FORMS OF BUSINESS ORGANIZATION Sole Trader Partnership Firm

FORMS OF BUSINESS ORGANIZATION Sole Trader Partnership Firm Joint Stock Company Co-operative Society

SOLE TRADING CONCERN / SOLE PROPRIETORSHIP Definition • Prof. James Lundy • “The sole proprietorship is an informal type of business owned by one person. ” Features • • Individual Ownership No Sharing of Profit and Risk Self-Employment Local Market Operations No Separate Legal Status Minimum Government Regulations Unlimited Liability

MERITS Easy Formation Quick Decision Maximum Secrecy Direction Motivation Flxibility Lower Cost Effciency

DEMERITS Limited Capital Limited Managerial Skill Unlimited liability Lack of Stability Lack of Specialization Not suitable for large scale operation

PARTNERSHIP FIRM Important terms • • Partnership Firm Name Partnership Deed or agreement

PARTNERSHIP FIRM DEFINITION SECTION 4 OF INDIAN PARTNERSHIP ACT 1932“PARTNERSHIP IS THE RELATION BETWEEN PERSON WHO HAVE AGREED TO SHARE THE PROFITS OF A BUSINESS CARRIED ON BY ALL OR ANY OF THEM ACTING FOR ALL. ”

PARTNERSHIP FIRM Features Agreement Joint Ownership Joint Management Lawful Business Liability Number of Partners Principal-Agent Relationship

Restriction of transfer of interest Registration Sharing of profits and losses Termination of partner Dissolution

MERITS Easy Formation Capital Business Secrecy Continued Existence Flexibility of operation Decision Making Effort-Reward Relationship Goodwill Specialization

Demerits Problem of Continuty Absence of Legal status Disputes Non-Transferability of interest Limited on number of partners Difficulty in Admissiom of Partners Unlimited Liability

Risk of Implied Authority Limited Capital Problem of Secrecy

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