case study questions of business studies class 11 chapter 2

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Class 11 Business Studies Case Study Questions

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CBSE Class 11 Business Studies Case Study Questions are available on myCBSEguide App . You can also download them from our student dashboard .

For students appearing for grade 11 CBSE exams from the Commerce stream, Business Studies is a fundamental subject. Business Studies is considered to be quite interesting as well as an occupying subject as compared to all other core subjects of the CBSE class 11 commerce stream. To ace this CBSE exam, students are not only required to work hard but they ought to learn to do smart work too.

Among all the other core subjects of the Commerce stream i.e accountancy, economics and business studies, Business Studies is the one that is purely theoretical. It is termed to be comparatively easier and more scoring than the other mandatory subjects of the commerce stream. Many students who opt for the commerce stream after their 10-grade exams desire to learn in-depth about the business organizations and their work, for them the subject is of utmost importance. Business Studies is an essential component of the class 11 commerce stream curriculum.

In order to ace the subject the student needs to have conceptual clarity. CBSE has designed the syllabus for class 11 Business Studies so as to provide students with a basic understanding of the various principles prevalent in the Business organizations as well as their interaction with their corresponding environment.   

Case Study Questions in class 11 (Business Studies)

Case-based questions have always been an integral part of the Business Studies question paper for many years in the past. The case studies have always been considered to be challenging for the students, for such questions demand the application of their knowledge of the fundamental business concepts and principles. Last year i.e-  2021 CBSE introduced a few changes in the Business Studies question paper pattern to enhance and develop analytical and reasoning skills among students.

It was decided that the questions would be based on real-life scenarios encountered by the students.CBSE not only changed the way case-based questions were formulated but also incremented their weightage in the Business Studies question paper. The sole purpose of increasing the weightage of case-based questions in the class 11 curriculum by CBSE was to drift from rote learning to competency and situation-based learning.

What is a case study question? (Business Studies)

In Business Studies, a case study is more like a real-world test of how the implementation works. It is majorly a report of an organization’s implementation of anything, such as a practice,a product, a system, or a service. The questions would be based on the NCERT textbook for class 11 Business Studies. Case-based questions will definitely carry a substantial weightage in the class 11 Business Studies question paper. questions.

A hypothetical text will be provided on the basis of which the student is expected to solve the given case-based question asked in the Business Studies class 11 exam. Initially, the newly introduced case-based questions appeared to be confusing for both the students and the teachers. Perhaps, they were reluctant to experiment with something new but now a lot more clarity is there that has made the question paper quite student-friendly.

Case study questions could be based on any chapter or concept present in the NCERT textbook. Thus, it is expected from the students to thoroughly revise and memorize the key business fundamentals. 

Business Studies syllabus of class 11 CBSE   

The entire Business Studies course is divided into 2 parts:

• Part A, Foundation of Business
• Part B, Finance and Trade

The class 11 Business Studies exam is for a total of 100 marks, 80 marks are for the theory and the remaining 20 for the project. Most of the questions are based on the exercises from the NCERT textbook. It is recommended to rigorously go through the contents of the book. A single textbook has been published by NCERT for Class 11 Business studies. There are a total of 10 chapters in this book divided into 2 parts. 

CBSE Class – 11

Business Studies (Code No. 054)

Theory: 80 Marks Time: 3 Hours Project: 20 Marks

Case Study Passage (Business Studies class)

As part of these questions, the students would be provided with a hypothetical situation or text, based on which analytical questions will have to be answered by them. It is a must for the students to read the passage in depth before attempting the questions. In the coming examination cycle (2022-23), case-based questions have a weightage of around 30%. These questions can be based on each chapter in the NCERT book for Business Studies, grade 11.

Students must prepare well for the case-based questions before appearing for their Business Studies exam as these questions demand complete knowledge of the various concepts in their syllabus. CBSE plans to increase the weightage of such questions in the upcoming years.

Sample case-based Questions in Business Studies

Business Studies as a subject provides a way of perceiving and interacting with the business ecosystem. It is a core subject of the commerce stream that is purely theoretical and relevantly easier than the other compulsory subjects of the stream. Class 11 Business Studies syllabus is closely related to trade and commerce. The subject cannot be ignored as it is the foundation of many concepts and theories which are studied at an advanced level in class 12.

The case-based questions asked in the CBSE Business Studies question paper for class 11 are of two types:

As per the latest circular issued by CBSE on Assessment and Evaluation practices of the board for the session 2022-23, CBSE has clearly mentioned that competency-based questions including case studies will be different from subjective questions.  

The questions can also be categorized on their difficulty level:

• Direct: such questions can be easily solved. Their answer is visible in the given passage itself.
• Indirect/ Analytical: such questions are confusing and tricky. These can be solved by the application of the theory or principle that is highlighted in the provided text. 

How To Prepare For Case-based Questions? (Business Studies grade 11)

Students need to prepare well for the case-based questions before appearing for their class 11 Business Studies exam. Here are some tips which will help the student to solve the case-based questions at ease:

• Read the provided text carefully
• Try to comprehend the situation and focus on the question asked
• Analyze and carefully answer the question asked
• In general, the passage given would be lengthy in Business Studies case-based questions but their solutions are comparatively short and simple
• One can significantly save time if they follow a reversal pattern, that is going through the questions before reading the comprehensive case study passage.
• Answer in a concise manner
• One should concentrate on solidifying key fundamental principles/theories
• Go through the NCERT textbook in depth. The language used is crisp and simple.
• While providing solutions to the case-based question, pick the keyword/keyline based on which you are driving insights.

 In order to excel in the Business Studies class 11 exam, one needs to ignore the shortcut techniques and get to read the NCERT textbook rigorously. Case studies can be easily solved if your key fundamentals are strong and clear. The best part of having these questions is that the asked question itself projects a hint of its answer. These simple points if kept in mind will definitely help the students to fetch good marks in case study questions, class 11 Business Studies. 

Case study question examples in Business Studies

Here a re some given case study questions for CBSE class 11 Business Studies. If you wish to get more case study questions and other study material, download the myCBSEguide app now. You can also access it through our student dashboard.

Business Studies Case Study 1

Read the hypothetical text given and answer the following questions:

Manish, Rahul and Madhav live in the same locality. They used to meet and discuss their ideas. After discussing the recent fire breakout in their area, they decided to take fire insurance for their house or work area. Manish gets his house insured against fire for ₹1 lakh and during the policy period, his house gets damaged due to fire and the actual loss amounts to ₹2.5 lakh. The insurance company acquired the burning material and approved his claim. Rahul gets his godown insured against fire for ₹1 lakh but does not take enough precautions to minimize the chances of fire like installing fire extinguishers in the factory. During the policy, a fire takes place in his godown and he does not take any preventive steps like throwing water and calling the employees from the fire fighting department to control the fire. He suffered a loss of ₹1,20,000. Madhav took a fire insurance policy of ₹20 lakh for his factory at an annual payment of ₹24,000. In order to reduce the annual premium, he did not disclose that highly explosive chemicals are being manufactured in his factory. Due to a fire, his factory gets severely damaged. The insurance company refused to make payment for the claim as it became aware of the highly explosive chemicals.

How much can Manish claim from the insurance company?

• None of the above

How much compensation can Rahul get from the insurance company?

Which principle is violated in the case of Rahul?

• Insurable Interest
• Utmost Good Faith

How much amount is the insurance company liable to pay to Madhav if he files a case against it?

• Insufficient information

Which principle of Insurance is violated by Madhav?

• Insurable interest
• Subrogation
• Proximate Cause

The insurance company acquired the burnt material and approved his claim. Which principle of Insurance is highlighted in the given statement.

• (a) Mitigation
• (a) Utmost Good Faith
• (d) Subrogation

Business Studies Case Study 2

 Sarthak Electronics Ltd. has a loss of Rs 15,00,000 to pay. They are short of funds so they are trying to find means to arrange funds. Their manager suggested a claim from the insurance company against stock lost due to fire in the warehouse. He actually meant that they can put their warehouse on fire and claim from insurance companies against stock insured. They will use the claim money to pay the loan.

• Will the company receive a claim if the surveyor from the insurance company comes to know the real cause of fire?
• Write any two Values which the company ignores while planning to arrange money from false claims.
• State any three elements of fire insurance

Business Studies Case Study 3

OLX and qickr are examples of well-known websites used to conduct business. Tarasha’s sofa set got spoiled in the rain. Her friend suggested that she should change the fabric so that it looks new and put it for sale on Olx. Tarasha followed her friend’s advice and got her sofa repaired so that it looked better and uploaded nicely clicked pictures on the website without disclosing the fact that it was damaged from the inside. She found a buyer and sold it for Rs 10,000. After five days the buyer found the real state of the sofa set and called Tarasha but she did not answer any of the calls.

• identify the type of business highlighted in the above case.
• Identify any two values which are overlooked by Tarasha.
• Explain any two benefits and limitations of e-business.

Advantages of case study questions in Business Studies

Class 11 Business Studies syllabus is not very vast but has to be focussed upon as it forms the base for your 12th grade Business Studies syllabus. Students are supposed to prepare themselves thoroughly from the NCERT textbook. The Case-based questions prominently focus on the real and current scenarios of the Business world. Approximately 30% of the question paper will comprise case study questions that demand high-order thinking and reasoning skills from the students. The students ought to practice class 11 Business Studies case-based questions from the various options available to them, so as to excel in the subject.

• Enhance the qualitative and quantitative analysis skills of students
• Provides an in-depth understanding of the key Business theories/concepts
• Inculcate intellectual capabilities in students
• Help students retain knowledge for a longer period of time
• The questions would help to discard the concept of rote learning
• Case studies promote and strengthen practical learning.

“Failure is success if you learn from it”

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Business Studies Class 11 Chapter 2 Important Questions and Answers

Home » CBSE » Business Studies Class 11 Chapter 2 Important Questions and Answers

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Business Studies is a subject taught in a Commerce student’s syllabus beginning in Class 11 and continuing through Class 12. Students will master an understanding of the area of management and other business disciplines if they study this subject. Forms of Business Organisation is the second chapter of the Class 11 syllabus, and it teaches about different forms of Business. This chapter covers concepts such as various forms of business organisation, features, merits, and demerits, and factors determining the appropriate form of business organisation. It carries significant weightage in the Business Studies syllabus. Students can easily access all this and more on the Extramarks website.

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Students must read through all the chapters to score well in Business Studies. Extramarks understands the importance of solving questions. As a result, we’ve gathered them from various sources, such as the NCERT Textbook, NCERT Exemplar, other reference books, past exam papers, and so on. Our Business Studies experts have curated step-by-step solutions to help students better comprehend the topics. Students can register with Extramarks and access Important Questions Class 11 Business Studies Chapter 2. 

Apart from Chapter 2 Class 11 Business Studies Important Questions, there is so much that the Extramarks website has to offer. Students can easily find materials like NCERT Solutions, CBSE revision notes , past year question papers, NCERT books, and more on the Extramarks website.

Get Access to CBSE Class 11 Business Studies Important Questions 2022-23 with Solutions

Sign Up and get complete access to CBSE Class 11 Business Studies Important Questions for other chapters too:

A team of Extramarks specialists have developed an entire list of Business Studies Class 11 Chapter 2 Important Questions taking cues from numerous sources. The questions comprise a wide variety of topics, including the different forms of business organisation, features, merits, and demerits of business organisation, factors determining the appropriate form of business organisation, and so on. These questions and their solutions help students better comprehend Forms of Business Organisations.

Mentioned below are a few Important Questions from Class 11 Business Studies Chapter 2 and their solutions:

Q1. What are the important privileges available to a private company?

Answer: When a business is formed as a private corporation, it has several advantages and exemptions that are not accessible to public companies. Some of the main benefits that a private corporation has are as follows:

• A private business can be formed with as few as two members, but a public corporation requires seven.
• In private business the public is not asked to subscribe to company’s shares and hence a prospectus is unnecessary.
• Shares can be distributed without a minimum subscription requirement.
• A private company can start operating as soon as it receives its establishment certificate. On the other hand, the public company must wait until it gets the starting certificate before it may begin operations.
• A private company only needs two directors, but a public company requires at least three.
• A member index is not necessary for a private organisation but is required for a public corporation.

Q2. With a notable example, explain mutual agency in partnership.

Answer: Mutual agency refers to the legal connection between participants in a partnership who have authorization powers and the authority to engage the collaboration in business contracts. In another way, each partnership member has the authority to make business choices that commit or bind the entire partnership to a commercial contract with a third party or entity. For example, even if the partnership agreement prohibits it, a grocery store partner who acquires a delivery truck in the partnership’s name enters a legally enforceable transaction. On the other hand, such behaviour would be unlawful if a law firm partner purchased a snowmobile for the firm.

Q3. What is meant by “partner by estoppel”? Explain.

Answer: A person who shows others that they are a company partner via their actions, behaviour, or statements, is referred to as Partner by estoppel. Such a person is not a partner, and they are not responsible for providing any cash to the company, nor are they accountable for any  portion of the company’s profit or loss. The same individual, however, may be held accountable for the firm’s debts. Hence, as a result, if the Business has adequate assets or finances, debt repayment can be obtained by selling off the partner’s private assets via estoppel.

Q4. What exactly is HUF?

Answer: Although the Income Tax Act does not define the Hindu Undivided Family (HUF), it is recognised under Hindu law. Unmarried daughters are included in the HUF, as are all those who are lineally settled from the same ancestor. A person does not create HUF but by a family’s standing, i.e., it is created automatically in any Hindu household.

Q5. Why do some consider partnership a relatively unpopular form of business ownership? Explain the merits and limitations of partnership.

Answer: A partnership is viewed as a relatively unattractive sort of company ownership due to the inherent limitations that come with it. These limits include infinite responsibility, limited resources, the possibility of conflict, and a lack of consistency.

• Ease of closure and creation: A partnership business can be established rapidly by agreement amongst potential partners. A company doesn’t need to be registered.
• Balance decision-making: The partners might manage various responsibilities depending on their expertise. As a result, the decision-making process in a partnership business is more balanced than in any other kind of corporate ownership.
• A large amount of funds: Each partner in a partnership provides a certain amount of money. Consequently, compared to a single owner, it is feasible to collect a more considerable sum of cash and carry out additional activities as needed.
• Confidentiality: There is no legal requirement for a partnership business to publish its financial accounts or submit reports. As a result, it may maintain secrecy regarding its operations.
• Sharing the risk: The risks that come with running a partnership business are shared by all partners. As a result, individual partners experience less worry, tension, and stress.

Limitations of business partnership:

• Restricted Resources: Capital investment contributions are frequently insufficient to sustain large-scale commercial activity due to the limited number of partners. As a result, partnership firms struggle to expand beyond a particular scale.
• Conflicts of Interest: The decision-making authority in a partnership business is distributed among the partners. This is also dependent on their level of competence, foresight, and ability.
• Unlimited liability: Partners are accountable for repaying debts from their assets if the Business’s assets are insufficient to fulfil its obligations.
• Lack of continuity: When one of the partners dies, retires, becomes bankrupt, or becomes mad, the partnership comes to an end. On the other side, the surviving partners might enter into a new agreement and continue to run the business.

Q6. In what form of Business do individuals associate freely for profit, with capital dividends into transferable shares, and ownership of which is a requirement of membership? Explain in terms of characteristics.

Answer. A joint-stock company is a non-profit organisation formed by a group of people to do profitable economic activities. It has a legal status distinct from its members and a capital structure separated into transferable shares. A corporation is an independent legal entity with its legal identity, perpetual succession, and a common seal. In a corporation, the shareholders are the company’s owners, and the Board of Directors, which the shareholders elect, is the company’s central management body.

The company’s capital is divided into smaller components known as “shares,” which can be freely transferred from one shareholder to the next (except in a private company). A joint-stock firm has the following characteristics:

• A corporation is a made-up entity. It is a legal entity that exists without the participation of its members.
•  The legal personality of a corporation is established. The law does not regard the Business and its owners as the same.
• Starting a business is a time-consuming, costly, and challenging endeavour. Therefore, incorporation is required for all enterprises.
• It will only be deactivated after completing a specialised operation known as winding up. Members may come and go, but the firm does not cease to exist.
• A company’s common seal may or may not exist.
• All shareholders share the risk of a company’s losses.

Q7. Even though there are limitations of size and resources, several people continue to prefer sole proprietorship compared to other forms of organisation? Why?

Answer: Due to the numerous sheer benefits, it provides despite the size and resource limits. The sole proprietorship is the company’s form of choice. The following are some of the advantages:

• A single proprietorship firm is simple to set up since there are few legal requirements. Similarly, closing a firm is a painless process.
• The sole owner controls the firm as the only decision-maker, allowing for swift choices.
• The sole proprietor enjoys all the Business’s gains while bearing all its misfortunes.
• Because the lone proprietor is the only person in charge of the business, it is highly flexible.

Q8. Which business model is best for the following businesses, and why?

• Coaching centre for the students of science subject
• A beauty salon
• A shopping centre
• Little repair shops

Answer. The suitable business model for the businesses as mentioned earlier would be:

• Coaching center for the students of science subject: Collaboration with a science coaching facility. It’s simple to set up and run, and it’s inexpensive. Partners report their share of profit or loss on their tax returns.
• A beauty salon: A salon can be run as a sole proprietorship. Created and ran straightforwardly and cost-effectively. The owner declares profit or loss on their tax return.
• A shopping center: shopping malls are JSCs (joint-stock corporations). Personal responsibility for commercial debts is restricted for business owners.
• Hotel: In the hotel industry, there are joint-stock companies. Small businesses are drawn to LLCs and corporations because they minimize their owners’ liability for corporate debts and court judgments against the company. Another factor to consider is income taxes: you may set up a limited liability company (LLC) or a corporation to benefit from reduced tax rates. Furthermore, an LLC or company may be able to deduct the cost of a range of fringe benefits passed on to its employees (including the owners) as a business expense.
• A little repair shop: A sole proprietorship is appropriate for a small repair shop. Created and ran straightforwardly and cost-effectively. The owner declares profit or loss on their tax return.
• Restaurant: Ownership of a restaurant as a sole proprietor. Created and ran straightforwardly and cost-effectively. The owner declares profit or loss on their tax return.

Q9. How does a cooperative society exemplify democracy and secularism? Explain.

Answer: A cooperative society is run by persons chosen by all members through a democratic process. Each member has an equal right to vote, regardless of the amount of money they have invested. As a result, it functions as a democracy in which all members are treated equally and have similar rights. Members are not discriminated against because of their caste, religion, or gender. People of the management committee can select the members they believe best represent them. As a result, it denotes secularism.

Q10. What does it mean to have unlimited liability?

Answer: General partners and sole proprietors with unlimited liability are jointly and severally liable for the company’s debts and obligations. However, this obligation is not limited and can be paid off by seizing the owners’ assets, distinguishing it from limited liability partnerships.

Q11. Compare the status of a minor in a Hindu joint family business with that in a partnership firm.

Answer: A person under 18 is considered a minor in Indian law. By being born into a Joint Hindu household, a minor becomes a member of the family company. Like other family members, the minor has equal ownership and rights to the property and company. However, his obligation is limited to his part of the property.

As per the Indian Partnership Act of 1932, a minor cannot become a partner in a partnership business. However, if all partners agree, a minor can be initiated and partake in a firm’s profits. Still, a minor does not need to contribute capital or carry any obligation if the Business supports the firm. Therefore, minors aren’t regarded as partners. However, once they reach the age of 18, they have the option of continuing the relationship or terminating it.

Q12. Who has equal ownership rights to an ancestor’s property? Emphasise its most important aspects

Answer: A Joint Hindu Family is a form of business owned and operated by members of the Hindu Undivided Family (HUF). The company’s membership is based on birth in a specific family, and three generations of the same family can be members. The family’s business is run by the eldest member of the family, known as Karta. Joint Hindu Family Business members with equal ownership rights over an ancestor’s property are known as coparceners.

A combined Hindu family company has the following characteristics:

• Because membership is by birth, there is no requirement for an agreement.
• Except for the Karta, all members are only responsible for their portion of the Business’s co-coparcenary property. The Karta’s responsibility is boundless.
• Karta oversees the family company, and his choices bind everyone.
• After Karta’s death, the business is carried on by the next eldest son, Karta.

Q13. Why is it important to choose an appropriate form of organisation? Discuss the factors that determine the choice of form of organisation.

Answer: Choosing an appropriate business organisation is necessary since it is one of the most important decisions to make when beginning a business or expanding an existing one. A business can be owned and run in several ways. It’s challenging to modify a company model after it’s been decided. As a result, the type of business company chosen should be done with care and consideration.

The following factors influence organisational structure selection:

• Control: With a sole proprietorship, you have complete control over your operations and decision-making authority. If the owners, on the other hand, want to share ownership to make better judgments, they can form a partnership or a corporation.
• Nature of Business: Businesses that involve direct personal connection with customers, such as beauty salons or grocery stores, are better suited to a single proprietorship. The corporate kind of structure benefits large manufacturing units. The partnership structure is significantly more served in the case of professional services.
• Management Skills: Being informed in all firm parts is difficult for a sole owner. Members split their labour in other organisations, such as partnerships and businesses, allowing management to specialise in specific areas and make better judgments.
• Capital Requirements: The corporation form is suitable for large-scale activity since it may generate a large amount of money by issuing shares. There are two options for medium and small firms: partnership or sole proprietorship. In the framework of a company, expansion capital requirements may be managed more easily.
• Continuity: The continuity of sole proprietorship and partnership enterprises can be disrupted by events such as the owners’ death, insolvency, or insanity. In organisations like joint Hindu family companies, cooperative societies, and corporations, such factors, on the other hand, have minimal influence on the business’s survival.
• Liability: The liability of the owners/partners of a sole proprietorship or partnership is unlimited. This might lead to the owners’ assets being used to repay the debt.
• Cost and Convenience of Starting a Company: A sole proprietorship is straightforward to start in terms of initial business costs and legal procedures, but because of its more minor activities, a partnership has the advantage of less legal formalities and lower prices. Registration is necessary in the case of cooperative societies and companies. The process of founding a company takes time and money.

Q14. What are the reasons for the formation of cooperative forms of organisation? Describe the different sorts of cooperative societies.

Answer. A cooperative society is a collection of individuals who get together voluntarily for the common welfare of its members. They are motivated by a desire to defend their economic interests from potential exploitation by intermediaries looking to increase their profits. The process of founding a cooperative organisation is simple, and all that is necessary is the agreement of at least ten adults. A society’s capital is raised by selling shares to its members. An organisation acquires a distinct legal character when it is registered.

One sort of cooperative society is the consumer cooperative society.

• It was designed to protect consumers’ interests.
• To improve operational savings, society strives to eliminate intermediaries. Instead, it purchases things in bulk from wholesalers and resells them to its members.
• Profits are dispersed depending on capital contributions to the organisation or purchases made by individual members.

Producer Cooperative Societies are a specific sort of producer cooperative society.

• It was established to protect the interests of small farmers.
• Members are producers looking for inputs to create commodities to fulfil customer demands.
• Profits are distributed according to their contributions to the society’s overall pool of products produced or sold.

Cooperative Societies Marketing-this organisation was established to help small manufacturers market their products.

