Business and its Types
What is
business ?
Business
is the activity which is involved in regular dealing of goods and services.
Like A is
your classmate and he wants you to buy his pen for Rs. 40 , and on the same
hand you are also willing to take that pen from him. So, now the their is a
deal done between you and your classmate A.
So, Do we call this as a business ?
Answer is
No, because this is not a business although their is a dealing of good but it
is not a deal which will be done on regular basis Instead it is called a
“Barter System”.
Now what
is this new term Barter System ?
Barter System or system of double coincidence of wants is the system where two
or more parties are ready to do the deals willingly and also to be noted that
in this system there is no money involvement.
Like , there are Three person A,B,C . A is possessing a sack of wheat , B is possessing a sack of rice and C is possessing a sack of pulse . Also, the fact that all three of them do not have ample of money to buy rice, wheat and pulse.
A have wheat but can’t buy rice and pulse.
B have Rice but can’t buy wheat and pulse.
C have Pulse but can’t buy rice and wheat.
So they
finalize the deal between themselves that A will give half-half to B and C , B will give half-half to A and C , C will
give half-half to B and A . But the twist in between is that no money
involvement . And, that is what Barter
system .
“Barter system is the system in which goods and services are exchange with one another on willingness without the involvement of money .”
But their is a disadvantage in this system that this can be only applicable by the consent of both the parties .Means you were willing to buy the pen from A but, he is not willing willing to sell then this system cannot be applicable.
So, now we will discuss about the types of business :
1. Sole proprietorship
2. Partnership business
3. Joint Hindu family business
4. Joint stock company
5. Cooperative society
It is the
type of business which is all the activities are controlled , managed and
organized by one person .
Advantages
:
l One man
control
l No profit
sharing
l Easy
formation
Disadvantages
:
l Unlimited
liability
l Alone risk
bearing
l Limited
period of business
Partnership
:
It is the
other type of business where two or more people come together and run a
business with a common motive.
Partnership
deed : The
document containing the terms and conditions of the partnership agreement, is
called partnership deed.
Advantages
:
l Large
capital resource
l Easy
formation (Indian partnership act, 1932)
l Liability
of each partner is up-to their shares
Disadvantages
:
l Lack of
secrecy
l Lack of
Stability
l Lack of
Continuity
Types of
Partner :
1.
Active Partner - These partner participates in the management.
His liability is unlimited and he contributes capital in the firm and get the
share in profit and losses
2. Sleeping Partner - These
partner do not participates in the management in the firm. They also contribute
the capital and also get the share in the profit and loss.
3.
Secret Partner - These
partner is one whose association or relation to the firm is not known to
outsiders.
4. Nominal Partner - These
partner are not the real partners. They do not participates in the management ,
do not get the share in profit and loss. They only lend their name and
reputation for the benefit of the firm.
( NOTE :
According to the companies act 2014, the
numbers of maximum partners in the firm can be 50 previously it was 100. )
Types of
Partnership firm :
a.
Partnership at will : It is a
partnership for indefinite period. This type of Partnership exists till all
partners are willing to continue it and comes to an end when any one partner
desires.
b.
Particular Partnership : It is a
partnership formed when that ventured to perform a particular venture is known
as particular partnership. It comes to an end when that venture gets over.
c.
Fixed Period Partnership : The
Partnership formed for a fixed period of time is known as fixed period
partnership.
Joint Hindu family business :
A business
of joint Hindu family in which the share is distributed between the coparceners
.
Coparceners
: Members of
the business to whom the share is to be distributed.
There are
two conditions of the joint Hindu family :
1.
Family must have two male members .
2.
There must be any ancestral property with
the family
The two
types of Hindu family business are ,
Dayabhaga and Mitakshara
Features
of joint Hindu family business :
l Easy formation
(Hindu family succession act , 1956)
l Liability : Each
member has their liability up-to their shares.
l Control : The
major control is done by the senior most member of the family which is called
as Karta .
l Minor : Minor is
also considered to be the share partner of business when he/she is born.
Cooperative
Society :
A
cooperative society is the form of business , where the main motive is not
earning money instead it is mutual help .
It works
on the principle of each for all and all for each.
Minimum 10
person are required to form a co-operative society.
Advantages
of Co-operative society :
l Equality
of voting status
l Limited
liability
l Open
Membership
l Stable
existence
Disadvantages
of co-operative :
l Limited
Capital
l Inefficient
Management
l Lack of secrecy
l Excessive
government control
Types of
Co-operative Organizations :
1.
Consumer’s Cooperative society
2.
Cooperative housing society
3.
Cooperative Marketing society
4.
Cooperative Farming society
5.
Cooperative Credit society
6.
Producer’s Cooperative society
Joint
stock company :
It is a
voluntary association of individuals for profit, having capital divided into
transferable shares, the ownership of which is the condition of the membership.
Advantages
of Joint stock company :
l Perpetual
Existence
l Limited
Liability
l Transfer
of interest
l Efficient
Management
Disadvantages
of Joint stock company :
l Oligarchic
Management
l Lack of
secrecy
l Complexity
of formation
l Delay in
decisions
Types of
companies :
1.
Private ltd. Company
2.
Public ltd. Company
3.
One person Company
Four Stages of Joint stock company :
Some important terminology:
What is
SEBI ?
SEBI(Securities
and Exchange board of India) is a regulatory body, which controls the capital
market India to protect the interest of investors.
What is
Prospectus ?
Prospectus
is a invitation issued to invite for general public for subscribing to the
shares of the company.
What is
Minimum subscription ?
To make it
sure that company does not have the shortage of funds, it is made compulsory
that company must receive applications for the some minimum number of shares.
This is called Minimum Subscription .
What is
Return of Allotment ?
Return of
Allotment is a statement giving the details about the names and address of all
the shareholders.
What is
Memorandum of Association (MOA) ?
Memorandum
of Association or Doctrine of Outdoor Management or Charter of the company are
one and the same thing. It states all the powers, scopes, Limitations and
objectives of the company.
6 clauses
of MOA :
a)
Name clause
b)
Situation clause
c)
Association clause
d)
Capital clause
e)
Liability clause
f)
Objects clause
What is
Article of Association (AOA) ?
Article of
Association contains rules and regulations regarding the management of
company’s internal affairs. It defines the power, duties and rights of
managers, officers and board of directors.
(NOTE :
Company can prepare their own Article of Association , if they do not want to
prepare then they can of select any one set
of AOA from Table-F )
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