Business Environments

Factors effecting choice of firm

Easy to start and easy to close Division of labor Large amount of resources Liability Secrecy Transfer of ownership

Ownership, management and control Continuity Quick decision making Contact with customers Flexibility & Taxation

Types of Business organizations

Sole Proprietorship Partnership firm Joint Stock Company Co-operative society

Sole Proprietorship

A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business.

Sole Proprietorship

Single individual takes the initiative of starting a business, supplies the entire capital and manages the business all by himself. He shoulders the entire responsibility of the business activities He performs all the duties in connection with the business activities The sole proprietorship carries on the business for his exclusive gain and bears all the risks incidental to the conduct of his business The liability of the sole proprietorship is unlimited. The sole proprietorship concern does not have a separate legal existence separate from that of the proprietor

Merits
Ease of formation Ease of dissolution Direct relationship between effort and reward Promptness in decision making Secrecy of the production processes Social utility of sole trading concerns

Demerits
Limited finance Unlimited liability Limited managerial skills Limited growth Uncertainty of duration

Partnership
The relation between two or more persons who have agreed to share profits of a business carried on by all or any of them acting for all Persons who have entered into partnership with one another are individually called "partners" and collectively as a "firm".

Partnership

Agreement: A partnership is the result of an agreement and not of status. It is created by mutual consent between the partners. There must be an oral or a written agreement to form a partnership. Presence of business: A partnership is a form of Business organization. The association of a few individuals is for conducting a certain business. Sharing of profits: The object of starting a partnership should be the sharing of profits. Unlimited liability: Each partner has an unlimited liability in respect of the debts of the firm. The creditors can recover their dues from the property of any or all the partners of the firm.

Merits

Demerits

Ease of formation Larger resources Unlimited liability Flexibility of organization Promptness in taking decisions Balance Judgment Reduced risk

Lack of harmony Instability Limited risk-taking Risk of implied authority Lack of public confidence Joint and several liabilities

Joint Stock Company

A company is a voluntary association of persons for the attainment of a common purpose with a capital divisible into units known as shares and with a limited liability. It is the creation of law and is known as an aI1ificial person with a perpetual success in and a common seal.

Joint Stock Company

Separate legal existence Limited liability Perpetual succession and common seal Transferability of shares Separation of ownership and management Number of members is seven

Merits
Large financial resources Limited liability Transferability of shares Benefit of large-scale operations Perpetual succession Public confidence Tax benefit Separation of ownership ami management

Demerits
Difficult and costly formation Oligarchic management Delay in administration Fraudulent management Concentration of economic power Delay in taking decisions

Co-operative Society

A co-operative organization is defined as "an association of persons, usually to achieve a common economic end, through the formation of a democratically controlled business organization, making equitable contributions to the capital required and accepting a fair share or risk and benefits of the undertaking"

Co-operative Society

Voluntary association The capital of a co-operative society is procured by way of share capital from its members. Democratic setup Ideal of service Member's liability The co-operatives received special incentives from the government such as the exemption from income tax Separate legal existence

Merits

Demerits

Ease of formation Democratic on management liability of the members is limited the balance of the surplus earned in any year, the funds can well be utilized for its growth Tax incentives Perpetual existence Social service

Limited capital Excessive state regulation Inefficiency management Lack of motivation

Examples

Co-operative Banks

Public Enterprises
On the basis of incorporation On the basis of liability On the basis of control On the basis of ownership On the basis of number of members

Forms of Public Enterprises

Departmental undertaking Public Corporation Government Company

Problems faced by Public Enterprises

Autonomy in many cases, is misused Public accountability Poor control of material handling costs Pricing policy is a sensitive area Delay in project execution Unrealistic production schedules Over capitalization Inadequate return on capital

The END
This is a presentation by

RAJESH