• Producers that demand fair pricing for their commodities are among the group’s members.
• It combines individual members’ production and marketing activities such as shipping, storage, and packaging to sell the commodities for the best feasible price. Profits are dispersed according to the amount of money each member puts in.

Farmers’ Cooperative Societies were formed to protect farmers’ interests by providing high-quality inputs at a reasonable price.

• Members are farmers who want to collaborate on farming projects.
• The idea is to increase productivity while reaping the benefits of large-scale farming. Improving farmer output and returns while addressing challenges associated with farming on fragmented land holdings.

Cooperative Financing Societies were established to give members timely credit at reasonable rates.

• Members are individuals seeking financial assistance in the form of loans.
• The purpose of such groups is to protect members from being taken advantage of by lenders who demand high-interest rates on loans.

A cooperative housing organisation is a sort of Cooperative Housing Societies.

• It was established to assist low-income people in constructing homes at a reasonable cost.
• These societies are people looking for a cheaper location to reside in.
• The purpose is to alleviate members’ housing issues by constructing homes and allowing them to pay in instalments.

Q15. If registration is optional, why do partnership firms willingly go through this legal formality and register themselves? Explain.

Answer: Although partnership business registration is optional, many firms choose to do so. This is owing to the severe legal consequences of failing to register. Listed below are a few examples:

• The partners of a non-registered business cannot sue a third party, but the non-registration of a partnership firm does not prevent other firms from hiring it.
• The company is forbidden from filing a lawsuit against any of its partners. Similarly, a partner in a non-registered firm cannot sue their co-partners or the company.
• Claims against a third party by a non-registered partnership entity cannot be enforced in court. As a result, partnerships are established to overcome these disadvantages.

Forms of Business Organisation Class 11 Important Questions – Key Topics Covered 

Class 11 Business Studies Chapter 2 Important Questions covers the following key topics:

Forms of business organizations

There are several different types of business organizations from which to choose:

• Sole proprietorship 

Joint Hindu family business

• Partnership 
• Cooperative societies

Joint-stock company

Sole Proprietorship

It is a type of Business owned, managed, and controlled by a single person who carries all the risks and reaps all the rewards.

• It can be formed and disbanded without the need for any legal requirements.
• In this business organisation, the lone proprietor’s responsibility is unrestricted.
• As the single risk carrier and profit recipient, he bears all the risks and reaps all the rewards.
• There is no distinction between the owner and the Business in the eyes of the law.
• All choices must be made by the owner, which necessitates prompt decision-making.
• As a lone proprietor, it is simple to keep company secrets.
• Because there is no one to share gains with, the owner enjoys all the profits.
• There are no legal requirements for establishing and closing a business, making creating and completing one simple.

Limitations:

• The owner’s savings or money borrowed from friends and family might be used to support the Business.
• A business’s life expectancy is limited as it is dependent on the owner’s health and mental state.
• His assets are at stake if the firm fails to satisfy its debts.
• A single individual may not be able to oversee all of the functions.

It is a type of business that is owned and managed by members of an undivided Hindu family, with three generations of family members potentially participating.

• Hindu Undivided Families are created when at least two family members have ancestral property. The Hindu Succession Act of 1956 governs it.
• Except for the Karta, all family members have limited responsibility for their part of the company property.
• Karta oversees all actions inside the corporate organisation.
• It can be stopped if all members of the family agree to it.
• Organisation membership is based on birth.
• With ‘Karta,’ you have complete control over your firm and can make better decisions.
• If ‘Karta’ dies, the Business continues until all members desire to continue, and then control is given to the next eldest member.
• Family members are only liable for their share of the business party.
• Because family members feel connected and loyal, they work together to achieve a common goal of progress.
• Businesses might be supported primarily via inheritance, restricting financial resources.
• Karta’s personal property is at risk due to his unlimited liability.
• Differences of opinion among members and the ‘Karta’ might lead to conflict.
• Karta’s managerial abilities are limited, and he may not be familiar with all of the Business’s functions.

Partnership:

According to the Partnership Act of 1932, a partnership is a relationship between people who have agreed to share the earnings of a firm run by all or by one acting on behalf of all of them.

• The partnership Act of 1932 governs the establishment of the Business.
• The liability of all company partners is unlimited.
• All the partners share the risk in the Business.
• All decisions are made with the approval of all partners, and each partner bears responsibility for the company’s day-to-day operations.
• Because registration is optional, a business can be formed and ended with the approval of all partners.
• As partners take on tasks according to their competence, all choices are made by consensual partners.
• All partners contribute money, broadening the scope of large-scale company operations.
• There is no need to report financial results; therefore, maintaining corporate secrets is simple.
• Their complete responsibility covers each partner’s personal property.
• All parties may have differing viewpoints, which can lead to conflict.
• Any disagreement between partners or the death of a partner might put the company out of operation.
• Due to a lack of financial disclosures, an outsider can’t determine the actual economic situation.

Cooperative society

An organisation of volunteers working for a shared goal to protect members’ economic and social interests. The Cooperative Societies Act of 1912 requires it to be registered.

• Any individual with a shared interest, regardless of caste, gender, or religion, is free to join or leave a cooperative organisation at any time.
• A cooperative society has a different identity from its members, and the registration of such a group is required.
• The goal of forming a society is to provide mutual assistance to team members.
• Each member has the same right to vote and elect managing committee members.
• Cooperative societies maintain their existence in the face of death, bankruptcy, or insanity among their members.
• Members of society work willingly, which helps to save expenses.
• The only funding source is the member’s capital contribution, and the low dividend discourages members from contributing money to the organisation.
• Volunteer members may lack the requisite competence and skills, resulting in inefficient operations and management.
• It’s challenging to preserve secrets since members provide all information about the society’s operations at the meeting.

“A corporation is an artificial person with a separate legal existence, eternal succession, and a common seal,” according to the Companies Act of 2013.

• A corporation is a legal entity with legal standing but does not act as humans do. The board of directors conducts all corporate actions in the corporation’s name.
• Companies are founded following the legal requirements outlined in the Companies Act of 2013.
• A corporation is formed by law and may only be disbanded by legislation. Therefore, the company’s existence is unaffected by the status of its members.
• The responsibility of shareholders is limited to their investment in the firm. Therefore, there is no chance of personal assets being lost.
• The firm’s existence is unaffected by its stockholders’ status; it continues to exist.
• Companies can borrow vast sums of money from financial institutions or banks and solicit cash from the public.
• The formation of a corporation necessitates the completion of several documents and legal requirements, making the process lengthy and complicated.
• There is no confidentiality or secrecy because all financial information is given to the general public.
• Decision-making must adhere to a hierarchy, leading to delays in making judgments and implementing actions.

Choice of the Type of Business organisation

• Nature of Business
• Cost of setting up the organisation
• Capital consideration
• Degree of control
• Management ability

The briefly described topics in the above sections are covered in the Important Questions Class 11 Business Studies Chapter 2. 

Benefits of Solving Class 11 Business Studies Chapter 2 Important Questions

Business Studies is one subject that requires a lot of reading and revisions. This subject is introduced in Class 11, and it prepares the base for Class 12 board examinations. Therefore, students are advised to access Important Questions of Business Studies Class 11 Chapter 2 . Students will get a sense of confidence by solving essential questions from all the chapters and overlooking their solutions. 

Mentioning below are some benefits of solving Important Questions Class 11 Business Studies Chapter 2:

• Students will benefit from practising questions similar to exam questions to do better in their examinations and earn high grades.
• The questions and answers follow CBSE criteria and are based on the most recent CBSE syllabus . As a result, students can rely on them.
• These important questions are prepared by following the exam writing pattern. Therefore, going through these will help students prepare for exams too.

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Q.1 The North Coast Cooperative that was Established in 1973 was the large consumer cooperative that offered a full service grocery store and deli. Director started to deal with bulk purchasing and packaging issues. Many people in the college-campus area wanted a supply of natural food products, which didnt exist. They wanted a cheaper, more reliable supply if they purchased togetherin bulk.

From the start, the co-op tried to provide a market for local produce. Initially, the farmers provided a fairly limited variety, mostly tomatoes, sweet corn, zucchini and other common garden vegetables. The co-op uses purchasing contracts, which act as a type of insurance to motivate farmers to produce new and different varieties

Explain the type of cooperative society that is refered to here. Also give three points to support the formation of such a form of business enterprise.

Marks: 1 Ans

This is a consumer cooperative society. These are formed to protect the interests of consumers. Members are consumers who want to get good quality products at reasonable prices. The society aims at eliminating middlemen for economy in operations.

Society purchases goods in bulk directly from the wholesalers and sells goods to the members directly.

Profits are distributed on the basis of either their capital contributions to the society or purchases made by individual members.

Merits of cooperative form of organisation are:

(i) Equal voting status: There is a principle of ‘one man one vote’ i.e., irrespective of the capital contribution by a member, each member is entitled to equal voting rights.

(ii) Limited liability: As the liability of members of a cooperative society is limited to the extent of their capital contribution, their personal assets of the members are safe from being used to repay business debts.

(iii) Stability: Death, bankruptcy or insanity of the members do not affect continuity of a cooperative Society i.e., it remains unaffected by any change in the membership.

(iv) Economy in operations: Focus of society is on elimination of middlemen which helps in reducing costs.

(v) Government support: Cooperative society exemplifies the idea of democracy and hence Government supports in the form of low taxes, subsidies, and low interest rates on loans.

(vi) Ease of formation: It can be started with a minimum of ten members and registration procedure is simple with few legal formalities.

Q.2 A friends group of a hotel management institute wants to start their own catering house that will serve parties, weddings, church functions and business events. All 4 of them are very good cooks and have managed the university parties very well. They want to start and see that how this business works with contributing small small savings initially.

What form of business organisation shall they form with limited funds

Looking at their conditions and case, the friends shall form a partnership initially. Partnership offers the advantage of less legal formalities and lower cost because of limited scale of operations.

After being successful, this partnership can take form of any other form of business organisation based on the decisions of partners.

Q.3 Karan is the sole owner of a shoe manufacturing factory. He took loan of `30 lakhs from a bank so as to expand his business further. However, he incurred losses in the business, due to which Karan was not able to pay the loan on time and his assets were also not sufficient enough repay back the loan. As a result, the bank asked him for repayment of loan, but he refused to pay on the ground that the loan was taken in the name of business and not for personal use. The bank file a case against Karan and the court gave the decision in favor of Bank on the on the basis that Karan is the sole proprietor and his business doesnt have separate identity from his own. The Court further stated that Karan is liable to repay the loan even by selling his personal property.

State the demerits of the business organisation being highlighted in the above case.

Marks: 6 Ans

The form of business organisation being highlighted above is Sole proprietorship.

Demerits of Sole proprietorship

• Limited life: Death, insolvency or illness of proprietor affects the business and may even lead to its closure as he/she is the sole owner of the business.
• Unlimited liability: Owner has unlimited liability. In case of business failure, creditors can recover their dues not only from the business assets, but also from the personal assets of proprietor. It makes the sole proprietor less inclined towards taking risks in the form of innovation or expansion
• Limited resources: Resources are limited to his/her personal savings or borrowing from other parties. Banks and other financial institutions might hesitate in lending long term loan to the sole proprietor. Size of the business rarely grows much and generally remains small due to lack of resources.
• Limited Managerial Ability: The proprietor has to assume responsibility of varied managerial tasks. Since a business owner may not be a specialist in every field, there is a possibility of unbalanced decision making. Moreover, proprietor may not be able to employ and retain talented and ambitious employees, due to limited resources.

Q.4 A private company is superior to a public company. Discuss this statement in the light of privileges of a private company.

Privileges of a private limited company as against a public limited company:i. A private company can be formed only by two members, whereas seven persons are needed to form a public company. ii. There is no need to issue a prospectus as public is not invited to subscribe to the shares of a private company. iii. Allotment of shares can be done without receiving the minimum subscription. iv. A private company can start business as soon as it obtains the certificate of incorporation, whereas a public company can start its business only after receiving the certificate of commencement of the business. v. A private company needs to have only two directors as against the minimum of three directors in case of a public company. vi. A private company is not required to keep an index of members, while it is necessary in case of a public company.

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Cbse class 11 business studies important questions, chapter 1 - business, trade and commerce.

Chapter 3 - Private, Public and Global Enterprises

Chapter 4 - business services, chapter 5 - emerging modes of business, chapter 6 - social responsibilities of business and business ethics, chapter 7 - formation of a company, chapter 8 - sources of business finance, chapter 9 - small business, chapter 10 - internal trade, chapter 11 - international business, faqs (frequently asked questions), 1. how many business studies books are there for class 11.

For Class 11 Business Studies, the Central Board of Secondary Education (CBSE) only recommends one book. Therefore, the National Council of Educational Research and Training (NCERT) has released this book, which is available in both English and Hindi. This book is broken into two sections and has ten chapters. Part A comprises six units that address business foundation information, while part B contains the remaining four units that discuss financial and trade knowledge.

2. What are the essential chapters in Business Studies in Class 11?

There are ten chapters in the Business Studies syllabus for Class 11. Chapter 7 – Sources of Business Finance, Chapter 8 – Small Business, Chapter 9 – Internal Trade, and Chapter 10 – International Business are the most significant. It is so because they have a greater weight than the rest of the syllabus. Students can refer to Important Questions Class 11 Business Studies Chapter 2 for easier comprehension of these chapters.

3. What is so special about Important Questions Class 11 Business Studies Chapter 2 that it makes Extramarks stand out from the rest?

 These Important Questions Class 11 Business Studies Chapter 2 are developed exclusively by the Extramarks subject experts. These solutions are 100 percent authentic and have been made after much research. They cover the concepts of the entire chapter and are written in simple and easy language.

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NCERT Solutions For Class 11 Business Studies Forms of Business Organisation

August 17, 2017 by phani

Free PDF download of NCERT Solutions for Class 11 Business Studies Chapter 2 Forms of Business Organisation solved by Expert Teachers as per NCERT (CBSE) Book guidelines. All Chapter wise Questions with Solutions to help you to revise complete Syllabus and Score More marks in your examinations.

NCERT Solutions Class 11 Business Studies Business Studies Sample Papers

TEXTBOOK QUESTIONS SOLVED

I. Multiple Choice Questions Tick the appropriate answer. Question 1. The structure in which there is separation of ownership and management is called (i) Sole proprietorship (ii) Partnership (iii) Company (iv) All business organizations Question 2. The Karta in Joint Hindu family business has: (i) Limited liability (ii) Unlimited liability (iii) No liability for debts (iv) Joint liability Question 3. In a cooperative society the principle followed is: (i) One share one vote (ii) One man one vote (iii) No vote (iv) Multiple votes Question 4. The board of directors of a joint stock company is elected by: (i) General public (ii) Government bodies (iii) Shareholders (iv) Employees Question 5. The maximum number of partners allowed in the banking business are: (i) Twenty (ii) Ten (iii) No limit (i v) Two Question 6. Profits do not have to be shared. This statement refers to: (i) Partnership (ii) Joint Hindu family business (iii) Sole proprietorship (iv) Company Question 7. The capital of a company is divided into number of parts each one of which are called: (i) Dividend (ii) Profit (iii) Interest (ii) Share Question 8. The Head of the Joint Hindu family Business is called (i) Proprietor (ii) Director (iii) Karta (iv) Manager Question 9. Provision of residential accommodation to the members at reasonable rates is the objective of (i) Producer’s cooperative (ii) Consumer’s objective (iii) Housing cooperative (iv) Credit cooperative Question 10. A partner whose association with the firm is unknown to the general public is called (i) Active partner (ii) Sleeping partner (iii) Nominal partner (iv) Secret partner Answer: 1. (iii) 2. (ii) 3. (ii) 4. (iii) 5. (ii) 6. (iii) 7. (iv) 8. (iii) 9. (iii) 10. (iv)

II. Short Answer Type Questions Question 1. For which of the following types of business do you think a sole proprietorship firm of organization would be more suitable, and why? (i) Grocery store (ii) Medical store (iii) Legal consultancy (iv) Craft centre (v) Internet cafe (vi) Chartered accountancy firm Answer:  Sole proprietorship will be more suitable for grocery store, medical store, and internet cafe because:

• It has easy formation and closure.
•  It needs limited resources.
• He will be sole risk bearer which is not so high and profit recipient.
• He will have 100% control.

Question 2. For which of the following types of business do you think a partnership firm of organization would be more suitable, and why? (i) Grocery store (ii) Medical store (iii) Legal consultancy (iv) Craft centre (v) Internet cafe (vi) Chartered accountancy firm Answer:  For legal consultancy and chartered accountancy firm, partnership firm will be more suitable because it has:

• Ease of formation and closure
•  Balanced decision making
• Sharing of risks
• Maintain secrecy

Question 3. Explain the following terms in brief: (i) Perpetual succession (ii) Common seal (iii) Karta (iv) Artificial person Answer:   (i) Perpetual Succession: Perpetual succession refers to continuous succession of a corporation. Perpetual succession is one of the remarkable features of a corporation. The very objective of a corporation is to have a perpetual succession, for there can not be a succession forever without incorporation. The company has perpetual succession. The death or insolvency of a shareholder does not affect its existence. A company comes into end only when it is liquidated according to provision of the Companies Act. (ii) Common Seal: The expression ‘Common Seal’ is not defined in the Companies Act, 1956. General practice is to adopt the Common Seal, at the first Board Meeting of the company. It must be kept under the safe custody of authorized director/officer. The Articles of Association, may set out how and when the common seal has to be affixed. (iii) Karta: Karta is the head of Joint Hindu family business. He has unlimited liability and final decision making power. (iv) Artificial Person: A person in the eyes of law is called an artificial person. An entity which has a separate legal entity in the eyes of law is called artificial person. A joint stock company and a cooperative society are artificial persons.

Question 4. Compare the status of a minor in a Joint Hindu Family Business with that in a partnership firm. Answer:  A minor becomes a member of Joint Hindu Family Business by virtue of his birth. On the other hand, in partnership, minor can be a partner only in profits.

Question 5. If registration is optional, why do partnership firms willingly go through this legal formality and get themselves registered? Explain. Answer:  However registration is optional, partnership firms willingly go through this legal formality and get themselves registered because it has some merits:

• Settlement of Claims: Registered firms can file suit against the third parties. So the rights of registered firms are safeguarded by law. But an un-registered firm or its partner cannot enforce its claim against the third parties or its co-partner.
• Protection of Rights: The rights and privileges of new partner are also protected in registered firm. But if incoming partner fails to register himself, he will incur great risk, because he will not be in a position to file suit for his dues against his firm or his co-partners.
• Protection of Property: The property of the retired or deceased partner continues to be liable for the acts firm does after his death or retirement until public notice is served for the change to registrar, So there is strong inducement for partners of registered firms to have the changes noted in the register. But if there is unregistered firm, the private property of the out-going partner will be considered liable to charge the debts in spite of retirement.
• Protection to Creditors: Registered firm has to maintain correct, complete and up-to-date record of its partners who will be liable for the obligations of the firm. The statement recorded in the register regarding constitution of firm would afford a strong safeguard against untrue refusal of partnership and the evasion of liability to persons who want to deal with the firm.

Question 6. State the important privileges available to a private company. Answer:  A company can be registered as a private company or a public company. When a company is incorporated as a private company, it enjoys certain privileges and exemptions when compared to a public company. Some of the privileges enjoyed by a Private Company are:

• The minimum number of members required to form a Private Company is only 2, whereas it is 7 in case of a Public Company.
• A Private company can start its business immediately after its incorporation. It need not obtain the Certificate of Commencement of Business. ‘Certificate of Commencement of Business, is issued by the Registrar of Companies to Public Companies. Once a Company has been registered or formed, it shall apply for the Certificate of Commencement of Business in the prescribed form to the ROC (Registrar of Companies). Only after this certificate has been obtained it can commence its business. This certificate has to be obtained within 6 months from the date of incorporation of a Company.’
• No qualification shares and consent of the Director to act as a Director is required to be filed with the ROC at any time during the tenure of the company, as in case of a Public company.
• A Private Company is not required to issue or file a prospectus or statement in lieu of prospectus with the Registrar of Companies. ‘Prospectus, is an important document for a public company. It is nothing but an invitation to the public to subscribe for the shares of the Company. In case a public company does not intend to invite the public to subscribe to the shares, it has to file a statement in lieu of prospectus.
• It is not required to have an index of members, as in case of a public company. The reason being the Companies Act limits the maximum number of members required for a Private Company to 50.
• It is not required to hold a statutory meeting or file a statutory report. ‘Statutory meeting is a general meeting of the shareholders of the Company which has to be held within a period of not less than one month and not more than 6 months from the date, on which it is entitled to commence its business.”
•  It is not required to offer new shares to existing shareholders in proportion to their shareholdings. In case of a Public Company further issue of capital shall be made to the persons who at the date of the issue are holders of the equity shares of the Company in proportion to their holding.
• A Private Company need to have a minimum of two directors only whereas a Public Company needs to have a minimum of three directors.
• All the Directors may be appointed by a single resolution in case of a Private Company.
• The Directors of a Private Company need not to retire by rotation i.e., they can be Permanent Directors.

Question 7. How does a cooperative society exemplify democracy and secularism? Explain. Answer:  Cooperative is a form of organization wherein persons voluntarily associate together as human beings on the basis of equality for the promotion of an economic interest for themselves. In a cooperative society, the power to take decisions lies in the hands of an elected managing committee. The right to vote gives the members a chance to choose the members who will constitute the managing committee and this lends the cooperative society a democratic character. Also, the principle of ‘one man, one vote’ governs the cooperative society, irrespective of the amount of capital contribution by a member, each member is entitled to equal voting rights. The membership of a cooperative society is voluntary. A person is free to join a cooperative society, and can also leave anytime as per his desire. Membership is open to all, irrespective of their religion, caste and gender. Thus, by keeping all these points in mind, a cooperative society exemplifies democracy and secularism.

Question 8. What is meant by ‘partner by estoppel’? Explain. Answer:  When a person, by words spoken or written or by conduct, represents himself or herself, or consents to another representing him or her to anyone, as a partner in an existing partnership or with one or more persons not actual partners, he or she is liable to any such person to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership and, if he or she has made such representation or consented to its being made in a public manner, he or she is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made, as follows:

• If a partnership liability results, he or she is liable as though he or she were an actual member of the partnership.
• If no partnership liability results, he or she is liable jointly with the other persons, if any, so consenting to the contract or representation as to incur liability, otherwise separately.
• When a person has been thus represented to be a partner in an existing partnership, or with one or more persons not actual partners, that person is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as though that person were a partner in fact, with respect to persons who rely upon the representation where all the members of the existing partnership consent to the representation, a partnership act or obligation results; but in all other cases it is the joint act or obligation of the person acting and the persons consenting to the representation.

