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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