CHOICE OF FORMS OF

BUSINESS
ORGANISATION
Powerpoint Presentation by Mehak
Business Organisation
 What will you learn?
 Different form of organisation
 Merits and Demerits of different forms of
organisation
 Suitability of different form of
oragnisation
Different Form Of Organisation
 Sole Proprietorship
 Partnership
 Private Companies
 Public Companies
 Cooperative Society
 Sole Proprietorship
 The term ‘sole’ means single
and‘proprietorship’ means ownership
 a form of business organisation in which a
single individual owns and manages the
business, takes the profits and bears the
losses, is known as sole proprietorship
 Small trading and services enterprise like
retain shops are example of Sole
Proprietorship
 Merits and Demerits
MERITS OF SOLE DEMERITS OF SOLE
PROPRIETORSHIP PROPRIETORSHIP
 Ease of formation and  Unlimited liabiltiy of
dissolution as there are no owner
legal formalities  Lack of managerial
 There are low start-up expertise
costs and low operational  No perpetual Succession
overhead
 Ownership of all profits.
 Difficult for an individual
to raise capital
 No corporate income
taxes. Income realized by
 This type of business
business is owner organisation is not
individual income tax suitable for large scale of
return. organisation
Suitability of Sole
Proprietorship
•Market is limited ,
localised and
customers give
importance to
personal attention.
•Capital

requirement is
small.
•Risk involved is

limited.
•Manual Skill is

required like
tailoring.
 Partnership
 A Partnership consists of two or more
individuals .
 ‘Partnership’ is an association of two or
more persons who pool their financial and
managerial resources and agree to carry
on a business, and share its profit.
 Partnership in India is governed by Indian
Partnership Act ,1932.
 Merits and Demerits of
Partnership
DEMERITS OF
MERITS OF PARTNERSHIP
PARTNERSHIP
 Easy to form as it is not  Liability of partner is
necessary to register unlimited
partnership firm.  A partnership may end
 Better decisions as there upon the withdrawal or
is more managerial death of a partner.
expertise compared to
proprietorship.
 Non-transferability of
share
 No corporate income
taxes. Partnerships
 Possibility of conflicts
declare income by filing a  Limited capital as
partnership income tax partner can not exceed
return. 20.
Suitability of
Partnership
•Persons having
different ability, skill
or expertise can join
hands to form a
partnership firm to
carry on the
business
•Capital requirement

is of medium size
•Construction

business is suitable
for business firms
Types Of Partners
 Private Company
 A Private Limited Company is a company
registered with 2 directors &
shareholder’s as per the Companies Act,
2013.
 It is initially formed as a small business
being managed by limited people without
any public/outside interference except for
the mandatory Compliance’s applicable
to it.
Merits and Demerits of Private
Company
MERITS OF PRIVATE DEMERITS OF PRIVATE
COMPANY COMPANY
 Separate Legal entity  Restriction for free
 Perpetual Succession transabitlity of
 Limited liability of shares
members  Members restricted
 Easy fund availabilty to 200
 Capability to create
 Prohibition to invite
brand itself public to subscribe
company ‘s shares
 Capacity to sue and
to be sued in its
 Listing of shares not
name possible
Suitablity of
Private Company
•Medium sized
trading and service
concerns
•Small

manufacturing
concerns requiring
simple techniques
•Chartered

accountants,
lawyer
firms ,consultants
can be suitable for
private companies
 Public Company
 As per Companies Act 2013, a Public
Limited Company is a company that has
limited liability and may offer shares to
the general public by Initial Public Offer
(IPO).
 Where the company is listed, an
individual can also acquire the shares of
such company via stock market.
 Merits and Demerits of Public
Company
MERITS OF PUBLIC DEMERITS OF PUBLIC
COMPANY COMPANY
 Separate Legal Entity  Lack of secrecy
 Easy transferability  Red tapism
of Shares  Control and
 Perpetual Succession regulations
 Raise capital through  Distribution of profit
Public buyers  Huge cost to start a
 No limit to members public company
Suitability of
Public Company
•Large scale of
operation
•Complex process

of production and
distribution
•Heavy investment

•Department

stores,chain
stores,commercial
undertakings are
example of public
commpany
 Difference between private
company and public company
PRIVATE COMPANY PUBLIC COMPANY
 Minimum 2 members  Minimum Seven numbers
 Maximum 200 members  No limit of members
 Suitable for medium  Suitable for large scale of
scale of operation operation
 At least 2 directors  At least 3 directors
required required
 Public subscription is not
 Public subscription is
allowed allowed
 2 members should be
 5 members should be
personally present in AGM
personally present in
AGM
 Cooperative Society
 The Section 4 of the Indian Cooperative
Societies Act 1912 definesCooperative
Society as “a society, which has its
objectives for the promotionof economic
interests of its members in accordance
with cooperativeprinciples.”
 It works on the principle of self help and
mutual help.
 Merits and Demerits of
Cooperative Society
MERITS OF COOPERATIVE DEMERITS OF
SOCIETY COOPERATIVE SOCIETY
 Easy to form  Lack of capital
 Limited Liability  Lack of managerial
 State Assistance expertise
 Open membership  Less motivation
 Stable Life  Corruption
 Democratic
Management
Suitability of
Cooperative
Society
•solvethe common
problem or to meet
the common
requirements this
form of business
organisation is most
suitable
•People can join hands

to get the consumer