III. Long Answer Type Questions Question 1. What do you understand by a.sole proprietorship firm? Explain its merits and limitations. Answer:  If entrepreneur starts sole proprietor form of business, then he has the following advantages. Advantages of Sole Proprietor Form of Business: 1. Easy formation: The formation of sole proprietorship business is very easy and simple. No legal formalities are involved for setting up the business except a license or permission in certain cases. The entrepreneur with initiative and certain amount of capital can set up such form of business. 2. Direct motivation: The entrepreneur owns all and risks all. The entire profit goes to his pocket. This motivates the proprietor to put his heart and soul in the business to earn more profit. Thus, the direct relationship between effort and reward motivates the entrepreneur to manage the business more efficiently and effectively. 3. Better control: The entrepreneur takes all decisions affecting the business. He chalks out the plan and executes the same. His eyes are on everything and everyone. There is no scope for laxity. This results in better control of the business and ultimately leads to efficiency. 4. Promptness in decision-making: When the decision is to be taken by one person, it is sure to be quick. Thus, the entrepreneur as sole proprietor can arrive at quick decisions concerning the business by which he can take the advantage of any better opportunities. 5. Secrecy: Each and every aspect of the business is looked after by the proprietor and the business secrets are known to him only. He has no legal obligation to publish his accounts. Thus, the maintenance of adequate secrecy leaves no scope to his competitors to be aware of the business secrets. 6. Flexibility in operations: The sole proprietorship business is undertaken on a small scale. If any change is required in business operations, it is easy and quick to bring the changes. 7. Scope for personal touch: There is scope for personal relationship with the entrepreneur and customers in sole proprietorship business. Since the scale of operations is small and the employees work under his direct supervision, the proprietor maintains a harmonious relationship with the employees. Similarly, the proprietor can know the tastes, likes and dislikes of the customers because of his personal rapport with the customers. 8. Free from Government control: Sole proprietorship is the least regulated form of business. Regulated laws are almost negligible in its formation, day-to-day operation and dissolution. Disadvantages of Sole Proprietor Form of Business: The sole proprietorship business is not free from criticism. It suffers from certain limitations and drawbacks, because of its very nature and scope of operations. These points may be duly taken care of while entrepreneur adopting this mode of business. 1. Limited resources: The financial resources of any small business as an individual is limited. He mainly finances from his own savings or borrows from financial institutions, friends and relatives as per his capacity. Thus, limited resource is the major drawback of this form of business. 2. Limited managerial capability: Modern business requires updated managerial skills in each and every sphere of activity. We cannot hope a single individual to possess all the managerial, talents necessary to carry on a business efficiently. The limited financial resources of the sole proprietorship is a hindrance to hire the services of managers with expertise in different areas, thereby the growth of the business. 3. Unlimited liability: Since the liability of the sole proprietor is unlimited, the private properties of the proprietor is also at risk. When the business fails, the private properties of the owner are utilized to pay off the business debts. Thus, the proprietor must have to look this aspect carefully. 4. Uncertainty of continuity: The continuity of the business is uncertain because the business may come to an end due to the incapacity or death of the proprietor. Even if at all the business passes on to the successor of the proprietor, it is unlikely that they may pose the business acumen like that of the proprietor. The discontinuance of the business is a social loss. 5. Not suitable for large-scale business: The limited financial resources, limited managerial capability of the proprietor, risk to the private property etc. makes the proprietorship business unsuitable for large-scale business. This system of business cannot afford for large-scale operation. 6. Difficult to maintain personal contact : Even though there is scope for personal touch in sole proprietorship business, it is unlikely to happen when the business is undertaken in different areas. It is not so easy on the part of the proprietor to have personal contact with customers and suppliers at the same time.

Question 2. Why is partnership considered by some to be a relatively unpopular form of business ownership? Explain the merits and limitations of partnership. Answer:  Partnership is considered by some to be relatively unpopular form of business ownership because:

• Uncertainty of duration: A partnership suffers from a possible limited span of life. Legally, a partnership firm must be dissolved on the retirement, death, bankruptcy, or lunacy of any partner or demanded by any partner. The probability of any one of these events occurring when the number of partners is much greater than in the case of a sole proprietor.
• Risks of additional liability: It is true that like the sole proprietor, each partner has unlimited liability. But his liability may arise not only from his own acts but also from the acts and mistakes of co-partners over whom he has no control.
• Lack of harmony: The old saying that “too many cooks spoil the broth” can be apt for a business partnership. Harmony may be difficult to achieve, especially when there are many partners. Lack of centralized authority and conflicts in policy can disrupt the organization.
• Difficulty in withdrawing investment: Investment in a partnership can be simple, but its withdrawal may be difficult or costly when this aspect is considered from the point of view of individual partners. This is so because no partner can withdraw his interest from the firm without the consent of all partners.
•  Lack of public confidence: A partnership may suffer from lack of public confidence
• Lack of public confidence: A partnership may suffer from lack of public confidence because, like that of a company there is no legal mechanism to enforce the registration of a partnership firm and the disclosure of its affairs.
• Limited resources: A partnership is good as it can be started with limited capital. However, it becomes a handicap in the growth and expansion phases of the business. There is a limit beyond which it is almost impossible for partners to collect capital. This limit is generally up to the personal properties of the partners.
• Unlimited liability: Unlimited liability discourages partners to undertake risky ventures, and therefore, their risk-taking initiative is very risky.

Merits of Partnership

• It is easy to set up.
• It has more capital, which can be brought into the business.
• Partners brings new skills and ideas to a business.
• Decision-making can be much easier with more brains to think about a problem.
•  Partners share responsibilities and duties of the business.
•  Division of labour is possible as partners may have different skills.

Limitations of Partnership

• There is an unlimited liability: All the partners are responsible for the debts of the firm and if the business goes bankrupt, all the partners will have to clear the debts even if they have to sell off their personal belongings.
• Disagreement among the partners can lead to problems for the business.
• There is a limit to the capital invested. Because of the fact that maximum 20 members are allowed, the business may find it difficult to expand after a certain limit.
• There is no continuity of existence. Partnership is dissolved if one of the partners die or resigns or becomes bankrupt.

Question 3. Discuss the characteristics, merits and limitations of the cooperative form of organization. Also describe briefly different types of cooperative societies. Answer:  It is important to choose an appropriate form of organization as it will determine: 1. Extent of control; 2. Extent of liability; 3. Availability of resources; 4. Legal formalities. All these in turn will determine profits of the business. Different types of cooperative societies are explained below:

• Producer’s cooperative societies: The producer’s cooperatives are established by the small producers. The members of the society produce goods in their houses or at common place. The raw materials, tools, money, etc. are provided to them by the society. The output is collected by the society and sold in the market at the wholesale rate. The profit is distributed among the members in proportion to the goods supplied by each member.
• Consumer’s cooperative societies: Consumer’s cooperative societies are established to remove middlemen from the field of trade. These societies purchase foods at the wholesale prices and sell these goods to the members at cheaper rates than the market prices. However, the goods are sold to the non-members at the market rates. The profit, if any, is distributed among the members in the shape of bonus according to their purchase ratio.
• Marketing cooperative societies: The marketing cooperative societies are formed by the small producers for the promotion of trade. The two main objectives of these societies are, to sell the good at reasonable prices by eliminating middlemen and to make there ready for the product of the member. These types of societies are formed by the small agriculturalist and artisans. These societies collect the products of its members and make its grading and keep them in warehouses and sell them in the market at whole sale rate when the market is ready for these products. The profit is distributed among the members according to the ratio of goods supplied by them.
• Credit cooperative societies: These cooperative societies are formed for the financial help of the members. These societies provide loans to the members at low rate of interest. In rural areas these provide loans to the farmers for the purchase of seeds, fertilizers and cattle. In urban areas these societies provide loan to its members for the purchase of raw materials and tools.
•  Farming cooperative societies: These societies are formed by the small agriculturalist to get the benefits of large scale farming. These societies provide help to the farmer for the improve method of cultivations by providing large scale farming tools such as tractors, threshers and harvesters, etc.
• Housing cooperative societies: These societies are formed for the procurement of land for the construction of houses on a homogeneous basis. These societies are formed by those members who are intended to construct their own home. These societies provide loan to the members for the construction of houses. These also purchase construction materials in bulk and provide this material to its member at cheaper rates.

Question.4. Distinguish between a Joint Hindu family business and partnership. Answer:  Differences between Joint Hindu family systems and sole proprietorship are given below:

• Regulating law: A partnership is governed by the provisions of the Indian Partnership Act, 1932. A Joint Hindu family business is governed by the principles of Hindu law.
• Mode of creation: A partnership arises out of a contract, whereas a Joint Hindu family business arises by the operation of law and is not the result of a contract.
• Admission of new members : In a partnership no new partner is admitted without the consent of all the partners, while in the case of a Joint Hindu family firm, a new member is admitted just by birth.
• The position of families: In a partnership women can be full-fledged partners, while in a Joint Hindu family business membership is restricted to male members only. After the passage of the Hindu Succession Act, 1956, families get only co-sharer’s interest at the death of a coparcener and they do not become coparceners themselves.
• Number of members: In partnership the maximum limit of partners is 10 for banking business and 20 for any other business, but there is no such maximum limit of members in the case of Joint Hindu Family business.
• Liability of members: In partnership, the liability of the partners is joint and several as well as unlimited. In other words, each partner is personally and jointly liable to an unlimited extent and if partnership liabilities cannot be fully discharged out of the partnership property each partner’s separate personal property is liable for the debts of the firm.

In a Joint Hindu family business, only the ‘Karta’ is personally liable to an unlimited extent, i.e., his self-acquired or other separate property besides his share in the joint family property is liable, for debts contracted on behalf of the family business.

Question 5. Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organization. Why? Answer:  Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organization because of following merits:

• Easy to start and close: It can be easily started and closed without any legal formalities.
• Quick decision making: As sole trader is not required to consult or inform anybody about his decisions.
• Secrecy: He is not expected to share his business decisions and secrets with anybody.
• Direct incentive: Direct relationship between efforts and reward provide incentive to the sole trader to work hard.
•  Personal touch: The sole trader can maintain personal contacts with his customers and employees.
• Social utility: It provides employment to persons with limited money who are not interested to work under others. It prevents concentration of wealth in a few hands.

MORE QUESTIONS SOLVED

I. Multiple Choice Questions Question 1. Name the form of business organization found only in India. (a) Sole Proprietorship (6) Partnership (c) Joint Hindu Family (d) Cooperatives Question 2. Choose the type of business in which sole proprietorship is very suitable. (a) CA Firm (b) Beauty Parlour (c) A shopping mall (d) All of these Question 3. Name the person who manages a Joint Hindu Family Business. (a) Manager (b) Minor (c) Members (d) Karta Question 4. Name the law which governs Joint Hindu Family Business. (a) Partnership Act (b) Hindu Law (c) Companies Act, 1956 (d) Contract Act Question 5. Which document is called charter of a company? (a) Memorandum of Association (b) Articles of Association (c) Prospectus (d) All of the above Question 6. What is the minimum number of persons required to form a co-operative society? (a) 2 (6) 7 (c) 10 (d) 20 Question 7. Which of the following has unlimited liability in business? (a) Sole Proprietor (b) Karta (c) Partners (d) All of the above Question 8. Name the type of company which must have a minimum paid up capital of 5 lacks, (a) Public Company (b) Private Company (c) Government Company (d) All of the above Question 9. Which of the following has a separate legal entity? (a) Joint Stock Company (b) Co-operative Society (c) Both of the above (d) None of the above Question 10. Minor can be full-fledged member of: (a) Co-operative Society (b) Joint Stock Company (c) Joint Hindu Family (d) Partnership Answer: 1. (c) 2. (b) 3. (d) 4. (b) 5. (a) 6. (b) 7. (d) 8. (a) 9. (c) 10. (c)

II. Short Answer Type Questions Question 1. Explain the concept of mutual agency in partnership with suitable example. Answer:  The right of all the partners in a partnership to act as the agents for the partnership’s normal business activities, with the authority to bind the partnership in to business agreements which have been entered into is called mutual agency. This statement sums up the partnership relationship. The relationship should offer flexibility, opportunity and balanced against that, risk. In partnership you entrust to fellow partners your future reputation and prosperity. Each of us has within our power the ability to enter into undertakings which could bankrupt our fellow partners.

Question 2. What is the role of Karta in Joint Hindu Family business? Answer:  In a Hindu Joint Family, the Karta or Manager occupies a pivotal and unique place. In that there is no comparable office or institution in any other system in the world. His office is independent and hence, his position is termed as sui generis. Karta’s position is sui generis. As had been explained earlier, his position/ office is independent and there is no comparable office in any system in the world.

• He has unlimited powers and even though he acts on behalf of other members, he is not a partner or agent.
•  He manages all the affairs of the family and has widespread powers.
• Ordinarily he is accountable to none. The only exception to this rule is if charges of misappropriation, fraud or conversion are levelled against him.
• He is not bound to save, economise or invest. That is to say that he need not invest in land if the land prices are about to shoot up, and hence, miss out on opportunities etc. He has the power to use the resources as he wishes, unless the above mentioned charges are levelled against him.
• He is not bound to pay income of joint family in any fixed proportion to other members. This means that the Karta need not divide the income generated from the joint family property equally among the family members. He can discriminate one member from another and is not bound to treat everyone impartially. Only responsibility is that he has to pay everyone something so that they can avail themselves of the basic necessities such as food, clothing, shelter, education etc. Karta’s Liabilities:

Apart from all the unlimited powers that are bestowed upon the Karta, he also has liabilities thrust on him.

• Karta has to maintain all the members of the joint family properly. If there is any shortfall in his maintenance, then any of the members can sue for maintenance.
• He is responsible for marriage of all the unmarried members in the family. Special emphasis is laid with respect to daughters in this case.
• In case of any partition suit, the Karta has to prepare accounts.
• He has to pay taxes on behalf of the family.
• Karta represents the family in all matters including legal, religious and social matters.

Question 3. Explain procedure of registering a partnership firm. Answer:  Procedure for Registration: In order to get a partnership firm registered an application in the prescribed form must be filed with the Registrar of Firms. The application should contain the following information:

• The name of the firm,
•  The principal place of business of the firm,
• Names of other places where the firm’s business is carried on,
• Names in full and permanent addresses of the partners,
• The date on which each partner joined the firm,
•  Duration of partnership, if any.

The application should be signed and verified by each partner. A small amount of registration fee is also deposited along with the application. The application is to be submitted to the Registrar for registration of the firm for its verification. If everything is in order and all legal formalities have been observed, the Registrar shall make an entry in the register of firms. He will also issue a certificate of registration. Any change in the information submitted at the time of registration, should be communicated to the Registrar. Registration does not provide a legal entity to the partnership firm.

Question 4. Is registration of partnership firm compulsory? What are the consequences of non-registration? Answer:  Registration of a partnership firm is not compulsory under law. The Partnership Act, 1932 provides hat if the partners so desire they may register the firm with the Registrar of Firms of the state in which the main office of the firm is situated. Consequences of Non-Registration: An unregistered partnership firm suffers from the following situations:

• It cannot enforce its claims against a third party in a court of law.
• It cannot claim adjustment for any sum exceeding Rs 100. Suppose an unregistered firm owes ? 1200 to A and A owes Rs 1000 to the firm the firm cannot enforce adjustment of ? 1000 in a court of law.
• It cannot file a legal suit against any of its partners.
• Partners of an unregistered firm cannot file any suit to enforce a right against the firm.
• The right of a partner to sue for the dissolution of the firm or for the accounts of a dissolved firm or to enforce any right or power to realise the property of a dissolved firm.
• The power of an Official Assignee or Receiver to realize the property of an insolvent partner.
• The rights of the firm, or its partners, having no place of business.
• Any suit or set off in which the claim does not exceed rupees one hundred.
• The right of a third party to sue the unregistered firm or its partners.

Question 5. What are the steps required for raising funds from public? Answer:  Following steps are required for raising funds from public:

• SEBI Approval: SEBI regulates the capital market of India. A public company is required to take approval from SEBI.
• Filing of Prospectus: Prospectus means any documents which invites offers from the public to purchase share and debenture of the company.
• Appointment of Bankers, Brokers, Underwriters: Bankers of the company receive the application money. Brokers encourage the public to apply for the shares. Underwriters are the persons who undertake to buy the shares if these are not subscribed by the public. They receive a commission for underwriter.
• Minimum Subscription: According to the SEBI guidelines, minimum subscription is 90% of the issue amount. If minimum subscription is not received then the allotment cannot be made and the application money must be returned to the applicants within 30 days.
• Application to Stock Exchange: It is necessary for a public company to list their shares in the stock exchange. Therefore, the promoters apply in a stock exchange to list company shares.
• Allotment of Shares: Allotment of shares means acceptance of share applied. Allotment letters are issued to the shareholders. The name and address of the shareholders is to be submitted to the Registrar.

Question 6. Define Articles of Association. What are its contents? Answer:  The Articles of Association are the rules for the management of the internal affairs of a company. The articles define the duties, rights and power of the officer and director of the company. Contents of the Articles of Association (It is not an exhaustive but illustrative list)

• The amount of share capital and different types of shares.
• Rights of each class of shareholder.
• Procedure for making allotment of shares.
• Procedure for issuing share certificates.
•  Procedure for forfeiture and reissue of share.
• Procedure for conducting, voting and proxy.
• Procedure for appointment of director.
•  Procedure for declaration of dividend.
• Procedure for alteration of share capital.
•  Procedure regarding winding up of the company.

Question 7. Differentiate between:

• Memorandum of Association and Articles of Association.
• Private and Public Company

Question 8. Define promoter. What are the functions of a promoter? Answer:  Promoter is a person who conceives the idea of starting a business, examines the feasibility of idea, assemble various resources, prepare necessary documents and perform other activities needed to commence the business. Functions of a promoter

•  Identification of business opportunity;
• Feasibility studies: the following feasibility studies may be undertaken: (a) technical feasibility (b) financial feasibility (c) economic feasibility
•  Name approval;
• Fixing up signatories to the Memorandum of Association;
•  Appointment of professionals;
•  Preparation of necessary documents.

Question 9. Explain the contents of Memorandum of Association. Answer:  Contents of Memorandum of Association: The memorandum must contain the following clauses:

• The Name Clause: It contains the name of company with which the company will be known.
• Registered Office Clause: It contains the name of the state, in which the registered office of the company is proposed to be situated.
•  Objects Clause: It defines the purpose for which the company is formed. It is further divided into two sub-clauses: (1) the main objects (2) other objects.
• Liability Clause: It states that the liability of members is limited to the amount unpaid on shares owned by them.
• Capital Clause: It specifies the maximum capital, which the company will be authorized to raise through issue of shares.
• Association Clause: In this clause, signatories to the memorandum, state their intention to be associated with the company and give their consent to purchase qualification shares.

III. Long Answer Type Questions Question 1. What do you mean by incorporation of a company? What are the steps involved in corporation of a company? Answer:  Incorporation of the company: It means registration of the company under Companies Act, 1956. The second stage involves the following steps:

• Memorandum of Association;
•  Articles of Association or statement in lieu of the prospectus (in case table A is adopted by public limited company);
• Written consent of proposed directors;
•  Agreement (if any) with proposed managing director, manager, etc.;
•  Copy of registrar’s letter approving the company’s name;
•  Statutory declaration;
• Notice of the exact address of the registered office.
• Payment of fees: Along with the above documents, necessary fees is to be paid.
•   Certificate of incorporation: The registrar issues a certificate of incorporation after being satisfied. Certificate is a conclusive evidence of regularity of incorporation of a company irrespective of any deficiency in its registration.

Question 2. Explain different types of partners. Answer:  Different types of partners are given below:

• General/Active Partner: Such a partner takes active part in the management of the firm.
• Sleeping of Dormant Partner: Although he does not take active part in the management of the firm, he invests money, shares profit and loss, has unlimited liability.
• Secret Partner: He participates in business secretly without disclosing his association with the firm to general public. His liability is also unlimited.
•   Nominal Partner: Such a partner only gives his name and goodwill to the firm. He neither invests money nor takes profit. But his liability is unlimited.
• Partner by Estoppels: He is the one who by his words or conduct gives impression to the outside world that he is a partner of the firm whereas actually he is not. His liability is unlimited towards the third party who has entered into dealing with firm on the basis of his pretension.
• Partner by Holding out: He is the one who is falsely declared partner of the firm whereas actually he is not. And even after becoming aware of it, he does not deny it. His liability is unlimited towards the party who has dealt it with firm on the basis of this declaration.

Question 3. Explain meaning, features, merits and demerits of Sole Proprietorship. Answer:  Sole Proprietorship means a business owned, financed and controlled by a single person who is recipient of all profits and bearer of all risks. It is suitable in areas of personalized services like beauty parlour, hair cutting saloons and small scale activities like retail shops. Features:

• Single Ownership: It is wholly owned by one individual.
• Control: Sole proprietor has full power of decision making.
• No Separate legal entity: Business and businessman are not separate entities in the eyes of law.
• Unlimited liability: The liability of owner is unlimited. In case the assets of business are not sufficient to meet its debts, the personal property of owner can be used for paying debts.
• No legal formalities: No legal formalities are required to start, manage and dissolve such business organization.
• Sole risk bearer and profit recipient: He bears the complete risk and there is nobody to share profit / loss with him.
• Quick decision making: As sole owner is not required to consult or inform anybody about his decisions.
•  Direct incentive: Direct relationship between efforts and reward provide incentive to the sole trader to work hard.
• Personal touch: The sole trader can maintain personal contacts with his customers and employees.

Limitations:

• Limited financial resources: Funds are limited to the owner’s personal savings and his borrowing capacity.
• Limited managerial ability: Sole trader can’t be good in all aspects of business and he can’t afford to employ experts also.
• Unlimited liability: Unlimited liability of sole trader compels him to avoid risky and bold business decisions.
• Uncertain life: Death, insolvency, lunacy or illness of a proprietor affects the business and can lead to its closure.
• Limited scope for expansion: Due to limited capital and managerial skills, it cannot expand to a large scale.

Question 4. Explain meaning, features, merits and demerits of partnership firm. Answer:  Partnership is a voluntary association of two or more persons who agree to carry on some business jointly and share its profits and losses. The partnership was evolved to overcome the shortcomings of sole proprietorship and Joint Hindu Family business. Features:

• Two or more persons: There must be at least two persons to form a partnership. The maximum number of persons is 10 in banking business and 20 in non-banking business.
• Agreement: It is an outcome of an agreement among partners which may be oral or in writing.
• Lawful business: It can be formed only for the purpose of carrying on some lawful business.
• Decision making and control: Every partner has a right to participate in management and decision making of the organization.
• Unlimited liability: Partners have unlimited liability.
•   Mutual agency: Every partner is an implied agent of the other partners and of the firm. Every partner is liable for acts performed by other partners on behalf of the firm.
• Lack of continuity: Firms existence is affected by the death, lunacy and insolvency of any of its partner. It suffers from lack of continuity.
• Ease of formation and closure: It can be easily formed. Only an agreement among the partners is required.
• Larger financial resources: There are more funds as capital is contributed by number of partners.
• Balanced decisions: As decisions are taken jointly by partners after consulting each other.
• Sharing of risks : In it, risk gets distributed among partners which reduces anxiety, burden and stress on individual partner.
• Secrecy: Secrecy can be easily maintained about business affairs as they are not required to publish their accounts or to file any report to the government.
• Limited resources: There is a restriction on the number of partners and hence capital contributed by them is also limited.
• Unlimited liability: The liability of partners is unlimited and they are liable individually as well as jointly. It may prove to be a big drawback for those partners who have greater personal wealth. They will have to repay the entire debt in case the other partners are unable to do so.
• Lack of continuity: Partnership comes to an end with the death, retirement, insolvency or lunacy of any of its partners.
• Lack of public confidence: Partnership firms are not required to publish their reports and accounts. Thus they lack public confidence.

