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Module-
Module-5::’Various
5::’Various forms of Organization’
Organization’
1. Factors affecting selection of ownership form:-
Nature or type of business
Sole proprietorship is best
Requires personal skill and attention
Partnership is best suited for medium scale business
Financial requirement
Requires financial resources at starting
Target at future expansion and also diversification
For expanding business partnership is the best
Liability
Every company has to repay its liability to its creditors
Every entrepreneur liable to creditor at starting of business
Even in sole proprietorship, the person or company has to clear his
labiality at the time of winding of business
Flexibility
Sole proprietorship is best for any alterations or decision making
In partnership business flexibility is very difficult because it is depend up
on the partners
So it is maximum in sole proprietorship and minimum in partnership
Taxation
Both sole proprietorship and partnership follows “PROGRESSIVE TAX
SYSTEM (PTS)”
PTS is defined as tax rate increases with increases of income and
decreases with decrease of income
Control
Every entrepreneur should has control over his business and also
sacrifice on his returns
It is possible in sole proprietorship and not easily possible in partnership
because board of directors are existed
NagendraPrasadMBA CMR-
CMR-CBS 1
BU-EDP-Moudule-5
B
Survival or continuity
Every entrepreneur expects continuity of his business
Without business the company can’t survive
Business secrets
Maintaining business secrets in sole proprietorship is very easy and safe
where as in partnership it is difficulty and unsafe
Government rules and regulations
They are mandatory for running of any company or firm
Sole proprietorship is very free from all rules and regulations
Joint company is governed by rules and regulations of government
I.Sole proprietorship
Definition: - The individual form of business organisation is an organisation at
the head which stands and individual as the one who is responsible, who
directs its operations and he alone runs the risk of failure.
NagendraPrasadMBA CMR-
CMR-CBS 2
BU-EDP-Moudule-5
B
NagendraPrasadMBA CMR-
CMR-CBS 3
BU-EDP-Moudule-5
B
Merits of partnership
ℵ Easy formation
ℵ More financial resources
ℵ Collective decision making
ℵ Sharing of risk
ℵ Flexibility
ℵ Complementary skills
ℵ Credit worthiness
ℵ Business secrecy
Demerits of partnership
ξ Unlimited liability
ξ Uncertain existence
ξ Limited funds
ξ Transfer of shares
Suitability of partnership
Partnership form of business is suitable in the following cases
NagendraPrasadMBA CMR-
CMR-CBS 4
BU-EDP-Moudule-5
B
NagendraPrasadMBA CMR-
CMR-CBS 5
BU-EDP-Moudule-5
B
NagendraPrasadMBA CMR-
CMR-CBS 6
BU-EDP-Moudule-5
B
NagendraPrasadMBA CMR-
CMR-CBS 7
BU-EDP-Moudule-5
B
NagendraPrasadMBA CMR-
CMR-CBS 8