Fundamentals of Business and Organization

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.

Documents

Fundamentals of Business and Organization