Question 5. Explain meaning, features, merits and demerits of joint stock company. Answer:  Joint stock company is a voluntary association of persons having a separate legal existence, perpetual succession and common seal. Its capital is divided into transferable shares. Features:

• Separate legal existence: It is created by law and it is a distinct legal entity independent of its members. It can own property, enter into contracts, can file suits in its own name.
• Perpetual existence: Death, insolvency and insanity or change of members has no effect on the life of a company. It can come to an end only through the prescribed legal procedure.
• Limited Liability: The liability of every member is limited to the nominal value of the shares bought by him or to the amount, guaranteed by him.
• Transferability of shares: Shares of public company are easily transferable. But there are certain restrictions on transfer of share of private company.
•  Common seal: It is the official signature of the company and it is affixed on all important documents of company.
• Separation of ownership and control: Management of company is in the hands of elected representatives of shareholders known individually as director and collectively as board of directors.
• Limited liability : Limited liability of shareholders reduces the degree of risk borne by him.
• Transfer of Interest: Easy transferability of shares increases the attractiveness of shares for investment.
• Perpetual existence: Existence of a company is not affected by the death, insanity, insolvency of member or change of membership. Company can be liquidated only as per the provisions of companies Act.
• Scope for expansion: A company can collect huge amount of capital from unlimited number of members who are ready to invest because of limited liability, easy transferability and chances of high return.
• Professional management: A company can afford to employ highly qualified experts in different areas of business management.
• Legal formalities: The procedure of formation of company is very long, time consuming, expensive and requires lot of legal formalities to be fulfilled.
• Lack of secrecy: It is very difficult to maintain secrecy in case of public company, as company is required to publish and file its annual accounts and reports.
• Lack of motivation: Divorce between ownership and control and absence of a direct link between efforts and reward lead to lack of personal interest and incentive.
• Delay in decision making: Red tapism and bureaucracy do not permit quick decisions and prompt actions. There is little scope for personal initiative.
• Oligarchic management: Company is said to be democratically managed but actually managed by a few people i.e., Board of Directors. Sometimes they take decisions keeping in mind their personal interests and benefit, ignoring the interests of Shareholders and company.

Question 6. Explain the meaning, features, merits and demerits of cooperative society. Answer:  A cooperative society is a voluntary association of persons of moderate means, who unite together to protect and promote their common economic interests. Features:

• Voluntary association: Everyone having a common interest is free to join a cooperative society and can also leave the society after giving proper notice.
• Legal status: Its registration is compulsory and it gives it a separate identity.
• Limited liability: The liability of the member is limited to the extent of their capital contribution in the society.
• Democratic control: Management and control lies with the managing committee elected by the members by giving vote. Every member has one vote irrespective of the number of shares held by him.
• Service motive: The main aim is to serve its members and not to maximize the profit.
• State control: They have to abide by the rules and regulations framed by government for them.
• Distribution of surplus: The profit is distributed on the basis of volume of business transacted by a member and not on the basis of capital contribution of members.
• Ease of formation: It can be started with minimum of 10 members. Registration is also easy as it requires very few legal formalities.
• Limited liability: The liability of members is limited to the extent of their capital contribution.
• Stable existence : Due to registration it is a separate legal entity and is not affected by death, lunacy or insolvency of any of its members.
• Economy in operations: There is economy in operation due to elimination of middle man and voluntary services provided by its members.
• Government support: Government provides support by giving loans at lower interest rates, subsidies and by charging less taxes.
• Social utility: It promotes personal liberty, social justice and mutual cooperation. They help to prevent concentration of economic power in a few hands.
• Shortage of capital: It suffers from shortage of capital as it is usually formed by people with limited means.
• Inefficient management: Cooperative society is managed by elected members who may not be competent and experienced. Moreover it can’t afford to employ expert and experienced people at high salaries.
• Lack of motivation: Members are not inclined to put their best efforts as there is no direct link between efforts and reward.
•   Lack of secrecy: Its affairs are openly discussed in its meeting which makes it difficult to maintain secrecy.
• Excessive government control: It suffers from excessive rules and regulations of the government. It has to get its accounts audited by the auditor and has to submit a copy of its accounts to registrar.
• Conflict among members: The members are from different sections of society with different view points. Sometimes when some members become rigid, the result is conflict.

Question 7. Explain different types of partners. Answer:  The different kinds of partners that are found in partnership firms are as follows:

• Active or managing partner: A person who takes active interest in the conduct and management of the business of the firm is known as active or managing partner. He carries on business on behalf of the other partners. If he wants to retire, he has to give a public notice of his retirement; otherwise he will continue to be liable for the acts of the firm.
• Sleeping or dormant partner: A sleeping partner is a partner who ‘sleeps’, that is, he does not take active part in the management of the business. Such a partner only contributes to the share capital of the firm, is bound by the activities of other partners, and shares the profits and losses of the business. A sleeping partner, unlike an active partner, is not required to give a public notice of his retirement. As such, he will not be liable to third parties for the acts done after his retirement.
• Nominal or ostensible partner: A nominal partner is one who does not have any real interest in the business but lends his name to the firm, without any capital contributions, and doesn’t share the profits of the business. He also does not usually have a voice in the management of the business of the firm, but he is liable to outsiders as an actual partner.
• Partner by estoppel or holding out: If a person, by his words or conduct, holds out to another that he is a partner, he will be stopped from denying that he is not a partner. The person who thus becomes liable to third parties to pay the debts of the firm is known as a holding out partner. There are two essential conditions for the principle of holding out : (a) The person to be held out must have made the representation, by words written or spoken or by conduct, that he was a partner ; and (b) The other party must prove that he had knowledge of the representation and acted on it, for instance, gave the credit.
• Partner in profits only: When a partner agrees with the others that he would only share the profits of the firm and would not be liable for its losses, he will own as partner in profits only.
• Minor as a partner: A partnership is created by an agreement. And if a partner is incapable of entering into a contract, he cannot become a partner. Thus, at the time of creation of a firm a minor (i.e., a person who has not attained the age of 18 years) cannot be one of the parties to the contract. But under section 30 of the Indian Partnership Act, 1932, a minor ‘can be admitted to the benefits of partnership, with the consent of all partners. A minor partner is entitled to his share of profits and to have access to the accounts of the firm for purposes of inspection and copy. He, however, cannot file a suit against the partners of the firm for his share of profit and property as long as he remains with the firm. His liability in the firm will be limited to the extent of his share in the firm, and his private property cannot be attached by creditors. On his attaining majority, he has to decide within six months whether he will remain regular partner or withdraw himself from partnership. The choice in either case is to be intimated through a public notice, failing which he will be treated to have decided to continue as a partner, and he becomes personally liable like other partners for all the debts and obligations of the firm from the date of his admission to its benefits (and not from the date of his attaining the age of majority). He also becomes entitled to file a suit against other partners for his share of profit and property.
• Other partners: In partnership firms, several other types of partners are also found, namely, secret partner who does not want to disclose his relationship with the firm to the general public. Outgoing partner, who retires voluntarily without causing dissolution of the firm, limited partner who is liable only up to the value of his capital contributions in the firm, and the like.

IV. Higher Order Thinking Skills (HOTS) Question 1. X is interested in the floatation of a company. Briefly discuss the steps he should take. Answer:  Stages in the formation of a company: The formation of a company involves the following four stages: 1. Promotion, 2. Incorporation, 3. Subscription of capital, 4. Commencement of business. These four stages are relevant for formation of a public limited company. For a private limited company, only the first two stages are needed.

• Promotion: Promotion stage includes all the steps right from the identification of a business opportunity till the company is formed. All the tasks during the stage of promotion are performed by a promoter.
•   Incorporation of the company: It means registration of the company under Companies Act, 1956. This second stage involves the following steps: 1. Filing of documents: An application to the registrar for incorporation must be accompanied with the following documents: (i) Memorandum of Association. (ii) Articles of Association or statement in lieu of the prospectus (in case table A is adopted by Public Limited Company). (iii) Written consent of proposed directors. (iv) Agreement (if any) with proposed managing director, manager, etc. (v) Copy of registrar’s letter approving the company’s name. (vi) Statutory declaration. (vii) Notice of the exact address of the registered office 2. Payment of fees: Along with the above documents, necessary fees is to be paid. 3. Certificate of Incorporation: The registrar issues a certificate of incorporation after being satisfied. Certificate is a conclusive evidence of regularity of incorporation of a company irrespective of any deficiency in its registration.
• SEBI approval;
• Filling of prospectus or statement in lieu of prospectus;
• Appointment of bankers, brokers and underwriters;
• Minimum subscription;
• Application to stock exchange.
• Commencement of business: In this stage, public company makes an application (along with some documents) to registrar for issue of “Certificate of Commencement of Business”. The registrar issues the certificate after being satisfied. The company can start its business activities from the date of issue of the certificate.

Question 2. Distinguish between Joint Hindu Family Business and Partnership. Answer:

• Regulating law: A partnership is governed by the provisions of the Indian Partnership Act, 1932. A Joint Hindu Family business is governed by the principles of Hindu law.
• Admission of new members: In a partnership no new partner is admitted without the consent of all the partners, while in the case of a Joint Hindu family firm a new member is admitted just by birth.
• The position of females: In a partnership women can be full-fledged partners, while in a Joint Hindu family business membership is restricted to male members only. After the passage of the Hindu Succession Act, 1956, females get only co-sharer’s interest at the death of a coparcener and they do not become coparceners themselves.
• Number of members: In partnership the maximum limit of partners is 10 for banking business and 20 for any other business but there is no such maximum limit of members in the case of Joint Hindu Family business.
• Authority of members: In partnership each partner has an implied authority to bind his co-partners by act done in the ordinary course of the business, there being mutual agency between various partners. In a joint family business all the powers are vested in the ‘Karta’ and he is the only representative of the family who can contract debts or bind his coparceners by acts done in the ordinary course of business, there being no mutual agency between various coparceners.
• Liability of members: In partnership, the liability of the partners is joint and several as well as unlimited. In other words, each partner is personally and jointly liable to an unlimited extent and if partnership liabilities cannot be fully discharged out of the partnership property each partner’s separate personal property is liable for the debts of the firm. In a Joint Hindu family business only the ‘Karta’ is personally liable to an unlimited extent, i.e., his self-acquired or other separate property besides his share in the joint family property is liable, for debts contracted on behalf of the family business. Other coparceners’ liability is limited to the extent of their interest in the joint family property and they do not incur any personal liability.
• Right of members to share in profits: In a partnership each partner is entitled to claim his separate share of profits but a member of a Joint Hindu family business has no such right. His only remedy lies in a suit for partition.

Question 3. Explain the factors which affect the choice of form of business organization. Answer:  The following factors are important for taking decision about form of organization.

• Cost and Ease in Setting up the Organization: Sole proprietorship is least expensive and can be formed without any legal formalities to be fulfilled. Company is most expensive with a lot of legal formalities.
• Capital Consideration: Business requiring less amount of finance prefer sole proprietorship and partnership form, where as business activities requiring huge financial resources prefer company form.
• Nature of Business: If the work requires personal attention such as tailoring unit, hair cutting saloon, it is generally set up as a sole proprietorship. Units engaged in large scale manufacturing are more likely to be organized in company form.
• Degree of Control Desired: A person who desires full and exclusive control over business prefers proprietorship rather than partnership or Co. because control has to be shared in these cases.
• Liability or Degree of Risk: Projects which are not very risky can be organized in the form of sole proprietorship and partnership. Whereas the risky ventures should be done in company form of organization because the liability of shareholders is limited.

Question 4. Which form of business is suitable for following types of business and why? (a) Beauty Saloon; (b) Garments shop; (c) Garment Factory. Answer:   (a) Beauty Saloon: Sole Proprietor is the right form of business because:

• It needs limited capital.
• It is easy to form.
• Entire profits will belong to the owner.
•  It requires personal attention.

(b) Garments Shop: Sole Proprietor is the right form of business because:

•  It is easy to form.

(c) Garment Factory: Partnership is more suitable because:

• It can be easily started and closed without any legal formalities.
• He is not expected to share his business decisions and secrets with anybody.
• Direct relationship between efforts and reward provide incentive to the sole trader to work hard.
• The sole trader can maintain personal contacts with his customers and employees.
• It provides employment to persons with limited money who are not interested to work under others. It prevents concentration of wealth in a few hands.

Question.5. Differentiate between a Joint Stock Company and a Cooperative Society. Answer. The main differences between Cooperative Organisation and Company Organisation are given below:

• Governing statute: A company is governed by the Companies Act, 1956 while a co-operative organisation is subject to the provisions of the Cooperative Societies Act, 1912 or State Cooperative Societies Acts.
• Basic objects: The primary objective of a cooperative society is to provide service, whereas a company seeks to earn profits. This does not mean that a cooperative society does not earn profits or a company does not render service to society. It simply means that all the activities of a cooperative society are guided by service motive and profits are incidental to this objective. On the other hand, the activities of a company are inspired by profit taking and services rendered to society are incidental to profit motive.
• Number of members: The minimum number of persons is 7 in a public company and 2 in a private company. A cooperative requires at least 10 members. The maximum number of members is 50 in a private company and 100 in cooperative credit society. There is no maximum limit in case of public companies and non-credit cooperative societies.
• Member’s liability: The liability of members of a company is generally limited to the face value of shares held or the amount of guarantee given by them though the Companies Act permits unlimited liability to companies. The members of a cooperative society can opt for unlimited liability. But in practice their liability is generally limited.
• Management and control : The management of a cooperative society is democratic as each member has one vote and there is no system of proxy. In a company, the number of votes depends upon the number of shares and proxies held by a member. There is little separation between ownership and management in a cooperative society due to limited and local membership.
• Distribution of surplus: The profits of a company are distributed as dividends in proportion to the capital contributed by the members. In a cooperative society a minimum part of surplus must be set aside as a reserve and for the general welfare of the public. The rest is distributed in accordance with the patronage provided by different members after paying dividend up to 10 per cent on capital.
• Share capital: In a company, one member can buy any number of shares but an individual cannot buy more than 10 per cent of the total number of shares or shares worth Rs 1,000 of a cooperative society. A public company must offer new shares to the existing members while a cooperative society issues new shares generally to increase its membership. The subscription list of a cooperative society is kept open for new members whereas, the subscription list of a company is closed after subscriptions. A company is thus capitalistic in nature while a cooperative society is socialistic.
• Transferability of interest: The shares of a public limited company are freely transferable while the shares of cooperative society cannot be transferred but can be returned to the society in case a member wants to withdraw his membership. A member of a cooperative society can withdraw his capital by giving a notice to the society. A shareholder, on the other hand, cannot demand back his capital from the company until it’s winding up.

Question 6. How is a partnership firm different from a sole proprietorship? Answer:  The difference between a partnership and sole proprietorship form of business may be as follows. This helps the entrepreneur in selecting form of business of his choice.

• Membership: Partnership is owned by two or more persons subject to the limit ten in banking business and twenty in case of other business. Sole proprietorship is owned by one and only one person.
• Formation: It is formed through an agreement which may be oral or in writing, is formed quite easily as it is the outcome of a single person’s decision without any legal administrative approval.
• Registration: The registration is not compulsory. It needs no registration except some compliance.
• Regulating law: It is governed by the rules contained under the Indian Partnership Act, 1932. There is no specific statutory law to govern the functioning of sole proprietors business.
• Capital: There is more scope for raising a larger amount of capital as there are more than one person. It has a limited financial capability. Hence, the scope for rising capital is naturally least.
• Quickness in decision-making: Decision-making in partnership is corporately delayed as the partners arrive at decision after consultation with one another. The decision of the sole proprietor is prompt as he need not consult anyone.
• Maintenance of secrecy: Maintenance of absolute secrecy is not possible if partnership as business secrets are accessible to more than one partners. The sole proprietor need not share his business secrets with anybody.
• Management: Every partner has the right to take active part in the management of the business. Each partner also enjoys the authority to bind the firm and other partners for his acts in the ordinary course of business. The sole proprietorship is self-managed one and a few employees may support him. However, the decision of the proprietor is final and binding. (i) Risk: The risk connected with the business is comparatively less as it is shared by all the partners. The risk of the sole proprietor is greater than that of partnership form of business. (j) Duration: It continues as long as the partners desire. Even though legally it comes to an end on the death, insolvency or retirement of any of the partners, the business is continue with the remaining partners. It comes to an end with the death, insolvency incapacity of the proprietor. Thus, there is uncertainty of duration of sole proprietorship

V. Value Based Questions Question 1. From social welfare point of view, which type of organization is most desirable from employment generation point of view? Answer:  Sole Proprietorship is most desirable from employment generation point of view because it is done at a small scale and small scale labour intensive methods are used. It will create more employment opportunities.

Question 2. Which value is of utmost importance when partnership form of business is used? Answer:  Maintaining trust and confidentiality of information is of utmost importance in a partnership business. It is also important to use mutual agency in utmost good faith keeping in mind the interests of all partners.

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NCERT Solutions for Class 11 Business Chapter 2 - Forms Of Business Organisation

• NCERT Solutions
• Business Studies
• Chapter 2 Forms Of Business Organisation

Class 11 NCERT Solutions Business Studies - Chapter 2 - Free PDF Download

This study consists of the Class 11 Business Studies Chapter 2 NCERT solutions in a PDF format and students can download the PDF file for free from Vedantu. These NCERT Solutions for Business Studies Class 11 Chapter 2 will help students to learn the concepts covered in this chapter properly.

By referring to these NCERT questions and solutions, students can prepare well and secure maximum marks in their examinations. Also, they can solve the exercise questions on their own and compare them with the NCERT Solutions to identify and rectify their mistakes.

NCERT Solutions for Class 11 Business Studies Chapter 2 Forms of Business Organisation

1. The structure in which there is separation of ownership and management is called (a) Sole proprietorship (b) Partnership (c) Company (d) All business organisations

Ans: (c) Company

2. The karta in Joint Hindu family business has (a) Limited liability (b) Unlimited liability (c) No liability for debts (d) Joint liability

Ans: (b) Unlimited liability

3. In a cooperative society the principle followed is

(a) One share one vote (b) One man one vote (c) No vote (d) Multiple votes

Ans: (b) One man one vote

4. The board of directors of a joint stock company is elected by

(a) General public (b) Government bodies (c) Shareholders (d) Employees

Ans: (c) Shareholders

5. Profits do not have to be shared. This statement refers to

(a) Partnership (b) Joint Hindu family business (c) Sole proprietorship (d) Company

Ans: (c) Sole proprietorship

6. The capital of a company is divided into number of parts each one of which are called

(a) Dividend (b) Profit (c) Interest (d) Share

Ans: (d) Share

7. The Head of the joint Hindu family business is called

(a) Proprietor (b) Director (c) Karta (d) Manager

Ans: (c) Karta

8. Provision of residential accommodation to the members at reasonable rate is the objective of

(a) Producer's cooperative (b) Consumer's cooperative (c) Housing cooperative (d) Credit cooperative

Ans: (c) Housing cooperative

9. A partner whose association with the firm is unknown to the general public is called (a) Active partner (b) Sleeping partner (c) Nominal partner (d) Secret partner

Ans: (d) Secret partner

10. Compare the status of a minor in a Joint Hindu Family Business with that in a partnership firm.

Ans: A male minor child becomes a member of a Joint Hindu Family Business as soon as he is born into the family. The minor has the same ownership rights as the rest of the family over the inherited property.

His liability, on the other hand, is limited to his portion of the joint property.

In the case of a partnership, a minor can be admitted as a member-only when all other partners have given their consent, and only for advantages; he cannot be required to contribute capital or pay the business's losses. Because a minor lacks the legal capacity to enter into legal contracts, he or she cannot be called a partner.

11. If registration is optional, why do partnership firms willingly go through this legal formality and get themselves registered? Explain.

Ans: Although registration for a partnership firm is optional, many firms choose to do so. This is due to the numerous legal ramifications that come with not registering. Here are a few examples:

A non-registered firm's partners cannot sue a third party; but, a partnership firm's non-registration does not restrict other firms from employing it.

The firm is prohibited from bringing a lawsuit against any of its partners.

A partner in a non-registered firm, likewise, cannot sue his or her co-partners or the firm.

A non-registered partnership firm's claims against a third party cannot be enforced in court. As a result, to avoid these drawbacks, partnerships are formed.

12. State the important privileges available to a private company.

Ans: When a company is formed as a private company, it receives various benefits and exemptions not available to public companies. The following are some of the significant advantages that a private company has:

A private company can be created with only two members, but a public company requires seven.

A prospectus is not required because the public is not asked to subscribe to a private company's shares.

Shares can be distributed without the requirement of a minimum subscription.

A private firm can begin operations as soon as the certificate of incorporation is received. The public corporation, on the other hand, must wait for the certificate of commencement to be received before it may begin operations.

A private business requires only two directors, whereas a public firm requires a minimum of three directors.

A private corporation is not required to maintain a member index, whereas a public firm is required to do so.

13. How does a cooperative society exemplify democracy and secularism? Explain.

Ans: In a cooperative society, each member has one vote, regardless of the number of shares they own. This means that all members have equal voting rights, resulting in a fully democratic management structure in which all decisions are made by a majority of the society's members. The company's membership is open and not restricted, and no one is discriminated against because of their religion, caste, or gender. As a result, a cooperative society is representative of a secularist system.

14. What is meant by 'partner by estoppel'? Explain.

Ans: A person is deemed a partner by estoppel if he or she provides the impression to others that he or she is a partner of the firm through his or her initiative, conduct, or behavior. Even though they do not provide cash or participate in management, such partners are held liable for the firm's debts since they are deemed partners in the perspective of a third party.

15. Briefly explain the following terms in brief.

Perpetual succession

Ans: Perpetual succession: Because a business is a legal creation, it can only be ended by legislation. It will only be decommissioned after a precise procedure known as winding-up is finished. Members may come and go, but the company does not cease to exist.

Common seal

Ans: Common seal: Because a company cannot sign any documents because it is an artificial person, it utilizes a common seal in place of signatures. Any agreement that isn't stamped with the business seal isn't legally binding on the company.

Ans: Karta is the family's eldest member, with infinite obligations and complete decision-making authority. A Joint Hindu family's Karta is in charge of running the family company and exercising complete control over it.

Artificial person

Ans: Artificial person: Company is an artificial person, yet it has the same rights, liabilities, and functions as a natural person.

It can own property, incur debts, borrow money, enter into contracts, sue, and be sued, yet it cannot breathe, eat, run, talk, or do any of the other things that humans can. As a result, it is referred to as an artificial human.

16. What do you understand by a sole proprietorship firm? Explain its merits and limitation?

Ans: A sole proprietorship is a type of business entity that is owned, managed, and controlled by a single person who receives all profits and bears all risks. The word "sole" means "only," while "proprietor" means "owner." As a result, a sole proprietor is the business's owner. The following are some of the advantages of a sole proprietorship business:

Quick Decision-Making: A solo owner has a lot of leeways when it comes to making business decisions.

