Forms of Business Organisation
Sole Proprietorship
A sole proprietorship is owned, managed and controlled by one person. It offers quick decisions and relatively simple formation, but the proprietor generally bears unlimited liability and the business has limited resources.
Partnership
Partnership arises from an agreement between persons who agree to share profits of a business carried on by all or any one acting for all. Mutual agency is a central feature. The Partnership Act, 1932 provides the legal framework for partnership in India.
Hindu Undivided Family Business
A HUF business is governed by Hindu law. The business is controlled by the karta, while coparceners have rights according to the applicable legal framework.
Cooperative Society
A cooperative is formed by persons with common interests who voluntarily associate for mutual benefit. Democratic control and service orientation are important features.
Company
A company is a separate legal entity formed under company law. Important features include separate legal personality, limited liability in relevant forms, perpetual succession and transferability of shares subject to applicable rules.
Explained MCQs
- Which feature is particularly associated with partnership?
Answer: Mutual agency.
Explanation: Each partner can act as an agent of the firm and the other partners in the course of business. - Why can a company raise larger capital than a sole proprietorship?
Answer: Its legal structure can facilitate mobilisation of capital from multiple owners/investors, subject to the type of company.
Explanation: Ownership can be distributed among shareholders rather than concentrated in one proprietor.
Comparison
Compare sole proprietorship, partnership, cooperative society and company under formation, liability, control, continuity and capital.