Forms of business organisation

AS and A Level Business Studies

FORMS OF BUSINESS ORGANIZATION

Sole proprietorship: in this business is run by only by one man and the profits and losses are taken by him only. In this case, resources are scarce which may act as a hindrance for the profit of the business. The liability is unlimited and it is easy to form such a enterprise as only one person owns the business.

Partnership firm: such a category involves two or more people to form a organization. The liability is unlimited and it doesn’t involve many legal issues in its formation.
Note: acc. to the partnership act of India, 1956, there is no limit on the no. of people who can form such organization. But acc. to the co. act, the limit for the banking sector is just 10 people and for any other business organization, the limit is 20 people.

Joint Stock Company: such business organization is characterized by a joint stock, which is held by all the members on equal basis. The liability in this case is limited. There are many legal issues that should be taken care of for its formation. It involves common ceal. It is difficult to wind up the company. Owner and business are regarded as separate entities. The shares are transferable.

Joint Hindu Family Business: this form is characterized by the fact that only the mail members of the family can be a part of the business according to the Hindu act. The main doer is regarded as the ‘KARTA’ of that business who is generally the head of the family. This form of business organization is most prevalent in India because of the Indian mentality of non-trust worthiness on a stranger.

Cooperatives: this form of business organization is a voluntary association of people who start the business for their common interest, which can ...

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Joint Hindu Family Business: this form is characterized by the fact that only the mail members of the family can be a part of the business according to the Hindu act. The main doer is regarded as the ‘KARTA’ of that business who is generally the head of the family. This form of business organization is most prevalent in India because of the Indian mentality of non-trust worthiness on a stranger.

Cooperatives: this form of business organization is a voluntary association of people who start the business for their common interest, which can be either social or economic. For e.g. the Lizzat papar- it was started by seven women from Gujarat who have come together to obtain self-sufficiency.

LOCATION OF BUSINESS ENTERPRISE

Different factors that affect the location of the Enterprise are:

Nearness to the market: entrepreneurs would always like to open up new plants in those areas, which are nearer to the market.
Labour: businessman would always like to reduce its labour cost and it would prefer a area the labour is easily available.
Transportation & Electricity: he would prefer facilities like Transportation & Electricity. They should be easily available and that to at a lower cost so that the overall costs are reduced.
Raw Material: the raw material should be easily available and that to in abundance at a cheaper cost to meet the production targets.
Banking: banking facilities should be easily available in that area for the smooth financial requirements of that company.
Climatic conditions should be favorable for the opening of plant because you can’t afford to open a plant in that area which is affected by floods, draughts, etc.
Government Rules and Regulations should be not that strict that it becomes difficult for you to run your business.

3) GOVERNMENT POLICY

According to government policy, to check concentration of industries at one point, the government gave two different approaches i.e. the positive approach and the negative approach.

Positive approach: according to this, people were encouraged to open up their plants and offices in the backward areas by giving tax rebates, subsidies, lowering excise duties, by ensuring smooth flow of their products.
Negative approach: people were discouraged to open new plants, offices and factories in in already developed areas by imposing certain restrictions on them like increase in tax rate, increase in the price of the infrastructural facilities, etc.

TYPES OF ENTERPRENEURS

Basically there are four types:

Innovative
Imitating
Fabian
Drone

Innovative entrepreneurs are those who are always looking for new products, market, technology, etc. to use in their business operation. They are those people who are always ready for a change that can bring some positive results in their company and increase the market share of the company. This category generally belongs to those businessmen who are in U.S.A or European countries.

Imitating entrepreneurs are those who will imitate new methods or technology, which have already been tried and tested by the innovative people. This category generally belongs to the Indian people for very quickly in imitating the right technology at the right time.

Fabian entrepreneurs are those who will continue to use the same systems or techniques of operations unless and until they are forced by the external factors to change their way, e.g. the case study of Nirma- initially the company used door-to-door selling to market their product. But it was forced by the competitors e.g. surf, etc. to change its process or marketing strategies to stay ahead in the competition.

Drone are those entrepreneurs who will continue to use same techniques even though if they are forced by the external factors. As a result, these entrepreneurs will be wiped out from the competitive market due to the usage of the same product or technique or procedures e.g. Super Seal Ltd. Which is a Faridabad based company, which has introduced the airtight containers, but due to its old technology the company was forced to shut down its operation/plans.

The major drawback of this philosophy given by Dan Holf was that it had included those people also who didn’t fall under the category of entrepreneurs or those people who were devoid of any features of the entrepreneurs.