Ease of Formation and Closure: There are very few legal requirements for forming a sole proprietorship business.

Personal Satisfaction: Working for oneself provides a sense of development. This also gives the person a sense of success and self-assurance in their talents.

Direct Incentive: A sole proprietor receives all of the revenues and benefits generated by the business. This encourages the solo proprietor to run his or her company efficiently and effectively.

The Following Are Some of the Limitations of a Sole Proprietorship Firm: 

Limited Resources: Alone proprietor's resources are limited to his or her savings and borrowings from others. Banks and other lending institutions may be hesitant to give a solo proprietor a long-term loan. As a result, business does not grow rapidly and often remains modest.

Limited Life of a Business Concern: The proprietorship and the owner are deemed the same in the eyes of the law. A proprietor's death, insolvency, or illness has an impact on the firm and can lead to its closure.

Unlimited Liability: If a firm fails, creditors can collect their debts not just from the company's assets, but also from the proprietor's assets.

Limited Managerial Skills: A sole proprietor is responsible for all of the company's essential tasks, such as purchasing, selling, and financing. A solo entrepreneur may also be unable to hire and retain talented and ambitious personnel due to a lack of resources.

17. Why is partnership considered by some to be a relatively unpopular form of business ownership? Explain the merits and limitations of partnership.

Ans: Because of the inherent limits that come with partnership, it is seen as a rather unpopular type of corporate ownership. These constraints include infinite liability, limited resources, conflict potential, and a lack of consistency.

Ease of Creation and Closure: A partnership firm can be formed quickly by putting an agreement in place between prospective partners. There is no requirement for a company to be registered.

Balanced Decision-Making: Depending on their areas of competence, the partners can manage different functions.

As a result, a partnership firm's decision-making process is more balanced than any other type of corporate ownership.

More Funds: In a partnership, each partner contributes a portion of the money. As a result, compared to a sole proprietor, it is possible to obtain a larger quantity of money and perform extra operations as needed.

Risk Sharing: All partners share the risks that come with running a partnership firm. Individual partners have less anxiety, strain, and stress as a result of this.

Confidentiality: A partnership firm is not compelled by law to publish its financial statements or submit reports. As a result, it can keep information about its operations discreet.

The Partnership has the Following Limitations:

Unlimited Liability: If the business's assets are insufficient to meet its debts, partners are responsible to repay debts from their assets.

Limited Resources: Because the number of partners is limited, capital investment contributions are usually insufficient to support large-scale commercial activities. As a result, partnership businesses have difficulty growing beyond a particular size.

Conflicts of Interest: In a partnership firm, decision-making authority is divided among the partners.

This is also contingent on their levels of ability, capability, and foresight.

Lack of Continuity: A partnership comes to an end when one of the partners dies, retires, becomes bankrupt, or becomes insane.

The surviving partners, on the other hand, can engage in a new agreement and continue to operate the company.

18. Why is it important to choose an appropriate form of organization? Discuss the factors that determine the choice of form of organization.

Ans: It is critical to select an appropriate form of company organization since one of the most crucial decisions to make when starting a business or growing an existing one is the form of organization. A company can be owned and operated in a variety of ways. It is tough to change a business model after it has been chosen. As a result, the type of commercial enterprise should be chosen with caution and deliberation.

The Following Considerations Influence the Choice of Organizational Structure:

Cost and Convenience of Beginning a Business: A sole proprietorship is simple to start in terms of initial business costs and legal requirements; a partnership, on the other hand, has the advantage of fewer legal formalities and lower costs due to its smaller scale of operations. In the case of cooperative societies and businesses, registration is required. The process of forming a business is time-consuming and costly.

Liability: In the case of a sole proprietorship or a partnership, the owners/partners' liability is unlimited. This could lead to debt repayment using the owners' assets.

Continuity: Events such as the death, insolvency, or insanity of the owners can disrupt the continuity of sole proprietorship and partnership businesses. Such elements, on the other hand, have little bearing on the longevity of the business in organizations such as joint Hindu family businesses, cooperative societies, and corporations.

Management Skills: It is tough for a sole proprietor to be knowledgeable in all aspects of the business. In other types of organizations, such as partnerships and corporations, members divide their labor, allowing management to specialize in specialized areas and make better decisions.

Capital Requirements: For big-scale activities, the corporate form is best since it can raise a huge quantity of money by issuing shares. Partnership or single proprietorship are two options for medium and small businesses. Expansion capital requirements can also be handled more simply in the form of a corporation.

Degree of Control: A sole proprietorship allows for complete control over operations and decision-making authority. However, if the owners desire to share ownership to make better decisions, they can join a partnership or a company.

Nature of Business: A sole proprietorship is better suited to enterprises that require direct human interaction with consumers, such as a beauty salon or a grocery shop. Large production units benefit from the company type of organization.

In the case of professional services, the partnership form is far more appropriate.

19. Discuss the characteristics, merits, and limitations of a cooperative form of organization. Also, describe briefly different types of cooperative societies.

Ans: "A cooperative organization is a society whose objectives are for the development of economic interests of its members under cooperative principles," according to the Indian Cooperative Societies Act, 1912. The following are characteristics of a cooperative organization:

Voluntary Membership: A cooperative society's membership is entirely voluntary. An individual has the freedom to join a cooperative organization and to leave at any moment.

Legal Status: Cooperative society registration is required. Society gains a distinct identity from its members as a result of this. Society has the authority to enter into contracts and hold property in its name, as well as to sue and be sued by others.

Limited Liability: The members of a cooperative society's liability is limited to the amount of capital they have contributed.

Control: Decisions are made by an elected managing committee, which is elected by all members of society using the "one man, one vote" system.

Service Motive: Society's primary goal is to emphasize the virtues of mutual aid and wellbeing. As a result, the motive of service guides its operations.

The Following are Some of the Advantages of a Cooperative Organization:

Voting Equality: The cooperative society is governed by the idea of "one man, one vote," regardless of the amount of capital invested.

Restricted Responsibility: A cooperative society's members' liability is limited to the amount of their capital contribution.

Stable Existence: A cooperative society's continuance is unaffected by the death, bankruptcy, or insanity of its members.

Cost-Effectiveness of Operations: Members typically provide honorary services to society. Because the focus is on eliminating middlemen, costs are reduced.

The following are some of the limitations of the cooperative type of organization: 

Limited Resources: A cooperative society's resources are comprised of capital contributions from members with limited means.

Management Inefficiency: Due to their unwillingness to pay high salaries, cooperative organizations are unable to attract and retain experienced managers.

Lack of Confidentiality: It is difficult to preserve secrecy regarding a cooperative society's operations due to open discussions at member meetings and disclosure duties under the Societies Act (7).

Government Control: In exchange for the benefits provided by the government, cooperative societies must follow a set of laws and regulations relating to account auditing, filing of accounts, and so on.

Differences of Opinion: Internal quarrels coming from opposing ideas can make decision-making harder.

Consumer Cooperative Societies are one type of cooperative organization. They are founded to provide consumer goods at reasonable costs to their members.

Producer Cooperative Societies: The goal of producer cooperative societies is to obtain low-cost raw materials and other inputs for small producers.

Marketing Cooperative Societies: These organizations pool members' outputs and provide marketing services such as transportation, labeling, packaging, and warehousing.

Farmers' Cooperative Societies: These organizations are made up of small farmers who pool their resources to gain access to the benefits of large-scale operations. These organizations ensure that farmers have access to higher-quality, more modern inputs at affordable prices.

Credit Cooperative Societies: These organizations ensure that funds are available to their members at a low-interest rate and on appropriate terms.

20. Distinguish between a Joint Hindu family business and partnership.

21. Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organization? Why?

Ans: A sole proprietorship is a type of business that is owned, managed, and controlled by a single person who bears all risks and reaps all profits. There are numerous advantages to operating as a sole proprietorship over other business structures. As a result, many individuals still prefer it. Here are a few examples:

Ease of Formation and Closure: There are very few legal requirements for forming a sole proprietorship business. Because a sole proprietorship is the least regulated type of business, it is simple to open and close the business according to the owner's wishes.

Direct Incentive: A sole proprietor receives all of the revenues and gains generated by the business. This encourages the solo proprietor to run his or her company efficiently and effectively.

Operational Flexibility: A sole proprietorship is extremely flexible in its operations. It can adapt to a variety of conditions and incorporate important changes, depending on the dynamism of the business environment.

NCERT Solutions for Class 11 Business Studies - Chapter 2 - Benefits for the Students

Check out the following benefits that are rendered to the students by referring to the NCERT solutions of Class 11 Business Studies:

Students will be benefited as they can practice more questions and answers by studying these NCERT solutions. 

NCERT is a very useful material for the CBSE examination. Questions based on NCERT solutions can appear in the exam. Thus, the students can study from these NCERT notes so that they can get common questions. 

NCERT questions and answers will help the students to know what type of questions can appear in the exam and they will gain insights about how to answer in the exam. 

By referring to the NCERT solutions, one can know the marks distribution and the pattern of the Business Studies question paper. 

NCERT Solutions for Class 11 Business Studies - Chapter 2: Important Topic Coverage 

The important topic coverage of this chapter is as follows:

Business Organisation

The business organisation is an entity formed to carry on commercial enterprise. This kind of organisation is predicated on law systems governing property rights, contract and exchange, and incorporation. The four primary forms of organisation are Sole Proprietorship, Partnerships, Corporations, and Limited Liability companies.

Sole Proprietorship

The majority of small businesses start as sole proprietorships. One person owns these firms, usually the individual who has day-to-day responsibility for running the business. Sole proprietorships own all the profits and the assets of the business generated by it. They also assume complete responsibility for any of their debts. For law and the public, you are the same as the business.

Partnerships

In a partnership, for a single business, two or more people share ownership. Like proprietorships, the law does not differentiate between the business and its owners. The partners should have a legal agreement that sets forth how disputes will be resolved, and decisions will be made. How future associates will be admitted to the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed. Yes, it's hard to think about a "break-up" when the business is just new, but many partnerships split up during crises, and unless there is a defined process, there will be even more significant problems. They should also decide upfront how much time and capital each will contribute, etc.

Corporations

A corporation hired by the state where it is headquartered is considered by law to be a unique entity, separate from those who own it. A corporation can be taxed, can be appealed, and can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the significant policies and decisions. The corporation does not dissolve when ownership changes; it has its own life.

Limited Liability Company

The Limited Liability Company is a relatively new type of hybrid business structure that is now permissible in most states. It is plotted to provide the tax efficiencies and operational flexibility of a partnership and limited liability features of a corporation. The formation is more complicated than that of a general partnership.

Decisions You Will Need to Make When Choosing a Business Type

Debt and Liability: Most small businesses and startups accept the personal liability or responsibility associated with a sole partnership as a necessary risk of doing business. The downside is that this typically takes more paperwork, costs more to register, and may have more significant reporting or upkeep requirements than more specific business types.

Filing Taxes: You have two options when it comes to filing your business taxes. Most owners of small businesses prefer the simplicity of filing taxes on their returns, but filing business taxes one by one can help you keep your personal and business finances separate.

Partners or Investors: If you're beginning your business with a partner or private investor, you won't be able to form a sole proprietorship. You can choose between a partnership (where all responsibilities are shared equally), a limited partnership (where you can dictate responsibilities and liabilities for individual members), or an LLC (to protect all members from personal liability).

Hiring Employees: Some of the easy business types—such as sole proprietorships—can make it difficult to hire employees down the road. If you already have employees or plan to hire employees, it may be better to be future-proof with a more formal business structure like an LLC or corporation.

NCERT Solutions for Class 11 Business Studies - Chapter 2  - Extra Questions and Answers 

Question: The capital of a company is divided into several parts each one of which is called____.

Answer: (4) Share

Question: Who elects the board of Directors in a Joint Stock Company?

Answer: The Shareholders elect the board of Directors in a Joint Stock Company. 

Question: Who is a Secret partner?

Answer: A secret partner is such a partner whose membership in the company is kept secret from the public. 

Studying Business Studies - Tips to Study Better

The following are the tips which will help the students to study in a better manner:

Practice writing the answers after understanding the concepts in your language. 

Pay attention to the important topics discussed in the chapters. 

Practice with the mock test papers and sample questions. 

Revise the subject on a regular basis. 

Study the HOTs and practice MCQs as well. 

Conclusion 

We hope the students have understood the importance of studying the NCERT-based questions and answers. You can also practise extra questions as provided in the article. Take care of the topics covered in this particular chapter and study the important ones among them that need more focus. Download the PDF and prepare well to see the improvement in your performance and scores in exams.

FAQs on NCERT Solutions for Class 11 Business Chapter 2 - Forms Of Business Organisation

1. What do you mean by Nonprofit organizations?

A nonprofit organisation is pretty self-explanatory, in that it's a business organisation that's intended to promote educational or charitable purposes. The "nonprofit" aspect comes into play where the organisation must keep the amount earned by the company to pay for its expenses, programs, and all. It would help if you kept in mind that there are several types of nonprofits available, many of which can receive "tax-exempt" status. This process requires filing paperwork with the government for them to recognize you as a nonprofit organisation. Depending on the parameters of your new business, they will be able to tell you which category you best fall for.

2. What is the most important reason for incorporating?

One of the primary reasons businesses incorporate is to protect the personal assets of the owners. When you combine your business, a separate legal entity is formed. This means your business can gather assets and debts, separate from your personal assets and debts.

Besides, incorporating your business is helpful in terms of reducing your liability. For example, suppose your business gets sued by a creditor or other third party. In that case, your risk of losing your house or personal assets is significantly reduced compared to a sole proprietor. In most cases, the extent that creditors can go to receive payment is limited to the interest of your ownership in the business.

3. Where do I get Class 11 Business Studies 1 Mark Questions?

Vedantu is the top-most pick by every student when it comes to seeking help regarding any academic matter. There are 11 chapters in  Business Studies in Class 11 , and all of them are extremely important from the examination point of view. To get a broader idea about what kind of 1 mark questions are asked in this subject, refer to this list of Important Questions for CBSE Class 11 Business Studies. 

4. How should I learn Class 11 Business Studies concepts easily?

The more questions you solve, the more well-versed you are bound to be in any subject. As the saying goes, practice makes perfect. When it comes to Class 11 Business Studies, topics like debts and liabilities, sole proprietorships, and partnerships should be crystal clear. Chapter 2 of the NCERT syllabus, like Forms of Business Organisation, is most important. You can check out all its solutions Class 11 NCERT Business Studies Chapter 2. The solutions are free of cost and also available on the Vedantu Mobile app.

5. What are the forms of business organisation Class 11?

As discussed in depth in the Class 11 NCERT Business Studies Chapter 2 of Forms of Business Organisation, we have four primary forms of organisation. These types commonly include Sole Proprietorship, Partnerships, Corporations, and Limited Liability Companies. Each of these types of organisations has the right to carry on commercial enterprise and to abide by the rules set by the government of the country. 

6. Which of the following is the form of a business organisation answer?

We have talked about the four types of business organisations. However, before starting a business, there are some decisions you will need to make about the business model beforehand. You need to consider your debt and liabilities before deciding upon which business pattern you will follow. Most of the businesses start as sole proprietorships and later expand into partnerships or corporations. Depending on the number of employees you want to hire, make an informed decision. 

7. Which form of business organisation lacks motivation?

It is generally noted that there is a lack of motivation in a company organisation form of business set-up. This is primarily because the team responsible for running the company, namely the directors and managers who look into managerial matters, do not get a share in the profits of the business. There is an absence of a direct link between effort and reward and it leads to a lack of motivation. 

NCERT Solutions for Class 11 Business Studies

Cbse study materials.

NCERT Solutions for Class 11th: Ch 2 Forms of Business Organisation

Ncert solutions for class 11th: ch 2 forms of business organisation business studies.

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Forms of Business Organisation Class 11 Notes PDF (Handwritten & Short Notes)

Students who have opted commerce stream, need to understand better and score well in questions regarding the chapter Forms of Business Organisation. Class 11 students can smoothly perform better with the help of Forms of Business Organisation Class 11 notes. Accordingly students can also understand other chapters of Class 11 Business Studies in a better way. 

Students can also practise some sort of questions from the Forms of Business Organisation Class 11 notes. Practising Forms of Business Organisation questions on a regular basis can help students to increase their accuracy level. Accordingly, students can also improve their inner confidence in attempting questions of the chapter Forms of Business Organisation. Inner confidence is a must for all students to decrease the level of stress while giving the Class 11 Business Studies board exam. Therefore, here we provide the Forms of Business Organisation Class 11 Notes in PDF file format.

Forms of Business Organisation Notes Class 11 PDF

The Forms of Business Organisation notes Class 11 PDF are one of the important study materials while preparing for the chapter. Students generally refer to the notes after completing the chapter Forms of Business Organisation. Class 11 notes is a collection of short summaries of sub-topics, topics and key points. With the help of these summaries, students can remember the important points on their fingertips. 

How to Download the Forms of Business Organisation Notes Class 11 in PDF?

All students studying in Class 11, need to have easy and free access to the Forms of Business Organisation notes Class 11 in PDF. Steps to download the Class 11 Business Studies Notes are:

• Open the Selfstudys website on any of the electronic devices. 
• Bring the arrow towards NCERT Books & Solutions which can be seen in the navigation bar. 
• Drop-up menu will appear, select NCERT notes from the list.

• A new page will appear, select Class 11th from the list of classes.

• Now select Business Studies from the list of subjects.

• Again a new page will appear, now select Forms of Business Organisation from the list of chapters. 

Features of the Forms of Business Organisation Notes Class 11

Features of Forms of Business Organisation notes Class 11 are considered to be an important and noticeable part. Those important features of Class 11 Business Studies notes are: 

• Number of the Unit is Given: Inside the Class 11 Forms of Business Organisation notes, the number of the unit is given. Accordingly students can easily identify the chapter name with the help of unit number of Class 11 Business Studies. 
• All Concepts are Completed: In the Class 11 Forms of Business Organisation notes, all the concepts are completed. Students can get a brief knowledge about the chapter Forms of Business Organisation. 
• Questions are Given: On the last page of the Class 11 Business Studies notes, different questions regarding the chapter Forms of Business Organisation are given to practise. Accordingly students can also improve their comprehensive skill for the chapter Forms of Business Organisation. 
• Chapter Name is Included: The chapter name of Forms of Business Organisation is mentioned inside the Class 11 Forms of Business Organisation notes. Through the notes, students can get a brief idea about the chapter Forms of Business Organisation. 
•  Provided in a Simple Language: The Forms of Business Organisation Class 11 notes are provided in a simpler language. Through this, students can easily understand all complex topics in a simpler manner. 
• For CBSE Board And State Boards: It is generally created for students studying in Class 11; thus, CBSE board as well as state board students can use the Forms of Business Organisation Class 11 Notes as it is suitable for them.

Benefits of Forms of Business Organisation Notes Class 11

The Forms of Business Organisation notes Class 11 has been associated with many benefits which includes helps to pay attention, helps in remembering the topics, etc. Through these students can easily score well in Class 11 Business Studies board exam papers. 

• Helps in Paying Attention: Class 11 Forms of Business Organisation notes can help students to pay attention and to stay alert throughout the preparation. Accordingly, Class 11 students can easily discover and cover different types of topics and concepts in a creative way. 
• Helps in Revising the Topics: With the help of Forms of Business Organisation notes Class 11, students can smoothly revise all the topics. According to which, students can boost their preparation for the chapter The Forms of Business Organisation and can perform well. 
• Can Attract Many Students as Eye-Catching Format of Notes is Given: The Class 11 notes of the chapter Forms of Business Organisation in the PDF have an eye-catching format. This format can attract many Class 11 students to complete the chapter The Forms of Business Organisation. 
•  Can Increase Comprehensive Skill: The Class 11 notes of the chapter The Forms of Business Organisation can aid students to increase their comprehensive skill. According to these skills, students can easily score well in the questions of the chapter The Forms of Business Organisation. 
• Helps Students to be Active During the Preparation: It is a must for all students to remain active and alert while preparing for the chapter The Forms of Business Organisation. Students can be active and alert with the help of Class 11 Forms of Business Organisation notes. Accordingly students can cover and revise each and every concept included in the Business Studies chapter The Forms of Business Organisation. 
• All Topics Are Covered: Inside the Class 11 Forms of Business Organisation notes, all topics are covered in a perfect manner so that students can easily complete the whole chapter. 

Strategy Tips to Cover the Chapter Forms of Business Organisation  

It is a must for Class 11 students to follow some strategy tips to cover The Forms of Business Organisation. Important strategy tips are: 

• Finish off the Chapter: First and foremost tip is to finish off the chapter The Forms of Business Organisation in a proper and accurate way. 
• Routine Practise of Questions: After completing the chapter Forms of Business Organisation, students need to have a routine practice of questions. Regular practice can help students to improve their accuracy level in attempting questions. 
• Jot Down The Mistakes: While analysing the questions, students can get to know their flaws. After identification, it is very important that students jot down their mistakes. Through this step, students can easily remove their earlier mistakes while attempting Forms of Business Organisation questions. 
• Try to Study During the Day: Many students prefer studying during the night but it is good to study during the day. As students would have a higher ability to concentrate in the chapter The Forms of Business Organisation. There are many benefits other than this, those are: natural daylight is better than artificial light, both friends and teachers are contactable to clear doubts. 
• Remain Focused: Throughout the preparation of the chapter Forms of Business Organisation, students are advised to remain focused. Accordingly, students can cover various topics whether it is easy, moderate, or difficult. 
• Revise Within a Day: After starting the revision process of Class 11 Forms of Business Organisation it is very important to complete the revision within a day otherwise the extension in revision will not aid much value in the preparation.
• Take Constant Breaks: It is a must to take constant breaks while preparing for the chapter Forms of Business Organisation. As students can lose their track of preparation if proper short breaks are not taken.  
• Try to Remain Calm: Class 11 students need to remain calm while preparing for the chapter Forms of Business Organisation in order to try to remove their exam stress and anxiety. 

Why Is It Important To Go Through The Forms of Business Organisation Class 11 Notes? 

It is a must to go through the Forms of Business Organisation Class 11 notes as it is considered as important study material. In this Class 11 Business Studies notes, topics and concepts are explained in a brief manner. Through this study material, students can understand all Forms of Business Organisation topics in an effective manner. These notes can be generally used during the last minute revision that help students memorise all topics of Forms of Business Organisation easily and help them solve questions in a better way. 

What Are Class 11 Forms of Business Organisation Notes and Why Is It Popular? 

The Class 11 Forms of Business Organisation notes are short and compressed content which includes all topics and concepts brief in an organised manner, better presentation and easier explanations. These notes help students to improve their grip for the chapter Forms of Business Organisation. Strong foundation for the chapter Forms of Business Organisation can help students to improve their score and because of these reasons the revision notes of Class 11 Forms of Business Organisation is popular among students.

Is Forms of Business Organisation Class 11 Notes Relevant to Exam Preparation?

Yes, the Forms of Business Organisation Class 11 notes are very much relevant during the preparation. The Class 11 Accountancy content is very accurate and contains relevant topics for students to study. Accordingly, students don’t need to search for various important topics here and there. Accordingly, students can easily study relevant content of the Class 11 Business Studies chapter Forms of Business Organisation if they refer to the NCERT Class 11 Business Studies Notes. 

