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Forms of Business Organisation

Q. Write down the advantages of registration of firms.

Ans.  The advantages of registrationof firms are:

(1) Advantage to the Firms: A registered firm, or any of its partners can file a suit against a third party.

(2) Advantage to Partners: When a firm is registered, the partners can file a suit against the firm or against their partners and take the course of law to claim their rights.

(3) Advantage to creditors: The rights ofcreditor is safeguarded by registration of the firm. The creditors can sue any partner whose name is in the Registrar of Firms to realise their money.

(4)Advantage to Incoming Partners: An incoming partner can claim his share and depend on the integrity of other partners in an unregistered firm


Q. What are the advantages of a Private company?  

Ans.  Main advantages of private company are as follows:-

1.    Easy Formation- Like partnership firm, a private company is easy to form, as two or more persons are required to form it.

2.    Lesser Legal Formalities- A private limited company can start its business immediately after its incorporation as it need not obtain the certificate of commencement of business. Company law does not prescribe any restrictions on the allotment of shares or appointment of directors by the private limited company.

3.    Secrecy- A private limited company does not have to show or present its accounts and financial statements before the Registrar of Companies or the public. This ensures secrecy in the business.

4.    Quick Decision- Policy decisions can be taken up more quickly in case of private limited company as compared to public companysincethere is lesser number of people to be consulted for every decision.

Q. What is partnership Deed? List out the contents of Partnership deed.                                                                               

Ans.  Partnership deed. It is a written agreement between the partners of a firm. It contains several clauses regarding name and address of partners, nature of business, Capital, profit sharing ratio etc.

Contents of Partnership Deed: -

1. Names and address of partners

2. Nature and scope of business

3. Duration of partnership

4. Contribution of capital by the partners

5. Sharing of profit or loss

6. Loans to and by the partners

7. Commission and salary of partners

8. Amount of drawings and interest on drawings for each partner.

9. Rights, duties and liabilities of partners

10. Admission and retirement of partners

11. Goodwill of the business

12. Dissolution of partnership

13. Death of a Partner

14. Breaking relationship with partnership

15. Audit of books of accounts

16. Arbitration clause


Q. Find out the Demerits or Limitations of Co-operative Societies.    

Ans.  The following are the disadvantages or the limitations of a co-operative organisation:-

1.    Limited Capital: Co-operative societies are generally formed by the weaker section of the society. The members can invest only a limited capital.

2.    Lack ofCompetent Management: Co-operative societies are managed by the elected representatives of the members who generally possess neither the experience, nor the technical and professional qualification to run a business organisation.

3.    Lack of Secrecy: The affairs of a co-operative society are openly discussed in the meetings of the members. This makes it very difficult for the societies to keep their secrets closely guarded.

4.    Non-cooperation and Infighting: The members of a society generally belong to the same locality or occupation; they have their own personal prejudices and professional jealousies against each other.

5.    Lack of Motivation: Laws governing the co-operatives prescribe a ceiling on the vote of return. This may dampen initiative and efforts on the part of members.

6.    Excessive Government Interference: The functioning of the co-operatives is adversely affected by the large number of regulations, supervision and government control.

Q. What are the merits and demerits of a company?


Differentiate between merits and demerits of a company.     




(Advantages of a company)

1. Huge capital

2. Limited liability

3. Perpetual existence

4. Transferability of shares

5. Specialized management

6. Scope for expansion

7. Wider distribution of risk

8. Public confidence

(Disadvantages of a Company)

1. Difficulties in formation

2. Excessive government regulations

3. Lack of secrecy

4. Slow decision making

5. Lack of Personal touch

6. Conflicts among shareholders

7. Fraudulent practices by promoters /directors

8. Difficulty in winding up

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