Business Studies

Forms of Business Organisation

Question:

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.

Merits:

  • 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.

Limitations:

  • 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.
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Forms of Business Organisation

Q 1.

X is interested in the floatation of a company. Briefly discuss the steps he should take.

Q 2.

What is the role of Karta in Joint Hindu Family business?

Q 3.

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

Q 4.

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

Q 5.

Define promoter. What are the functions of a promoter?

Q 6.

Explain meaning, features, merits and demerits of Sole Proprietorship.

Q 7.

Explain procedure of registering a partnership firm.

Q 8.

Explain different types of partners.

Q 9.

Explain procedure of registering a partnership firm.

Q 10.

Explain meaning, features, merits and demerits of partnership firm.

Q 11.

What are the steps required for raising funds from public?

Q 12.

What do you mean by incorporation of a company? What are the steps involved in corporation of a company?

Q 13.

Explain meaning, features, merits and demerits of joint stock company.

Q 14.

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

Q 15.

State the important privileges available to a private company.

Q 16.

Define Articles of Association. What are its contents?

Q 17.

Is registration of partnership firm compulsory? What are the consequences of non-registration?

Q 18.

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

Q 19.

Explain the contents of Memorandum of Association.

Q 20.

Distinguish between a Joint Hindu family business and partnership.

Q 21.

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

Q 22.

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

Q 23.

Explain the concept of mutual agency in partnership with suitable example.

Q 24.

Distinguish between a Joint Hindu family business and partnership.

Q 25.

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

Q 26.

Explain the meaning, features, merits and demerits of cooperative society.

Q 27.

Explain different types of partners.

Q 28.

Explain the following terms in brief:
(i) Perpetual succession (ii) Common seal
(iii) Karta (iv) Artificial person

Q 29.

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

Q 30.

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

Q 31.

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

Q 32.

Differentiate between:

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