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NCERT Solutions for Class 11 Business Studies

Cbse class 11 business studies solutions guide.

Shaalaa.com provides the CBSE Class 11 Business Studies Solutions Digest. Shaalaa is undoubtedly a site that most of your classmates are using to perform well in exams.

You can solve the Class 11 Business Studies Book Solutions CBSE textbook questions by using Shaalaa.com to verify your answers, which will help you practise better and become more confident.

CBSE Class 11 Business Studies Textbook Solutions

Questions and answers for the Class 11 Business Studies Textbook are on this page. NCERT Solutions for Class 11 Business Studies Digest CBSE will help students understand the concepts better.

NCERT Solutions for Class 11 Business Studies Chapterwise List | Class 11 Business Studies Digest

The answers to the NCERT books are the best study material for students. Listed below are the chapter-wise NCERT Business Studies Class 11 Solutions CBSE.

•  • Chapter 1: Business, Trade and Commerce
•  • Chapter 2: Forms of Business Organisation
•  • Chapter 3: Private, Public and Global Enterprises
•  • Chapter 4: Business Services
•  • Chapter 5: Emerging Modes of Business
•  • Chapter 6: Social Responsibilities of Business and Business Ethics
•  • Chapter 7: Formation of a Company
•  • Chapter 8: Sources of Business Finance
•  • Chapter 9: Small Business and Entrepreneurship
•  • Chapter 10: Internal Trade
•  • Chapter 11: International Business
• Commerce (English Medium) Class 11 CBSE
• Arts (English Medium) Class 11 CBSE

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• NCERT solutions for Economics - Introductory Microeconomics Class 11 CBSE [अर्थशास्त्र - व्यष्टि अर्थशास्त्र एक परिचय परिचय ११ वीं कक्षा]
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• NCERT solutions for Political Science Class 11 [राजनीति विज्ञान - राजनीतिक सिद्धांत ११ वीं कक्षा]
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• NCERT solutions for Sanskrit - Shashwati Class 11 [संस्कृत - शाश्वत कक्षा ११]
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Chapters covered in NCERT Solutions for Class 11 Business Studies

Ncert solutions for class 11 business studies (11th) chapter 1: business, trade and commerce, ncert class 11 business studies (11th) chapter 1: business, trade and commerce exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 2: Forms of Business Organisation

Ncert class 11 business studies (11th) chapter 2: forms of business organisation exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 3: Private, Public and Global Enterprises

Ncert class 11 business studies (11th) chapter 3: private, public and global enterprises exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 4: Business Services

Ncert class 11 business studies (11th) chapter 4: business services exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 5: Emerging Modes of Business

Ncert class 11 business studies (11th) chapter 5: emerging modes of business exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 6: Social Responsibilities of Business and Business Ethics

Ncert class 11 business studies (11th) chapter 6: social responsibilities of business and business ethics exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 7: Formation of a Company

Ncert class 11 business studies (11th) chapter 7: formation of a company exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 8: Sources of Business Finance

Ncert class 11 business studies (11th) chapter 8: sources of business finance exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 9: Small Business and Entrepreneurship

Ncert class 11 business studies (11th) chapter 9: small business and entrepreneurship exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 10: Internal Trade

Ncert class 11 business studies (11th) chapter 10: internal trade exercises.

NCERT Solutions for Class 11 Business Studies (11th) Chapter 11: International Business

Ncert class 11 business studies (11th) chapter 11: international business exercises.

Class 11 is one of the most overlooked academic years, but it is one of the most important ones, as it's a prelude to the following academic year, where students must appear for their board exams. Students need to use class 11 wisely and lay a strong foundation for what awaits them the following year without losing sight of the current academic year. Providing superior and reliable study material, such as NCERT Class 11 Business Studies, is essential to aid and assist students in achieving academic success. It is widely known that when students can access excellent books such as NCERT Business Studies Class 11 Solutions guide, they can go beyond their abilities to succeed.

Class 11 NCERT solutions answers all the questions given in the NCERT textbooks in a step-by-step process. Our Business Studies tutors have helped us put together this for our Class 11 Students. The solutions on Shaalaa will help you solve all the NCERT Class 11 Business Studies questions without any problems. Every chapter has been broken down systematically for the students, which gives fast learning and easy retention.

Shaalaa provides free NCERT solutions for Class 11 Business Studies. Shaalaa has carefully crafted NCERT solutions for Class 11 Business Studies that can help you understand the concepts and learn how to answer properly in your board exams. You can also share our link for free Class 11 Business Studies NCERT solutions with your classmates.

If you have any doubts while going through our Class 11 Business Studies NCERT solutions, then you can go through our Video Tutorials for Business Studies. The tutorials should help you better understand the concepts.

Frequently asked questions about NCERT Solutions for Class 11 Business Studies

Are ncert solutions business studies class 11 books dependable.

Over the years, books such as NCERT Business Studies Class 11 Solutions guide have proven to be one of the most trusted and reliable books in recent times. Business Services Class 11 NCERT Solutions are known to provide students with some of the most detailed and in-depth explanations for every chapter. Books such as Class 11 Snapshot give students the extra motivation they need.

Can NCERT Class 11 Business Studies Solutions be found on the internet?

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Forms of Business Organisation Class 11 Important Extra Questions Business Studies Chapter 2

February 12, 2021 by Prasanna

Here we are providing Business Studies Class 11 Important Extra Questions and Answers Chapter 2 Forms of Business Organisation. Business Studies Class 11 Important Questions with Answers are the best resource for students which helps in class 11 board exams.

Class 11 Business Studies Chapter 2 Important Extra Questions Forms of Business Organisation

Forms of business organisation important extra questions short answer type.

Question 1. Differentiate sole proprietorship and partnership form of business. Answer: Difference between Partnership and Sole Trader:

Question 2. What is partnership deed and mention in brief the provisions contained in partnership deep? Answer: Partnership Deed: A partnership agreement contains the terms and conditions relating to partnership and the rules and regulations governing its management. It may be oral or in writing. A written agreement of partnership is called ‘Deed of Partnership’. A partnership deed contains all the details on which partnership has been formed. These terms and conditions are also known as articles of partnership.

A partnership deed usually contains the following details:

• The names and addresses of the partnership firm and its partners.
• The nature of the business proposed to be carried on by the firm.
• The duration of the partnership.
• The amount of capital contributed by each partner.
• The rate of interest payable to partners on their capital or to be paid by partners on the amount drawn by them.
• The mode of maintaining accounts and operation of the bank account.
• Rights and duties of the partners for the management of the business of the firm.
• The ratio in which profits will be shared by the partners.
• The amount of salary and/or commission payable to the partners
• Arbitration clause for settlement of disputes between the partners,
• Mode of dissolution and settlement of accounts.

Question 3. What are the advantages and disadvantages of employment of Paid Assistant insole proprietorship business? Answer: Employment of Paid Assistant When the sole proprietor employs a paid assistant, he has the following advantages and disadvantages –

Advantages: (a) Division of work: A specialist assistant can be appointed whose expertise can be used for the benefit of the business. By delegating some of the work, the proprietor can concentrate on more important matters.

(b) No share in profits: The assistant is not entitled to any share in the profits of the firm. He gets a fixed salary which is an expense of the business. The assistant is not given a share in the profits.

(c) Complete control: The paid assistant has no right to interfere in the decision making. Therefore, the proprietor has full control over the affairs of the business.

(d) Independent decision: The proprietor can take decisions independently without consulting the assistant. There is no interference from the assistant.

(e) Easy to dismiss: The proprietor can terminate the services of the assistant as and widen he likes.

Disadvantages: (a) Lack of motivation: The assistant does not have sufficient incentive to work hard unless he is given a share in the profits. Therefore, he may not be as sincere and careful as the proprietor himself,

(b) Lack of sharing right: The employee is not responsible for the losses incurred in the business. The risk of failure has to be borne by the proprietor himself. The monthly salary of a paid assistant is assured as long as he remains in business.

(c) Problem of capital: Appointing a paid assistant does not solve the problem of finance. The employee does not bring any capital with him.

(d) Disclosure of secrets: The business is, in a way, at the mercy of the paid assistant. He may leak out trade secrets to competitors or join them. He may quit his job and set up his own business in competition.

Question 4. What are the advantages and disadvantages of admitting a partner in a sole proprietorship form of business? Answer: Admission of a Partner: By taking one or more partners, the proprietor obtains the following benefits and drawbacks –

Advantages: (a) Availability of additional capital: The new partner brings some capital into the business. This strengthens the financial position of the business.

(b) Division of work: Work can be divided between the original proprietor and the partner on the basis of knowledge and skills. There is the pooling of judgment and experience. This will improve the efficiency of the business.

(c) Motivation: A partner gets a share in profits and, therefore, has an incentive to work hard for the success of the business. Admission of partners also increases the goodwill and borrowing capacity of the firm.

(d) Reduced risk: Each partner shares the loss and liability of a business. As a result, the risk of the sole proprietor is reduced.

(e) Economy of costs: No wage or salary is to be paid to the partner. Therefore, the cost of management is comparatively low.

Disadvantages: (a) Profit-sharing: The proprietor has to share the profits with the partner.

(b) Dilution of freedom: Every partner has a right to be consulted. The proprietor cannot take decisions independently without consulting his partner. Freedom of action and complete control of one individual in the decision: making are lost. As a result, there may be delays in taking decisions.

(c) Lack of stability: By taking a partner the continuity of business is endangered. Lunacy, insolvency or death of one partner may terminate the partnership.

(d) Difficulty in removing partner: A partner cannot be pushed out from the business without the consent of all the other partners. The capital is blocked as a partner cannot withdraw his capital or transfer his interest to outsiders without the approval of the other partners.

(e) Source of disputes: When the partners are unable to take decisions unanimously, conflicts may develop between the partners.

(f) Risk of dishonesty: If a partner is not fair and honest in dealings, the risk of the business may increase manifold.

Question 5. Explain the difference between a private limited company and a public limited company form of business. Answer: Difference Between Private Company And Public Company:

Question 6. What is the difference between a Joint Stock Company and a Cooperative Society? Explain. Answer: Difference between Joint Stock Company and Cooperative:

Question 7. Explain in brief the merits or advantages of a joint-stock company. Answer: Merits/Advantages of Joint Stock Company: A joint-stock company form of business organization is based on the following advantages – 1. Permanent existence: The life of the company is permanent, ft is not affected by the death, incapability, lunacy, and insolvency of the shareholders. It has a separate legal entity. The ownership and the management of the company change smoothly without the dissolution of the company.

2. Limited liability: The liability of a shareholder is limited to the face value of shares held by him. The personal assets of the shareholders cannot be attached, even if the company is unable to meet the claims of outsiders.

3. Availability of large capital: The capital of the company is contributed by its shareholders, whose number is unlimited as much as the company requires. Different types of securities can be issued to mobilize funds from different kinds of investors.

4. Transferability of shares: The shares of the company are listed on the stock exchange so that member can easily sell their shares. These special features also ensure that the company will not be required ‘to refund the capital. The shares of the company are purchased and sold in the stock exchange in the open market.

5. Economies of large scale: The company form of a business organization provides tremendous scope for growth and expansion. urge capital facilitates. This is why the company enjoys internal and external economies of large scale enterprise.

6. Tax relief: Tax law s offer certain developmental rebates and concessions on certain commodities of export promotion and for the establishment of industries in backward regions. The company is charged income tax at the Hat rate. As such the tax liability on higher-income is comparatively lower.

7. Diffused risk: The risk of business is shared among innumerable shareholders, so every shareholder has to bear the nominal risk. This is not the case in proprietorship and partnership, where the loss has to be borne by the individual proprietor and a limited number of partners of a firm individually or collectively.

Question 8. Mention in brief the main features of sole: proprietorship. Answer: Features of Sole Proprietorship: The salient features or characteristics of sole proprietorship form of organization are discussed below:

1. Single Ownership: A sole proprietorship is wholly owned by an individual. It is run entirely at his risk of loss. The sole trader provides both capital and management to the business from his own resources or borrowed funds.

2. Common Identity: A sole trader ship concern has no separate 1 legal entity independent of the owner. The owner and business exist together. Thus, there is no difference between the sole trader and his business.

3. Capital: Insole tradership, the capital is employed by the owner himself from his personal resources. He may also borrow money from his friends and relatives for investment in the business.

4. Unlimited Liability: The proprietor is personally liable for all the debts of the business. The creditors have the right to recover their dues even from the personal property of the proprietor in case the business assets are not sufficient to pay the debts.

5. Management and Control: Sole leadership is a one-man show. The sole trader provides management to the business. He takes all the decisions, procures materials and other resources, employs workers, and directs and controls the affairs of the enterprise. He is not required to consult anyone else in taking any decision. The sole trader may delegate some of his authority to his employees, but the ultimate authority to manage and control rests with him.

6. No Profit Sharing: The sole proprietor alone is entitled to all the profits and losses of a business. He bears the complete risk and there is nobody to share the profits or losses.

(vii) No Legal Formalities: No legal formalities are required to start, manage and dissolve this type of business. Only a license is necessary for certain business-like chemist shops etc.

Question 9. Explain the meaning and important features of the Joint Hindu Family business. Answer: Meaning of Joint Hindu Family (JHF) The Joint Hindu Family firm is a form of business organization in which the family possesses some inherited property and the ‘Karta’, the head of the family, manages its affairs. It comes into existence by the operation of Hindu Law and not out of a contract between the members or coparcener. If the persons who have coparcenary interest in the ancestral property canyon business, k is a case of Joint Hindu Family firm. Thus, the Joint Hindu Family Business is a business by a coparcener of a Hindu undivided estate.

The Joint Hindu Family Business may be defined as a form of business organization in which all the male members of a Hindu undivided family carries on business under the management and control by the head of the family called ‘Karta’. The property is managed and held by the senior male member of the father as the Head of the Family, technically known as Karta’.

In Hindu law, a family business is taken as a part and parcel of the inheritable property, and therefore’, the family business becomes the subject matter of coparcenary interest. The rights and liabilities, of coparcener, are determined by the general rules of the Hindu Law. It should be noted that a joint family firm is created by the operation of law and does not arise out of a contract between the coparceners.

Features of Joint Hindu Family Firm: The Joint Hindu Family Firm possesses the following features – 1. Status: The membership of the family business is the result of / status arising from birth in the family. There is no question of the members being discriminated against in terms of minority and majority on the basis of age.

2. Male Members: Only male persons of the family can claim coparcenary’s interest in the Joint Hindu Family business firm. The male child becomes copartners immediately on his birth.:

3. Karta: The right to manage the business vests in Karta alone. He has the legal right to obtain loans through a mortgage, etc. for the purpose of the business. Other members have neither any right to manage the affairs of the business nor any right to take loans on the mortgage of business property.

4. Liability: The liability of Karta is unlimited and that of other members of the family is limited to the extent of their share in the property.

5. No need for Registration: The activities of a Joint Hindu Family business are governed by Hindu Law. But the law does not require any registration of the business.

Forms of Business Organisation Important Extra Questions Long Answer Type

Question 1. Explain the important characteristics and differentiate between the various types of business enterprises. Answer: Characteristics of Business Enterprises: The main characteristics of various types of business enterprises are given below – 1. Public Sector Enterprises: Public enterprises or public sector enterprises are those enterprises that are owned and operated by the government. The capital of such enterprise is contributed by the central government, state government, or the local government.

Their characteristics are as follows: (a) State ownership: Public enterprises are owned by the government. Even where private entrepreneurs are permitted to invest capital, more than 50 percent of capital is in government hands.

(b) Government control: The management and control of public enterprise exclusively risk with the government. Parliamentary control is exercised over public enterprises.

(c) Service motive: The public welfare or service is the main objective of public enterprise though it may also earn profits. There is usually benevolent management in public enterprises.

(d) Public accountability: The capital of public enterprise is supplied from the public exchequer or government department in charge of public money. Therefore, public enterprises are accountable to the general public.

2. Private Sector Enterprises: The characteristics of private sector enterprises are as follows: (a) Private ownership: It is owned and managed by a private enterprise or group of individuals. The entire share capital is provided by these businessmen.

(b) No state participation: There is no participation by the Central or state governments in the establishment and ownership of a private-sector enterprise.

(c) Independent management: The management and control of a private-sector enterprise are vested in the hands of one or more private businessmen.

Management is accountable to the owners (their elected representatives). There is no interference by the government in internal management.

(d) Profit motive: The main object of a private-sector enterprise is to earn profits rather than to render service to society.

3. Joint Sector Enterprises: The characteristics of joint sector enterprises are as follows: (a) Mixed ownership: The government, private entrepreneurs, and the investing public jointly own a joint sector enterprise.

(b) Combined management: The management and control of a joint sector enterprise lie with the nominees or representatives of the government, private businessmen, and the public.

(c) Share capital: The shares of the government, private businessmen and the public in the capital are 26 percent, 25 percent, and 49 percent, respectively. The aim is to pool the financial resources and technical knowledge how of the state and the private individuals.

Comparison Between Private, Public, And Joint Sector Enterprises:

Question 2. What is the scope of setting small business and also give reasons for considerable scope of setting small scale businesses in our country? Answer: Scope of setting up small business enterprises: There is considerable scope for setting up small scale units due to the following reasons –

1. Limited Demand: The demand for certain products is local and seasonal. In such cases, it is not economical to attempt a scale of operation which exceeds local demands. Brick kilns, hair: cutting saloons, restaurants, etc. are examples of such cases. In the case of perishable goods also, the size of firms tends to be small. In certain cases, the nature of the production process favors small units.

2. Specialised Service: When an enterprise supplies specialized services, small scale firms are more suitable. Beauty parlors, interior decorators, and tailoring shops are examples of this type. A small firm can understand its customers and can provide personal attention which may not be possible in a large-scale enterprise. Similarly, firms providing professional services like eye clinic, tax consultancy, chartered accountancy, etc. are also organized as a small scale because they must maintain, personal touch with their clients. Thus, small firms are required to cater to individual tastes and fashions and to render personalized services to consumers.

3. Flexibility: Certain businesses are subject to wide variations in demand, e.g. manufacture of jewelry, ready: made garments, etc. In such cases, greater flexibility of operations is required. Small firms can be more flexible due to simple technology and low overheads. They are capable of being adapted to changing tastes and fashions. They can easily make changes in products and can shift to new lines of business whenever the need arises. Therefore, small firms are more suitable for manufacturing and selling specialty items that may be popular for only a short period of time.

4. Employee relations: When close rapport with employees is essential to provide high-quality products to the customers, small scale unit is in a better position. The owners, also the managers of such business have the most valuable advantage of being close to the employees. They know better their problems and can take necessary remedial measures quickly and efficiently.

5. Introduction of New Products: Before starting the production of a new product on a commercial scale, it is always desirable to test it in the market. In the initial stages, the requirements of customers and management are uncertain and unknown. Therefore, operations are usually carried on a small scale when new products or ideas are being introduced in the market. This also helps to reduce the risk.

6. Direct Motivation: Small scale enterprises foster individual initiative and skill. The identity of ownership and management serves to curb misconduct as mistakes bear directly on one’s property and income. There is maximum incentive to put the resources to best use because the resulting gains accrue directly to the owner. Red: tapis is absent and prompt decisions are possible.

7. Human Inertia: Many businessmen do not want to expand their business due to fear of loss of freedom. Growth may involve more work and worry. People who want to lead a comfortable and simple life may be satisfied with the small scale of business.

8. Shield to Big Business Many small firms serve as ancillary units or feeders to large firms. Such units also provide a training ground for entrepreneurs. Small firms also provide some guarantee against the emergence of new competition. A threat to the big firms. They provide superficial evidence that monopoly does not exist in the industry.

9. Social Utility: Small scale industries are helpful in generating self: employment for a large number of persons. These industries are also useful in preventing the concentration of income and wealth. They facilitate the economic development of rural and backward areas. Small firms use local resources and their social cost is comparatively low.

10. State Assistance and Patronage: Small scale industries get several concessions from the government on account of their social benefits. The government provides then loans on concessional rates of interest. Technical, managerial, and marketing assistance is also provided. The government has reserved several products for exclusive production in the small scale sector. Several institutions have been set up to protect and promote the growth of small scale industries in the country.

Question 3. Discuss the main types of partners. Answer: A partnership firm can have different types of partners with different roles and liabilities. There can be the following types of partners:

• Active Partner
• Sleeping or Dormant Partner
• Secret Partner
• Nominal Partner
• Partner by estoppel
• Partner by holding out
• Minor Partner

1. Active Partner: Those partners who contribute capital and also takes an active part in the management of the firm are called active partners. These partners act as agents of the firm and have unlimited liability. All other partners are responsible for their deals.

2. Sleeping or dormant partner: Those partners who contribute capital only but do not take an active part in the affairs of the business are called sleeping partners. They have shared in the profit loss of the firm and also have unlimited liability. But they do not come face to face with the third party.

3. Secret Partner: This type of partner contributes capital and takes an active part in the management of the firm’s business. He shares in the profit and losses of the firm and has unlimited liability. However, his connection with the business of a partnership firm is not known to the outside world.

4. Nominal Partner: Those partners who neither invest money nor have shared in the profit and loss and also have no role in the administration of the firm. The firm makes them partners to gain from their personal goodwill. They have unlimited liability also.

5. Partner by estoppel: A person who by his words or conduct, represents himself as a partner becomes liable to those who advance money to the firm on the basis of such representation. He cannot avoid the consequences of his previous act.

6. Partner by holding out: When a person is declared as a partner and he does not deny this even after becoming aware of it, he becomes liable to third parties who lend money or credit to the firm on the basis of such a declaration.

7. Minor Partner: A minor is a person who has not completed 18 years of age. Minor may be admitted as a partner only for the benefits of the partnership with the mutual consent of all the partners. On being so admitted, a minor can impact and copy the books of accounts but could not take an active part in the management. His liability is limited to the intent of his share in the capital and profit of the firm.

Question 4. Explain the various types of partnerships. Answer: A partnership can be classified on the basis of two factors:

On the basis of duration, there can be two types of partnership:

• Partnership at will,
• Particular partnership

On the basis of liability, the two types of partnership are:

• Partnership with limited liability
• Partnership with unlimited liability.

On the basis of Duration: 1. Partnership at will: It is a partnership formed for an indefinite period. It can continue for any length at any time depending upon the will of the partners. It can be dissolved by any partner by giving notice to the other partners of his desire to quit the firm.

2. Particular Partnership: It is a partnership formed for a particular objective. It is formed fora specific time period or to achieve specified objectives. It is automatically dissolved on the expiry of the specified period or on the completion of the specific purpose for which it was formed.

On the basis of liability: 1. Partnership with limited liability: In this type of partnership the liabilities of partners are limited to the amount of capital introduced by them except one partner who has unlimited liability. Registration of such a partnership is compulsory. The limited partner could not take an active part in the firm’s management and their acts also do not bind the firm or other partners.

2. Partnership with unlimited liability: This is also called a general partnership. In this liability of the partner is unlimited and joint. They enjoy the right to participate in the management of the firm and their acts are binding on each other as well as on the firm. Registration of this type of firm is optional. Because of unlimited liability, the firm’s creditors can realize these dues in full from any of the partners by attaching their personal property if the firm’s assets are found to be inadequate to pay off its debts.

