint stock company : Public & Private
Co-operative Society Trade association & Chamber of commerce
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INTRODUCTION
Economic activity
Profession
Employment Business
Industry : Extractive , Genetic ,
Manufacturing , construction industry
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Commerce : Trade & aids of trade
Internal trade : Whole sale & Retail
External : Export , Import , Re export Aids of trade : Transportation
Warehousing
InsuranceAdvertising
Banking
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Features of Business
Dealing with goods and services
Production and /or exchange
Continuity and regularity in dealings Profit motive
Elements of Risk
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Requisites for starting a business
Ease of formation
Scope of raising capital
Extent of liability Flexibility of operations
Stability and continuity
Extent of government control and regulations Business secrecy
Tax burden
Effective management
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Forms of business organization
Non corporate forms of organizations:
SOLE TRADER ORGANISATION
PARTNERSHIP ORGANISATION Corporate forms of organizations
JOINT STOCK COMPANY
COOPERATIVE ORGANISATION
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SOLE TRADER ORGANISATION
One man ownership
No separation of ownership and management
No separate entity All profits to proprietor
Individual risk
Unlimited liability Less legal Formalities
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Very limited capital
Ownership transfer at will
Business stability depends upon owner life Business secrecy
No state regulations
No special income tax No auditing of accounts is required
Winding up at will
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Partnership form of organization
The Indian partnership act 1932 defines
partnership as the the relation between
persons who have agreed to share profits of
business carried on by all or any of them
acting for all
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PARTNERS
BASED ON THE
EXTENT OF
PARTICIPATION
BASED ON
SHARING PROFITS
BASED ON
LIABILITY
BASED ON NATURE
OF BEHAVIOUR
ACTIVE PARTNER
Also known as
working partner.
NOMINAL
PARTNER
A person who just
lends his name to
the partnership .
No investment and
participation.
LIMITED PARTNER
Known as special
partners and
liability is limited to
the extent of capital
contributed by him.
PARTNER BY
ESTOPPEL
Fashion as to give
an impression that
he is one of the
partner.
SLEEPING PARTNER
Dormant partner
and invest hiscapital and does
not participate in
management.
PARTNER IN
PROFITS
A partner whoshares the profits of
the business
without being liable
for losses.
GENERAL PARTNER
Known as unlimited
partner , his liabilityis unlimited and
entitled to
participate in the
management of the
business.
PARTNER BY
HOLDING OUT
Representing otherperson as a partner
though he is not
the one and does
not contradict it.
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Partnership Deed
A agreement of both written or oral
Generally it is written agreement duly
stamped and registered
1. Name of the firm
2. Nature of business to be carried out
3. Names of the partners4. The town and the place where business will
be carried on
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5.The amount of capital to be contributed by eachpartner
6.The profit and loss sharing ratio of each partner
7. Loans and advances by partners and the interestpayable on them
8. The amount of drawings by each partner and therate of interest allowed thereon
9. The rate of interest on capital
10. Duties , powers and obligations of partners
11. Remuneration , if any , payable to the active
partner.12. Maintenance of accounts and arrangements for
audit.
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13. Settlement in the case of dissolution of
partnership
14. The methods of evaluation of goodwill onadmission or death or retirement of a partner
15. The method of revaluation of assets and
liabilities on admission or death or retirementof a partner
16. Arrangements in case a partner becomes
insolventREGISTRATION OF FIRM
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JOINT HINDU FAMILY FIRM
Governed by Hindu law and by two schools of
thought
Mitakshara : Applicable to whole of india
except Bengal and Assam. (inheritance)
Coparceners and Karta
Dayabhaga : It is applicable in Bengal and
Assam ( inherit after father death)
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Features
Business is managed by the senior member of
the family called Karta.
Other members do not have the right to
participate in the management of the firm.
Other members cannot question the authority
of karta.
Karta has the power to barrow funds . The
liability of karta is unlimited , for others liable
to the extent to their share in their business.
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If the karta has misappropriated the funds of
the business , he has to compensate the other
coparceners to the extent of their shares in
the joint property.
The death of any member of the family does
not dissolve the business or the family.
