CHAPTER 2
FORMS OF BUSINESS
ORGANISATION
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•
identify different forms of business organisation;
•
explain features, merits and limitations of select forms of business
organisation;
•
distinguish between various forms of organisation; and
•
analyse factors determining choice of an appropriate form of
business organisation.
22
BUSINESS STUDIES
2.1 INTRODUCTION
If one is planning to start a business or
is interested in expanding an existing
one, an important decision relates to
the choice of the form of organisation.
The most appropriate form is
determined by weighing
the
advantages and disadvantages of each
type of organisation against one’s own
requirements.
Various forms of business
organisations from which one can
choose the right one include:
(a) Sole proprietorship,
(b) Joint Hindu family business,
(c) Partnership,
(d) Cooperative societies, and
(e) Joint stock company.
Let us start our discussion with
sole proprietorship — the simplest form
of business organisation, and then
move on to analysing more complex
forms of organisations.
2.2 SOLE PROPRIETORSHIP
Do you often go in the evenings to buy
registers, pens, chart papers, etc., from
a small neighbourhood stationery
store? Well, in all probability in the
course of your transactions, you have
interacted with a sole proprietor.
Sole proprietorship is a popular
form of business organisation and is
the most suitable form for small
businesses, especially in their initial
years of operation. Sole proprietorship
Neha, a bright final year student was waiting for her results to be declared.
While at home she decided to put her free time to use. Having an aptitude for
painting, she tried her hand at decorating clay pots and bowls with designs.
She was excited at the praise showered on her by her friends and acquaintances
on her work. She even managed to sell a few pieces of unique hand pottery from
her home to people living in and around her colony. Operating from home, she
was able to save on rent