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MCQ Questions for Class 11 Business Studies Chapter 2 Forms of Business Organisation with Answers

We have compiled NCERT MCQ Questions for Class 11 Business Studies Chapter 2 Forms of Business Organisation with Answers Pdf free download. MCQ Questions for Class 11 Business Studies with Answers were prepared according to the latest question paper pattern. Practicing these Forms of Business Organisation Class 11 Business Studies MCQs Questions with Answers really effective to improve your basics and learn all the key concepts.

Forms of Business Organisation Class 11 MCQs Questions with Answers

Objective Type Questions

Question 1. The structure in which there is separation of ownership and management is called: (a) Sole proprietorship (b) Partnership (c) Company (d) All business organization.

Answer: (c) Company

Question 2. In a co-operative society, the principle followed is : (a) One share one vote (b) One man one vote (c) No vote (d) Multiple votes.

Answer: (b) One man one vote

Question 3. The maximum number of partners allowed in the banking business are : (a) Twenty (b) Ten (c) No limit (d) Two.

Answer: (b) Ten

Question 4. The capital of a company is divided into number of parts each one of which are called: (a) Dividend (b) Profit (c) Interest (d) Share.

Answer: (d) Share.

Question 5. Provision of residential accommodation to the members at reasonable rates is the objective of: (a) Producer’s cooperative (b) Consumer’s cooperative (c) Housing cooperative (d) Credit cooperative.

Answer: (c) Housing cooperative

Question 6. The karta in Joint Hindu Family business has : (a) Limited liability (b) Unlimited liability (c) No liability for debts (d) Joint liability.

Answer: (b) Unlimited liability

Question 7. The board of directors of a joint stock company is elected by : (a) General public (b) Government bodies (c) Shareholders (d) Employees.

Answer: (c) Shareholders

Question 8. Profits do not have to be shared. This statement refers to : (a) Partnership (b) Joint Hindu Family business (c) Sole proprietorship (d) Company.

Answer: (c) Sole proprietorship

Question 9. The Head of the Joint Hindu Family business is called : (a) Proprietor (b) Director (c) Karta (d) Manager

Answer: (c) Karta

Question 10. A partner whose association with the firm is unknown to the general public is called: (a) Active partner (b) Sleeping partner (c) Nominal partner (d) Secret partner.

Answer: (d) Secret partner.

Fill in the blanks

1. …… are business practise which are desirable form the point of new of society.

Answer: Business ethics

2. Business ethics depends on welfare of ……

Answer: Business

3. Business owes some …… towards society.

Answer: Society

4. …… gives partnership birth.

Answer: Compromises

5. The partner who invested capital only but not take a part in management is called ………

Answer: Inactive partner.

6. The liabilities of chief (owner) of Hindu undivided family are ……… on the contrary the liabilities of its members are ……..

Answer: Unlimited, limited

7. ……. only can take a part of JHF.

Answer: Who can take birth in family

8. The limit in Rs. of small scale industries is …………

Answer: One crore

9. Minimum number of members are required for company ………

Answer: Two

10. …….. company does not issue share capital.

Answer: Private

11. The first preference has been given for paying dividend …… shares.

Answer: Preference

12. The debenture required for mortgage of asset is called ………

Answer: Mortgage debenture

13. To making Article of Association for Joint Stock Pvt. Ltd. company is ……….

Answer: Not compulsory

14. Memorandum of Association of a company is …….. charter.

Answer: Non-convertible

15. In Memorandum of Association of company the rights and ……. are written.

Answer: Object

16. ……….. is a important document of a company.

Answer: Memorandum of Association

17. Company is a …….. person.

Answer: Artificial

18. The persons which construct a company is called ……..

Answer: Promoter

19. In Memorandum of Association at least ………. person’s sign is compulsory.

Answer: Seven.

20. …….. is to pursue those policies which are desirable for values of society.

Answer: Business responsibility

21. Maximum social welfare in business shows …….. responsibility.

Answer: Social

22. Moving vehicle causes …… pollution.

Answer: Air

23. The first objective of cooperative society is ……..

Answer: For provide service

24. The life of sole tradership is ……….

Answer: Uncertain

25. In sole tradership does have ……. capacity.

Answer: For making contract

26. For selecting any kind of business is …….. most important factor.

Answer: Financial

27. We need type of business for large scale production and distribution …………

Answer: Company

28. For public company ……. minimum number of members are required.

Answer: Three

29. For every proposal of company ……. having voting right.

Answer: Equity

30. The small parts of capital of every company is called …….

Answer: Shares

31. To making Memorandum of Association is ………

Answer: Compulsory

32. For purchasing share / debenture company issued its ……….. for inviting public.

Answer: Prospectus

33. In the absence of Article of Association the rules and regulations followed by company is ………

Answer: Table-A

34. Company incorporated in it …..

Answer: Company Act 1956

35. ……… is the evidence of existence of company.

Answer: Incorporation

36. Registration of company is called …….. company.

37. In place of prospectus ………. can issued.

Answer: Substitute prospectus

True or False

1. Co-operative society was originated in England and Germany.

Answer: True

2. Registration of partnership is compulsory.

Answer: False

3. Registration of sole tradership is compulsory.

4. Company is a word of French language.

Answer: Flase

5. Equity share capital is included ownership capital.

6. Debenture holder is included in ownership capital.

7. After getting maturity then member of family can become partner of family business.

8. The having one member can never be company.

9. Partnership deed defines oral agreement among partners.

10. Private company start business after obtaining the certificate of incorporation.

11. When company became existence the work of promoter ends.

12. M.O.A. is a important document of company.

13. Article of Association is compulsory.

14. For registration of company prospectus of company is compulsory.

15. In partnership responsibility of members are limited.

16. Secracy in sole tradership is always profitable.

17. Chief of Hindu family is called Karta.

18. Public company do not issued prospectus.

19. Public deposit is a medium term source of finance.

20. Preference shares do not have the right of getting dividend.

21. First company act was passed in India on 1850.

22. There is no risk in sole tradership.

23. Public sectors main aim is not to earn profit.

24. Alteration in Article of Association is easy.

25. Company can alter in memorandom of association by passing a ordinance.

26. Private company start business instantly after getting certificate of incorporation.

27. A.O.A. is second important document of company.

28. Table-A can be the subsitute of A.O.A.

Match the Columns

We hope the given NCERT MCQ Questions for Class 11 Business Studies Chapter 2 Forms of Business Organisation with Answers Pdf free download will definitely yield fruitful results. If you have any queries related to CBSE Class 11 Business Studies Forms of Business Organisation MCQs Multiple Choice Questions with Answers, drop your questions below and will get back to you in no time.

NCERT Solutions for Class 11 Business Studies Chapter 2 Forms of Business Organisation

Detailed, Step-by-Step NCERT Solutions for 11 Business Studies Chapter 2 Forms of Business Organisation Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.

Forms of Business Organisation NCERT Solutions for Class 11 Business Studies Chapter 2

Forms of business organisation questions and answers class 11 business studies chapter 2.

Tick the appropriate answer :

Question 1. The structure in which there is the separation of ownership and management is called (a) Sole Proprietorship (b) Partnership (c) Company (d) All business organizations Answer: (c) Company

Question 2. The Karta in Join Hindu Family -business has (a) Limited liability (b) Unlimited liability (c) No liability for debts (d) Joint liability Answer: (b) Unlimited liability

Question 3. In a cooperative society the principle followed is (a) One share one vote (b) One man one vote (c) No vote (d) Multiple vote Answer: (b) One man one vote

Question 4. The board of directors of a joint stock company is elected by (a) General public (b) Government bodies (c) Share-holders (d) Employees Answer: (c) Share-holders

Question 5. The maximum number of partners allowed’in the banking business are …………. (a) Twenty (b) Ten (c) No limit (d) Two Answer: (b) Ten

Question 6. Profits do not have to be shared. This statement refers to (a) Partnership (b) Joint Hindu Family business (c) Sole Proprietorship (d) Company Answer: (c) Sole Proprietorship

Question 7. The capital of a company is divided into number of parts each one of which are called (a) Dividend (b) Profits (c) Interest (d) Shares Answer: (d) Shares

Question 8. The Head of the Joint Hindu Family business is called (a) Proprietor (b) Director (c) Karta (d) Manager Answer: (c) Karta

Question 9. Provision of residential accommodation to the members at reasonable rates is the objective of (a) Producer’s Cooperative (b) Consumer’s Cooperate (c) Housing Cooperative (d) Credit Cooperation Answer: (c) Housing Cooperative

Question 10. A partner whose association with the firm is unknown to the general public is called (a) Active Partner (b) Sleeping Partner (c) Nominal Partner (d) Secret Partner Answer: (d) Secret Partner

Short Answer Questions

Question 1. For which of the following types of business do you think a sole proprietorship form of organisation would be more suitable and why? (a) Grocery store (b) Medical store (c) Legal consultancy (d) Craft centre (e) Internet cafe (f) Chartered accountancy firm Answer: (a) Grocery store – For grocery’ store, sole proprietorship is suitable form of business as it does not require large capital, lire individual management is required to run the store. It does not require professional skills and the business needs personal touch and control with customers and no legal formalities required to start the business.

(b) Medical store – It is suitable for sole proprietorship as it does not need any legal formalities to start the business except to obtain licence from medical association. It does not require huge amount of capital and no professional management is needed.

(c) Chartered accountancy firm – Sole proprietorship is suitable firm of business as it needs personal contact with the firms or customers, having technical knowledge, skill and professional degree are required.

Question 2. For which of the following types of business do you think a partnership form of organisation would be more suitable, and why? (a) Grocery store (b) Medical clinic (c) Legal consultancy (d) Craft centre (e) Internet cafe (f) Chartered accountancy firm Answer: (a) Legal consultancy – For legal consultancy, partnership form of business is suitable as it needs large volume of capital. Partners can accomplished different functions according to the area or division. The accounts are not published so it has more secrecy also.

(b) Craft centre- For craft centre also, partnership firm is suitable as more financial resources are required. In craft Centre, partners may divide the work according to the suitability of the partner.

(c) Internet cafe – In internet cafe, both sole proprietorship or partnership firm are suitable, but it will be more profitable in partnership as it require large amount of capital and to some extent involves risk also which will be shared among the partners.

Question 3. Explain the following terms in brief.

• Perpetual succession
• Common seal
• Artificial person.

Answer: 1. Perpetual succession: A company is a legal entity separate from its owners or members. It can be brought to an end only by law as it is created by the law. It will only cease to exist when a specific procedure for its closure, called winding up, is completed.

Members may come and go, but the company continues to exist through a consecutive succession of old members by new members on a continuous basis. We can say that ‘perpetual succession’ implies permanent existence which is not affected by death, retirement insolvency of members.

2. Common Seal: A company is a creation of law and exists independent of its members. The company is thus considered to be an artificial person who acts through its Board of Directors. When the Board of Directors enters into an agreement with others, it indicates the company’s approval through a common seal.

The common seal is the engraved equivalent of an official signature. Any agreement which does not have the company seal put on it is not legally binding on the company.

3. Karta: The head of the Joint Hindu Family who is the eldest member and controls the Joint Hindu Family business which is a specific form of business organization found only in India is called Karta. Joint Hindu Family business refers to a form of organization wherein the business is owned and carried on by the members of the Hindu Undivided Family (HUF).

It is governed by Hindu Law. The control of the family business lies with the Karta. He takes all the decisions and is authorized to manage the business. His decisions are binding on the other members. The Karta has unlimited liability while the liability of all other members is limited to their share of coparcenary property of the business.

4. Artificial Person: A company is called an artificial person because just like natural persons, a company can own property, incur debts, borrow money, enter into contracts, sue, and be sued but unlike them, it cannot breathe, talk, walk, eat, etc. A company is a creation of law and exists as an artificial person independent of its members.

Question 4. Compare the status of a minor In a Joint Hindu Family business with that in a partnership firm. Answer: When the inclusion of an individual into the business occurs due to the birth in the Hindu Undivided Family (HUF) is known as Minor. On the other hand, the partnership is based on a legal contract between two persons who agree to share the profits or losses of a business carried on by them and a minor is incompetent to enter into such a valid contract with others. Hence, a minor cannot become a partner in any firm. However, a minor can be admitted to the benefits of a partnership firm with the mutual consent of all other partners.

Question 5. If registration is optional, why do partnership firm willingly go through this legal formality and get themselves registered? Explain. Answer: Registration of Partnership – Under law, it is not compulsory to get the partnership firm registered. It is optional for the partners to get their firm registered. If they so desire, they can get their firm registered with the Registrar of Firms of the relevant State. The registration of a firm is a simple process. In order to get registered, a firm must submit an application to the Registrar of firms containing the followings:

• the firm name
• the principal place of business
• the names of other places where firm carries on business;
• the date when each partner joined the firm;
• the names and addresses of the partners; and
•  the duration of the firm.

The application must be duly signed by all the partners and should be accompanied by the partnership deed and the necessary registration fee. After being satisfied, the Registrar of Firms will enter the name of the firm in the Register of Firms and will issue a Registration Certificate to the firm.

Consequences of Non-registration – A partnership arises out of an agreement between two or more persons and not out of registration. Registration provides only a reliable evidence and a conclusive proof of the existence of a partnership firm. Non-registration of a firm does not make the partnership agreement or any transaction between the partners and outsiders void. However, according to Sec. 69 of the Partnership Act, the consequences of non-registration are as follows :

• It cannot enforce its claim against a third party in a court of law.
• Partners of unregistered firms cannot sue the firm to enforce their claims.
• An unregistered firm cannot file a suit against a third party for the recovery of claims. It cannot claim a set-off in a suit filed against it.
• An unregistered firm can’t file a suit against any of its partners.

Because of the above disabilities due to non-registration, it is desirable to get the firm registered. The registered firm and its partners will have the rights to file suits mentioned above. Another effect of registration is that any statement, intimation or notice recorded in the Register of Firms is a conclusive proof of the facts stated there in.

Advantages of Registration: The advantages of registration of a firm are as follows:

• Partners of a registered firm can file suits against the firm to enforce their rights.
• Partners can file suits against each other and against outsides.
• The firm can file a suit against any of its partners to enforce its rights in a court of law.
• The firm can enforce its claim against third parties in a court of law. It can also claim a set-off in a suit filed against it.
• Third parties can obtain information about the firm and its partners from the Registrar of Firms before dealing with it.
• A person intending to join as a partner can obtain necessary information from the Registrar of firms.

Question 6. State the important privileges available to a private company. Answer: The following are some of the privileges of a private limited company as compared to a public limited company

• The minimum number of members required to form a private company is only two while at least seven people are needed to form a public company.
• A private company does not need to issue a prospectus as the public is not invited to subscribe to its shares.
• Allotment of shares can be done without receiving the minimum subscription.
• A private company can start a business as soon as it receives the certificate of incorporation and does not have to wait for the receipt of a certificate of commencement as in the case of a public company.
• A private company needs to have only two directors as against the minimum of three directors in the case of a public company.
• A private company is not required to keep an index of members unlike a public company
• There is no restriction on the number of loans to directors in a private company while in the case of public company permission from the government is required.

Question 7. How does a cooperative society exemplify democracy and secularism? Explain. Answer: Cooperative is an association of persons usually of limited means, who have voluntarily joined together to achieve a common economic end through the formation of a democratically controlled business organizations. Cooperative societies enjoy the various advantages specially democracy and secularism.

Democratic Management – Every member has one vote irrespective of the amount of shares subscribed by him. The principle of “one vote one man” is followed. Office bearers are the elected , representative of the members.

Secularism Principle – A person having common interest may join and leave the society at his own will. Membership is open irrespective of religion, caste and sex. Mutual cooperation, distributive justice, decentralization of power, open membership makes cooperative societies asocial utility.

Question 8. What is meant by ‘Partner of Estoppel’. Explain. Answer: A partner by estoppel is a person who gives an impression to others that he/she is a partner of the firm through his / her own initiative, conduct, or behavior. Such partners are held liable for the debts of the firm because in the eyes of others, they are considered partners, even though they do not contribute capital or take part in its management, e.g., Mr. Sharma is a friend of Mr. Mathur who is a partner in a pharmaceutical firm Health First.

On Mr. Mathur’s request, Mr. Sharma accompanies him to a business meeting with Wellness Pharmaceuticals and actively participates in the process of negotiation for a business deal and gives the impression that he is also a partner in Health First. If credit is extended to Health First on the basis of these negotiations, Mr. Sharma would also be liable for repayment of such debt, as if he is acting as the partner of the firm.

Long Answer Questions

Question 1. What do you understand by sole proprietorship? Explain its merits and limitations. . Answer: Sole proprietorship refers to a form of business organization which is owned, managed and controlled by an individual who is the incipient of all profits and bearer of all risks. The word “Sole’’ implies “only” and “proprietor” refers to “owner”. Hence, a sole proprietor is the only owner of a business. This form of business is particularly common in small-scale businesses and areas of personalized services.

Merits: A sole proprietorship offers many advantages. Some of the important ones are as follows: (i) Quick decision making: A sole proprietor enjoys a considerable degree of freedom in making business decisions. Further, the decision-making is prompt because there is no need to consult others. This may lead to timely capitalisation of market opportunities as and when they arise.

(ii) Confidentiality of information: Sole decision-making authority enables the proprietor to keep all the information related to business operations confidential and maintain secrecy. A sole trader is also not bound by law to publish a firm’s accounts.

(iii) Direct incentive: A sole proprietor directly reaps the benefits of his/her efforts as he/she is the sole recipient of all the profit. The need to share profits does not arise as he/she is the single owner. This provides a maximum incentive to the sole trader to work hard.

(iv) Sense of accomplishment: There is personal satisfaction involved in working for oneself. The knowledge that one is responsible for the success of the business not only contributes to self-satisfaction but also instills in the individual a sense of accomplishment and confidence in one’s abilities.

(v) Ease of formation and closure: An important merit of sole proprietorship is the possibility of entering into business with minimal legal formalities. There is no separate law that governs sole proprietorship. As sole proprietorship is the least regulated form of business, it is easy to start and close the business as per the wish of the owner.

Limitations: Notwithstanding various advantages, the sole proprietorship form of organization is not free from limitations. Some of the major limitations of sole proprietorship are as follows: (i) Limited resources: Resources of a sole proprietor are limited to his/her personal savings and borrowings from others. Banks and other lending institutions may hesitate to extend a long-term loan to a sole proprietor. Lack of resources is one of the major reasons why the size of the business rarely grows much and generally remains small.

(ii) Limited life of a business concern: In the eyes of the law, the proprietorship and the owner are considered one and the same. Death, insolvency or illness of a proprietor affects the business and can lead to its closure.

(iii) Unlimited liability: A major disadvantage of a sole proprietorship is that the owner has unlimited liability If the business fails, the creditors can recover their dues not merely from the business assets, but also from the personal assets of the proprietor. A poor decision or unfavourable circumstances can create a serious financial burden on the owners. That is why a sole proprietor is less inclined to take risks in the form of innovation or expansion.

(iv) Limited managerial ability: The owner has to assume the responsibility of varied managerial tasks such as purchasing, selling, financing, etc. It is rare to find an individual who excels in all these areas. Thus decision-making may not be balanced in all cases. Also, due to limited resources, sole proprietors may not be able to employ and retain talented and ambitious employees.

Though sole proprietorship suffers from various shortcomings, many entrepreneurs opt for this form of organisation because of its inherent advantages. It requires less amount of capital. It is best suited for businesses which are carried out on a small scale and where customers demand personalised services.

Question 2. Why is partnership considered by some to be a relatively unpopular form of business ownership? Explain the merits and limitations of partnership. Answer: Advantages of Partnership – Along with sold proprietorship, partnership firm also gained popularity because of many advantages. Partnership allows raising more amount of capital. The strains on the sole proprietor can be relieved by sharing the work between two or more partners.

Each partner can look after those matters for which he is best fitted. This will lead to benefits of specialisation. The partners can consult each other and they can represent other partners in dealings with third parties. The fear of discontinuance of business is less as compared to sole tradership because of a number of partners who can take care’of the business in case of ill-health, insolvency, insanity or death of a partner.

The partnership firm has greater chances of survival as it can operate in a number of business lines to secure its interests. It can raise more funds because of the personal reputation of the partners.

As compared with a sole, leadership and company, the advantages of a partnership firm are discussed below : (i) Ease of Formation – Partnership is simple to form, inexpensive to establish and easy to operate. No legal formalities are required. An agreement, which may be oral or written, is sufficient to enter into partnership. Registration of the firm is not compulsory. But if a firm wants to get itself registered, the procedure is very simple.

(ii) Large Financial Resources – A partnership firm can raise larger capital as compared to sole trader. All the partners contribute to the capital of the firm. Moreover, new partner can be admitted to raise further capital of firm whenever necessary.

(iii) Better Management – A firm can conduct business on a large scale. It can afford to employ competent managers. Moreover, the partners also bring managerial skills for the business of the firm. Thus, the business is managed better as compared to sole tradership.

(iv) Better Decisions – Two heads are always better than one. This principle applies to partnership firms. The important decisions are taken with the mutual consent of all the partners.

(v) Sharing of Risks – The risks of the firm’s business are shared by a number of partners. The burden of risks on each partner is much less as compared to a sole proprietor.

(vi) Flexibility – Partnership business is free from legal restrictions and government control. Partners can make changes m the size of business, capital and managerial structure without any approval. Capital, profit-sharing ratio, price policy and other terms and conditions of the partnership can be changed very easily.

(vii) Matching of Ownership and Capital – The skill and experience of all the partners are pooled together. Moreover, there is a relationship between the efforts and rewards as in case of a sole trader. This acts as a motivating factor for the partners to work hard for the success of the business.

(viii) Impact of Unlimited Liability – The partners are severally and jointly liable for the debts of the firm up to an unlimited extent. This compels them to conduct business carefully. This acts as a brake on hasty and reckless decisions. Each partner tends to be cautious and adopts sound business practices in the interest of the partnership business.

(ix) Secrecy – Important secrets of a partnership firm can be maintained as it is not compulsory for it to get its accounts audited and published.

(x) Easy Dissolution – Partnership business suffers from instability, insolvency, insanity, retirement or death of a partner may cause abrupt end to business. There are no legal hurdles involved in dissolution. This helps in protection of minority interest. If a partner feels that his interests are not secured in the firm, he cannot be compelled by the majority partners to remain in the business. He can demand dissolution of the partnership firm.

Limitations or Disadvantages of Partnership – The partnership form of organisation suffers from the following disadvantages: (i) Limited Resources – There is a limit to the maximum number of partners in a firm. Therefore, it is not possible to collect huge financial resources. Blowing capacity of partners is also limited.

(ii) Unlimited Liability- Every partner is fully liable for the debts. Fear of risks may restrict initiative and growth of business. Private properties of partners can also be taken up for business losses.

(iii) Mutual Conflicts – All the partners can participate in the management of the business. But difference in their skills, capacity and foresightedness may make a ‘mess’ of the business of the firm.

(iv) Delay in Decision-making – The consent of all the partners is required in order to take all policy decisions. It may create delays in taking decisions.