Through mutual agreement the joint Hindu
family firm can be dissolved.
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COMPANY FORM OF
ORGANISATION
A joint stock company is an association of
persons registered under companies act for
carrying on some business.
A company is a incorporated association
Artificial person since created by law
Separate legal entity
Common seal
Persistence existence
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Separation of ownership and management
Number of members : 7&no limit ; 2&50max
Limited liability Transferability of shares : public limited
company enjoys a statutory right to sell
Regidity of scope of business is limited:object clause
A company is governed by the companies act
follows various provisions.
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Classification of Companies
Based on mode of
incorporation
Based on the type
of liability
Based on category
of shareholders
Based on the
jurisdiction of
functioning
Statutory company Unlimited company Private Ltd
company
National company
Registered
company
Company limited by
Guarantee
Public Ltd company Multinational
company
Chartered Company Company limited by
shares
Government
company
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Registered company : A company which is
incorporated through registration with the
registrar of companies under the companies
act 1956. Also called incorporated company
Chartered company : A company which is
incorporated under a special royal charter
granted by the monarch. Regulated by theprovisions of the chartered
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Unlimited companies : Company in which the
liability of the members unlimited . At the
time of winding up shareholders are liable to
clear their debts from their own pocket
Company limited by guarantee : Members are
guarantee for the debts of the company up to
a certain limit in addition to the shares held bythem. They dont focus on profit.
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Companies limited by shares : In this case the
liability of the members is limited to the
amount of shares held by them.
Private limited company :
Restricts the right to transfer its shares
Limits the number of its members to fifty
Prohibits any invitation to public to subscribe
for any shares of the company
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Public limited company :
The right of the shareholder to transfer his
shares is not restricted
The minimum number of shareholders is 7
but there is no limit to the maximum number
of members.
It can invite public to subscribe for its shares
and debentures.
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Government company : Company which not
less than 51 per cent of the paid up share
capital is held by the central/state or both
National company : Boundaries of the country
Multinational company : Transnational
company , operations extended beyond
boundaries.
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Merits
Raise large capital
Limited liability
Stability of existence Economics of scale
Scope of expansion
Public confidence
Transferability of shares
Tax benefits , Risk diffused , Professional
management.
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COOPERATIVE FORM OF
ORGANISATION
The Indian cooperation societies act 1912 ,
section 4 defined it as a society which has as
its objectives the promotions of economic
interests of its members in accordance with
cooperative principles.
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MAIN FEATURES
SERVICE IN PLACE OF PROFIT
MUTUAL HELP IN PLACE OF COMPETITION
SELF-HELP IN PLACE OF DEPENDENCE MORAL SOLIDARITY IN PLACE OF UNETHICAL
BUSINESS PRACTICES
VOLUNTARY ASSOCIATION AUTONOMY AND STABILITY
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DEMOCRATIC MANAGEMENT one member
one vote.
CAPITAL : share capital , government loans
GOVERNMENT CONTROL :
Cooperative societies act 1919
State Cooperative societies act. SERVICE MOTIVE
LIMITED RETURN OF CAPITAL
DISTRIBUTION OF SURPLUS : bonus
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CLASSIFICATION OF COOPERATIVES
CONSUMER COOPERATIVES
PRODUCERS COOPERATIVES
MARKETING COOPERATIVES HOUSING COOPERATIVES
CREDIT COOPERATIVES
FARMING COOPERATIVES
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MERITS
Easy formation
Limited liability
Social services State assistance
Open membership
Supply of goods at cheaper rates
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CRITERIA FOR CHOICE OF
ORGANIZATION
AT THE TIME OF STARTING ABUSINESS
CRITERIA AT THE TIME OF EXPANSION
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AT THE TIME OF STARTING
Nature of business
Volume of business
Area of operation
Desire for control
Capital requirements
Extent of risk and liability
Government regulations
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Criteria at the time of expansion
Need for larger financial resources
Need for internal reorganization and control
Need for specialized services like
communication , accounting , marketing etc.
Increase in governmental controls and
regulations
Increase in the problem of control and
coordination.
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