(v) Risk of Implied Authority’ – Every’ partner is an agent of the firm. A dishonest partner may cause a great loss to the firm, All the partners may suffer due to the negligence.of one partner.

(vi) Non-transferability of Interest – A partner cannot transfer his interest in the firm to outsiders without the unanimous consent of all other partners. This discourages people from investing in partnership firms.

Suitability of Partnership – Despite its various disadvantages or limitations, partnership firm has not lost popularity. It is a simple and convenient form of proprietorship. This form of or|anisation is suitable where the size the business is relatively ginal I and I the capital requirements are low.

It is also suitable where the partners use their professional skills; That is why this form of organisation’s the most popular among chartered accountants, lawyers, stock brokers, estate agents, solicitors and doctors.

Partnership firm ¡s suitable under the following conditions:

• The business is run on a smàll or medium scale.
• Personal touch with the customers or clients is essential.
• lt is convenient Ibr the professionals to form partnership.
• lt facilitates partnership between those having capital and those having technical qualifications.

Question  3. Why Is It Important to choose an appropriate form of organization? Discuss the factors that determines the choice of form of organization. Answer: The important factors determining the choice of organization are discussed below: (i) Cost and ease in setting up the organisation: As far as initial business setting-up costs are concerned, sole proprietorship is the most inexpensive way of starting a business. However, the legal requirements are minimum and the scale of operations is small. In the case of partnership also, the advantage of fewer legal formalities and lower cost is there because of the limited scale of operations.

Cooperative societies and companies have to be compulsorily registered. The formation of a company involves a lengthy and expensive legal procedure. From the point of view of initial cost, therefore, sole proprietorship is the preferred form as it involves least expenditure. Company form of organisation, on the other hand, is more complex and involves greater costs.

(ii) Liability: In case of sole proprietorship and partnership firms, the liability of the owners/partners is unlimited. This may call for paying the debt from personal assets of the owners. In joint Hindu family business, only the Karta has unlimited liability.

In cooperative societies and companies, however, liability is limited and creditors can force payment of their claims only to the extent of the company’s assets. Hence, from the point of view of investors, the company form of organisation is more suitable as the risk involved is limited.

(ii) Continuity: The continuity of sole proprietorship and partnership firms is affected by such events as death, insolvency or insanity of the owners. However, such factors do not affect the continuity of business in the case of organisations like joint Hindu family business, cooperative societies and companies.

In case the business needs a permanent structure, company form is more suitable. For short term ventures, proprietorship or partnership may be preferred.

(iv) Management ability: A sole proprietor may find it difficult to have expertise in all functional areas of management. In other forms of organisations like partnership and company, there is no such problem. Division of work among the members in such organisations allows the managers to specialise in specific areas, leading to better decision making.

But this may lead to situations of conflicts because of differences of opinion amongst people. Further, if the organisation’s operations are complex in nature and require professionalised management, the company form of organisation is a better alternative.

Proprietorship or partnership may be suitable, where the simplicity of operations allow even people with limited skills to run the business. Thus, the nature of operations and the need for professionalised management affect the choice of the form of organisation.

(v) Capital considerations: Companies are in a better position to collect large amounts of capital by issuing shares 10 a large number of investors. Partnership firms also have the advantage of the combined resources of all partners. But the resources of a sole proprietor are limited.

Thus, if the scale of operations is large, company form may be suitable whereas for medium and small-sized business one can opt for partnership or sole proprietorship. Further, from the point ’ of view of expansion, a company is more suitable because of its capability to raise more funds and invest in expansion plans.

It is precisely for this purpose that in our opening case Neha’s father suggested she should consider switching over to the company form of organisation.

(vi) Degree of control: If direct control over operations and absolute decision-making power is required, proprietorship may be preferred. But if the owners do not mind sharing control and decision making, partnership or company form of organisation can be adopted.

The added advantage in the case of a company form of organisation is that there is complete separation of ownership and management and it is professionals who are appointed to independently manage the affairs of a company.

(vii) Nature of business: If direct personal contact is needed with the customers such as in the case of a grocery store, proprietorship maybe more suitable. For large manufacturing units, however, when direct personal contact with the customer is not required, the company form of organisation may be adopted.

Similarly, in cases where services of a professional nature are required, a partnership form is much more suitable. It would not be out of place to mention here that the factors stated above are inter-related. Factors like capital contribution and risk vary with the size and nature of the business, and hence a form of business organization that is suitable from the point of view of the risks for a given business when run on a small scale might not be appropriate when the same business is carried on a large scale.

It is, therefore, suggested that all the relevant factors must be taken into consideration while making a decision with respect to the form of organisation that should be adopted.

Question  4. Discuss the characteristic, merits and limitations of cooperative firm of organization. Also describe breifly different types of cooperative societies. Answer: Characteristics of Cooperatives – The essential features of a cooperative form of organisation are discussed below

(1) Voluntary Association – A cooperative society is a voluntary organization of persons desirous of improving their economic status on cooperative basis. They can become the members of the cooperative society on their own and can leave it whenever they feel like, by giving a notice to the society,

(2) Open Membership – There is no restriction on entry into a cooperative society. Its membership isopen to all persons having certain common interests. Caste, creed, religion or sex is no bar on membership.

(3) Separate Legal Entity – A cooperative society is required to be registered with the Registrar of Cooperative Societies under the Cooperative Societies Act, 1912. On registration, it becomes a body corporate. It can own property in its own name. It can enter into contracts with other persons; It becomes an autonomous and self-governing organisation. It can also sue and be sued in its own name.-

(4) Service Motive – The primary aim of a cooperative society is to provide service to its members. Its motto is “each for all and all for each”. However, a cooperative society may earn some profits for the benefit of its members. ,

(5) Democratic Management – A cooperative society is a democratic form of organisation because each member has equal voting rights. One member, one vote ensures democratic management and control of a cooperative society. The organisation of a cooperative society is democratic and all members have an equal voice in the management.

(6) Disposal of surplus – The surplus arising out of year’s working is not distributed among the members by way of dividend. A specified portion of the profits is transferred to Statutory Reserve Fund and then a fair rate of interest is paid on the capital subscribed by the members. The remaining profits are distributed equitably among the members according to the extent of the business transacted with it by each member.

Advantages and Disadvantages of Cooperative Organisation

Advantages of Cooperative Organisation – The cooperative form of organisation is gaining popularity because of the following advantages:

(1) Mutual Benefit Association Cooperatives are formed on the basis of voluntary association of persons to provide them with certain services at ‘no profit, no loss’ basis. The members form a society on the basis of mutual help. This promotes a feeling of cooperation and selflessness among the members.

(2) Steady Supply of Goods and Services – Consumers’ cooperative stores ensure a steady and regular supply of goods at reasonable prices by eliminating middlemen and thus avoiding their excessive profits.

(3) Fair Dealings – Cooperatives ensure fair and honest business practices. They do not indulge in overstocking and speculative buying of goods.

(4) Open Membership – Any person having a common interest can become a member of a cooperative society having one share. Moreover, the shares are non-transferable. Hence, the shares are free from Speculation.

(5) Democratic Management – Management of cooperative is fully democratic in nature because of the principle of ‘one man, one vote’. It prevents the domination of the rich shareholders having greater number of shares over the other shareholders of the society.

(6) Equitable Distribution of Surplus – The entire surplus is not distributed in the form of dividend on capital. The rate of dividend cannot exceed a certain limit. The yearly profit or surplus is utilised in transferring apart of it to the reserve fund and the remaining in the form of bonus to the members on the basis of their transactions with the society. This leads to the equitable distribution of surplus.

(7) Limited Liability- The liability of the members in a cooperative organisation is limited to the extent of their capital contribution. The effect of limited liability is mentioned in the bye-laws of the cooperatives which is checked by the registrar at the time of registering the same.

(8) Continuity – The cooperative society enjoys a separate legal entity of its own independent of the entity of its members who own it. The death, leniency or insolvency of a member does not affect its existence.

(9) Government Assistance – Since cooperatives have been accepted by the Government as an instrument of economic policy, a number of grants, loans and financial assistance are offered to them to make them function efficiently.

Disadvantages of Cooperative Organisation – The cooperatives suffer from the following drawbacks:

(1) Limited Capital – Cooperative societies is not able to mobilise adequate capital for their large-scale operations because the rate of dividend on capital is low and every member has equal voting rights irrespective of the member of shares held by him. A cooperative society often faces shortage of funds.

(2) Inefficient Management – The guaranteed market for the cooperatives slackens the efforts of the management. Moreover, the management may not comprise of competent and efficient persons to deal with the business problems. A cooperative society cannot afford to employ expert management at high salaries.

(3) Excessive Government Regulations — The cooperatives are subjected to a variety of regulations from the cooperative department of the State Government partly because the Government offers a number of financial grants and partly because it is always anxious to see that the movement succeeds. All this has led to excessive Government regulations in the day-to-day functioning of the cooperative which, at times, amounts to interference.

(4) Lack of Motivation – Honorary office-bearers of a cooperative society have very little incentive to work hard for the society. The members of the managing committee with whom rests the responsibility of managing the cooperative do not feel sufficiently motivated to do their best to see the cooperative a grant success.

(5) Lack of Secrecy – As is usually common with the forms of organisation which enjoy separate legal entity and as such as under obligation to make full disclosures of their operations to their members, the cooperatives too being corporate in status fail to preserve their business secrets. Therefore, it becomes difficult to keep the secrets of business.

(6) Conflicts – Quite often disputes arise among the managing committee and members. Moreover, some members are indifferent towards the working of the cooperative society which gives unrestricted power to the managing committee.

(7) Misuse of Funds – Ignorance of business principles and misuse of funds for personal ends may lead to recurring losses. This may put the survival of the cooperative society in danger. The cooperative credit societies may advance loans to the members without sufficient security.

Types, of Cooperative Societies – Cooperatives Societies may be classified into different categories according to the nature of the services rendered by them. Following are the main types of cooperative societies:

• Consumers’cooperative societies.
• Cooperative credit societies.
• Producers’cooperative societies.
• Marketing cooperative societies.
• Cooperative fanning societies.
• Cooperative housing societies.

(1) Consumers’ Cooperative Societies – A consumer cooperative store is set up to ensure a steady supply of essential commodities at fair prices. A consumers’ cooperative store purchases the consumer goods either from the manufacturers or the wholesalers and then sells them to its members a reasonable prices.

The profits made by the society during a year are utilised for strengthening the reserve fund of the society, for declaring a moderate rate of dividend and for declaring a bonus to the members according to the purchases made by them. Such societies are formed to provide residential accommodation to their members either on ownership basis or at fair rents.

(2) Cooperative Credit Societies – Cooperative credit societies are formed to provide financial assistance in the form of direct loans to their members. These societies are organised both in rural and urban areas. Funds are pooled together by members’ contributions and are utilised in giving loans to needy members on easy terms. Thus, the members are protected from the clutches of the money-lenders who charge very high rates of interest. Another equally important purpose of credit cooperatives is to encourage the habit of thrift among their members.

(3) Producers’ Cooperative Societies – An industrial or producer’s cooperative is organised on small scale producers to face competition and to increase the production. The society sells the output in the market and distributes the profits by each member. Thus, a producers’ society not only provides money and materials to the small artisans but also undertakes to sell their products.

(4) Cooperative Marketing Societies – Cooperative marketing is of great importance to the small producers and agriculturists who face many difficulties in selling their output at remunerative profits. Marketing cooperatives seek to ensure a steady and favourable market for the output of their members. The output of its members is pooled together and sold according to market conditions. The profits on sales are distributed according to the contribution of the members to the pool. Marketing cooperatives eliminate middlemen and ensure honest trading practices as regards weight, measurement and accounting.

(5) Cooperative Farming Societies – These are voluntary associations of small farmers who join together to avail the benefits of large scale mechanised farming. It provides economic and social security to farmers. They aim at scientific organization of agriculture involving use of improved seeds, fertilizers, irrigation, soil conservation and other modem techniques.

(6) Cooperative Housing Societies – These societies are formed mostly in urban areas where the problem of housing is acute. These societies are allotted land by the land authority or by the Urban Development Authority at concessional prices. Such societies can also negotiate loans for its members on easy terms from financial institutions.

Question 5. Distinguish between a Joint Hindu family business and a partnership. Answer: Joint Hindu family business is the form of business owned by the members of a family. It is managed by the head of the family, known as karta, whose liability is unlimited. The liability of other members is limited. The membership attains since birth of a child in the family.

Partnership firm is an agreement between two or more persons to carry on legal business with profit motive, carried on by all or any one of them acting for all.

Difference between joint Hindu family business and partnership firm: Following are the bases of difference between Joint Hindu family business and partnership- .

Difference between Partnership and Joint Hindu Family Business :

Question 6. Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organizations? Why? Answer: Sole proprietorship refers to a form of business organization which is owned, managed, and controlled by an individual who bears all risks and receives all profits. This form of business is suited mainly in areas of personalized services and small-scale activities due to a shortage of capital and limited abilities of an individual who is the proprietor.

Still, many people continue to prefer sole proprietorship over other form organization as sole proprietorship offers many advantages such as: (i) Prompt Decision Making: The decision-making is prompt under sole proprietorship as there is a considerable degree of freedom in making business decisions and there is no need to consult others as in the case of a partnership or co-operative societies. This results in the effective capitalization of market opportunities as and when they arise.

(ii) Confidentiality: All the information related to business operations is kept confidential and secrecy is maintained as the sole decision-making authority rests with the proprietor unlike a partnership or co-operative form. A sole proprietor is also not bound legally to publish a firm’s accounts as in the case of a company.

(iii) Incentive to Work: The sole proprietor receives all the business profits as a reward for bearing the business risk. He is the single owner and does not need to share profit. This provides an incentive to the sole proprietor to work hard.

(iv) Sense of Accomplishment: There is a sense of personal satisfaction involved in working for oneself. It instills a sense of accomplishment and confidence in the individual as he/she is the one who takes all the decisions without any interference from others which is present in all other forms of organization.

(v) Ease of Formation and Closure: An important merit of a sole proprietorship is the possibility of entering into business with minimal legal formalities. There is no separate law that governs sole proprietorship, unlike other forms like co-operative societies or companies. As sole proprietorship is the least regulated form of business, it is easy to start and close the business as per the wish of the owner.

• CBSE Class 11 Study Material

MCQs for CBSE Class 11 Business Studies Chapter 2 Forms of Business Organization: As Per Revised CBSE Syllabus 2024

  mcqs for cbse class 11 business studies chapter 2: this article brings to you multiple-choice questions of class 11 business studies chapter 2, forms of business organization. students can use the download link attached here to save it for future reference..

MCQs for CBSE Class 12 Business Studies Chapter 2: Central Board of Secondary Education(CBSE) has included MCQs as an integral part of the end-term exam question paper, making it important for students to practise MCQs. Here, we have listed MCQ-type questions for CBSE Class 11 Business Studies Chapter 2, Forms of Business Organizations. Solving MCQ-type questions can help you score good marks in upcoming CBSE End Term Examinations and prepares you for Competitive Exams.

• Read your chapters thoroughly
• Manage your time well
• Use a rough sheet for calculations
• Go through all the available options carefully
• Do not waste your time on questions you have no idea about
• Start with questions you are confident about

CBSE Class 11 Business Studies Revised Syllabus 2023-2024 (PDF)

MCQs for CBSE Class 11 Business Studies Chapter 2 Forms of Business Organizations

Find here a list of MCQs for CBSE Class 11 Business Studies Chapter 2 Forms of Business Organisations along with a pdf download link for the same. Check the MCQs and understand the type of 1-mark questions that can be a part of your exam. Multiple Choice Questions (MCQs) emphasizes on small details and thus builds a habit of reading in between the text.

  1)Liability of partners in a partnership business is generally of unlimited nature. But Neha joined a partnership firm in the year 2018 as a partner. As per the provisions of the firm she joined, the liability of the partners is limited and its firm name consists of a specific word LLP in it. Which of the following types of partnership is referred to in the above case?

(a) Partnership at will

(b) Particular Partnership

(c) General Partnership

(d) Limited Liability Partnership

Answer. d) Limited Liability Partnership

2)A Joint Hindu Family business run by Mr. Sachin Agarwal, in Hyderabad, Telangana. In a centralized management environment, he is operating and manages all business activities as the Eldest Member of the family. How Mr. Sachin should be designated or recognized in the family business?

(a) Elder Member

(c) Coparcener

(d) Partner

Answer. b) Karta

3)Which of the following statement is not correct?

(a) A company can refer to Table A if it does not prepare its articles of association.

(b) A private limited company can have a maximum of 200 members.

(c) A minor as a partner can inspect the books of the firm.

(d) One-person company is a company, which has one person as its member.

Answer. c) A minor as a partner can inspect the books of the firm

4)Profits are not shared in case of

(a) Company

(b) Cooperative society

(c) Sole proprietorship

(d) Partnership

Answer. c) Sole Proprietorship

5)Assertion (A) Sole Trading Concern is treated as a “One Man Show”.

Reason (R) It is owned, controlled, managed, and operated by the owner all alone.

(a) Both A and R are true. R is the correct explanation of A

(b) Both A and R are true, but R is not the correct explanation of A

(c) A is correct, but R is incorrect

(d) A is incorrect, but R is correct

Answer. a) Both A and R are true. R is the correct explanation of A

6)Ajeet started its Travel Agency in the year 2000 by taking a small room on Rent in Delhi. He invested money and efforts to build his business. Quality and timely services provided by his Travel Agency made him popular in Delhi. Name the form of business organization owned and operated by Ajeet.

(a) Partnership

(b) One-Person Company

(c) Joint Venture

(d) Sole Trading Concern

Answer. d) Sole Trading Concern

7)The maximum amount up to which a company can issue capital is called

(a) Authorized Capital

(b) Called Up Capital

(c) Issued Capital

(d) Subscribed Capital

Answer. a) Authorized Capital

8)Assertion (A) In a partnership firm the liability of all the partners is unlimited.

Reason (R) The partners are individually as well as jointly responsible for paying off business debts.

9)Ramesh is presenting himself as a partner of ABC Associates through his conduct or behavior. Clients dealing with the firm accept him as a partner due to his self-acclaimed attitude of being a partner of the firm. Which type of partner Mr. Ramesh is referred to in the above case?

(a) Active Prater

(b) Sleeping Partner

(c) Secret Partner

(d) Partner by Estoppel

Answer. d) Partner by Estoppel

10)After completing high studies in Hotel Management courses from one of the highly reputed Hotel Management Institutes of India, Mahesh decided to start his own Bakery in his hometown. His father arranged funds and supported him to commence his business. He recruited some staff and purchased the required equipment and machines. Within a few months, he started manufacturing bakery products in the market and sold them at reasonable prices. His quality products and reasonable prices helped him in making a good profit. Identify the form of business organization highlighted in the above case.

(b) Joint Hindu Family Business

(c) Sole Trading concern

Answer. c) Sole Trading Concern

11)Which of the following is not a clause of a memorandum of association?

(a) Capital clause

(b) Objects clause

(c) Director clause

(d) Name clause

Answer. c) Director Clause

12)Transfer of ownership is easy in the case of _____________ whereas it is difficult in the case of:

(a) Joint-stock company, partnership

(b) Sole proprietorship, joint stock company

(c) Sole proprietorship, partnership

(d) Partnership, joint stock company

Answer. a) Joint Stock company, partnership

13)Assertion (A) Secrecy can be maintained in the case of the sole proprietorship.

Reason (R) All Sole Proprietors are always honest.

Answer. c) A is correct but R is incorrect

14)Rakesh and Rajesh are two close friends who decided to take the franchise of Tata Sky. Both of them invested equally to get the franchise for their home district. It was agreed mutually between Rakesh and Rajesh to share the profits or losses of the firm on an equal basis. Name the form of business organizations run by the friends referred to in the above case.

Answer. a) Partnership

15)Sudhanshu is an active partner in a partnership firm, where, the liability of partners is unlimited. Partners are allowed to participate in the management of the firm business. All the partners are abiding by the rules framed in the partnership. Registration of a partnership firm is optional and the firm business may come to an end in the event of death, insolvency, and lunatic of any partner. Which type of partnership is referred to in the above case?

(a) General Partnership

(b) Partnership at will

(c) Limited Liability Partnership

(d) Particular Partnership

Answer. a) General Partnership

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https://educationhub.blog.gov.uk/2024/08/20/gcse-results-day-2024-number-grading-system/

GCSE results day 2024: Everything you need to know including the number grading system

Thousands of students across the country will soon be finding out their GCSE results and thinking about the next steps in their education.   

Here we explain everything you need to know about the big day, from when results day is, to the current 9-1 grading scale, to what your options are if your results aren’t what you’re expecting.  

When is GCSE results day 2024?  

GCSE results day will be taking place on Thursday the 22 August.     

The results will be made available to schools on Wednesday and available to pick up from your school by 8am on Thursday morning.  

Schools will issue their own instructions on how and when to collect your results.   

When did we change to a number grading scale?  

The shift to the numerical grading system was introduced in England in 2017 firstly in English language, English literature, and maths.  

By 2020 all subjects were shifted to number grades. This means anyone with GCSE results from 2017-2020 will have a combination of both letters and numbers.  

The numerical grading system was to signal more challenging GCSEs and to better differentiate between students’ abilities - particularly at higher grades between the A *-C grades. There only used to be 4 grades between A* and C, now with the numerical grading scale there are 6.  

What do the number grades mean?  

The grades are ranked from 1, the lowest, to 9, the highest.  

The grades don’t exactly translate, but the two grading scales meet at three points as illustrated below.  

The bottom of grade 7 is aligned with the bottom of grade A, while the bottom of grade 4 is aligned to the bottom of grade C.    

Meanwhile, the bottom of grade 1 is aligned to the bottom of grade G.  

What to do if your results weren’t what you were expecting?  

If your results weren’t what you were expecting, firstly don’t panic. You have options.  

First things first, speak to your school or college – they could be flexible on entry requirements if you’ve just missed your grades.   

They’ll also be able to give you the best tailored advice on whether re-sitting while studying for your next qualifications is a possibility.   

If you’re really unhappy with your results you can enter to resit all GCSE subjects in summer 2025. You can also take autumn exams in GCSE English language and maths.  

Speak to your sixth form or college to decide when it’s the best time for you to resit a GCSE exam.  

Look for other courses with different grade requirements     

Entry requirements vary depending on the college and course. Ask your school for advice, and call your college or another one in your area to see if there’s a space on a course you’re interested in.    

Consider an apprenticeship    

Apprenticeships combine a practical training job with study too. They’re open to you if you’re 16 or over, living in England, and not in full time education.  

As an apprentice you’ll be a paid employee, have the opportunity to work alongside experienced staff, gain job-specific skills, and get time set aside for training and study related to your role.   

You can find out more about how to apply here .  

Talk to a National Careers Service (NCS) adviser    

The National Career Service is a free resource that can help you with your career planning. Give them a call to discuss potential routes into higher education, further education, or the workplace.   

Whatever your results, if you want to find out more about all your education and training options, as well as get practical advice about your exam results, visit the  National Careers Service page  and Skills for Careers to explore your study and work choices.   

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Tags: GCSE grade equivalent , gcse number grades , GCSE results , gcse results day 2024 , gsce grades old and new , new gcse grades

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