Description
Structure of Business BBA1
Business Activities
On the basis of Size
On the basis of Ownership
On the basis of Function
Small Scale
Large Scale
Private
Public
Industry
Commerce
Sole Proprietorship
Departmental Undertaking
Consumer Goods
Partnership
Public Corporation
Capital Goods
Joint Hindu Co.
Government Company
Joint Stock Co.
Co-operative Society
Industries
Primary
Secondary
Tertiary
Extractive
Genetc
Manufacturing
Construction
Banking Insurance Warehousing Advertising Transportation
Directly consumed (Fish, coal)
Nurseries Farming Poultry/Dairy farming Animal Husbandry Pisciculture
Consumer Goods Intermediate Goods Capital Goods
Raw Material For others (Minerals)
Commerce
Trade
Auxiliary Activities
Internal
External
Transportation
Wholesale
Import
Warehousing
Retail
Export
Insurance
Entreport
Banking
Advertising
Private Sector Enterprise
• Owned, managed and controlled by private entrepreneur(s). • Tata, Birla, Reliance
– Sole proprietorship – Joint Hindu Family – Partnership – Co-operative Society – Company
Sole Proprietorshi - Features
• • • • • • Individual ownership Individual management and control Individual financing Individual accountability Unlimited liability Minimum government regulation
Sole Proprietorship - -Advantages
• • • • • • • • Easy formation Full control Quick decisions Flexible management Full secrecy Sole beneficiary of profits Suitable for small scale operations Easy dissolution
ole Proprietorship - -Limitations
• • • • • Limited financial resources Limited managerial skills Unlimited liability Lack of continuity Not suitable for large scale operations
• In 1937, what business Shivkisan Agarwal started in Rajasthan?
Joint Hindu Family Business
• Unique to India
– Dayabhaga – Mitakashara
• Business owned by members of a Joint Hindu Family • Originally, 3 successive generations in the male line • Governed by Hindu law; no contract or registration
Partnership
• “Partnership is the relation between two or more persons who have agreed to share the profits of a business carried on by all or any of them acting for all.” The Indian Partnership Act, 1932
Partnership - Features
• • Partnership
– Two or more persons (Companies Act, Sec 11) – Competent to contract (Indian Contract Act, 1872)
Partnership agreement
• Partnership deed (Indian Stamp Act, 1889)
• • • • • • •
‘Business’ must exist Sharing of profits Mutual agency relationship Unlimited liability Joint ownership and control Non-transferability of share Duration of partnership
Partnership - Registration
• Registrar of Firm of the area where
– business situated – proposed to be situated
• ‘Register of Firms’ • Is it compulsory?
– No suit by a partner against the firm or the other partner. – No suit by the firm against the third parties – No right to claim set off in excess of Rs 100
Partnership - Duration
• Partnership at Will • Particular Partnership
Partnership - Types
• Actual partner
– active
• Sleeping/dormant partner
– Non-active
• Nominal partner
– Lends name
• Partner in profits only
– Shares the profits only and not losses
• Partner by Estoppel or Holding out • Sub-partner
– A third person with whom a partner agrees to share his profits
Partnership - Advantages
• • • • • • Easy formation More financial resources More managerial skills Flexible management Balanced business decisions Sharing of risks
Partnership - Limitations
• • • • • • Uncertainty of existence Risks of implied authority Risks of conflicts Lack of institutional confidence Limited capital Unlimited liability
Co-operative Organization
• Transformed the socio-economic conditions of the rural population • Bring people desirous to have an economic activity together, sharing the functions in such a way that it benefits them individually as well as collectively • Dairy cooperatives– Amul pattern societies
• • • •
Promoters Collection of share capital General Body Registered with state co-operative department • State government + NABARD + NCDC share capital and credit facility
Few Famous Cooperatives
• Gujarat Cooperative Milk Marketing Federation (GCMMF) • National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) • Indian Farmers Fertiliser Cooperative Ltd (IFFCO)
Structure of Cooperatives
FEDERATION (State Level)
UNION (District Level)
DCS (Village Level)
FARMERS
Impact of Cooperatives
• • • • Widespread throughout the country 5,00,000 societies operating Covers more than 50% rural adults Blessing and encouragement of central and state governments • One central place for procurement, distribution, marketing and collection of dues • Efficient distribution networks • Collective gurantee for credit given to cooperatives
Criticism of Cooperatives
• Bureaucratic approach • Political interference/control
Company
• • • • • • • Governed by The Companies Act, 1956 An artificial person created by law Separate legal entity Perpetual existence Common seal Limited liability Free transferability of shares
An Artificial Person
• • • • • • Creation of law Governed by Memorandum of Association Has nationality Can own and hold property in its name Can sue/sued in its own name Can enter into contracts
Separate Legal Entity
• Company may enter into contract with its members and vice-versa. Thus, a member can be both a debtor and a creditor of the company at the same time. • Its members can not be held responsible for acts of company. • Members can not claim ownership rights in company’s assets. • Creditors can recover dues only from company and not from members/directors.
Perpetual Existence
• Existence not affected by
– Death, unsoundness of mind, insolvency of members – Transfer of shares by members
• Continues for indefinite period
Common Seal
• Official signature of the company
Limited Liability
• A company limited by shares • A company limited by guarantee
Free Transferability of Shares
• Possessed by public companies and not by private companies
Merits of a Company
• • • • • • • • • • Large financial resources Limited liability Dispersal of ownership Free transferability of shares Stability of existence Scope for expansion and growth Efficient, democratic management Public confidence Dispersal of ownership Assumption of social responsibilities
Limitations of a Company
• • • • • • • • • Lengthy and expensive procedure for formation More government regulations Lack of personal interest Delay in decision making and action Conflict of interests Oligarchic management Speculation by Directors Growth of monopolistic tendencies Influencing government decisions
Suitability
• Large scale activity • Heavy investment • Limited liability of members
Company Types
• Chartered • Statutory • Registered/incorporated
– Private – Public
Private Company
• • • • Minimum paid-up capital Rs 100,000 Maximum members 50 (minimum 2) Share transfer restricted by Article of Association Can not
– issue share or debenture – accept money except form members, directors or their relatives
• If limited by shares/guarantee – Private Limited at the end of its name • At least 2 directors
Public Company
• • • • Minimum paid-up capital Rs 500,000 At least 7 members Share transfer not restricted Can
– issue share or debenture – accept money from public
• If limited by shares/guarantee – Limited at the end of its name • At least 3 directors
Factors Affecting the choice of form of Business
• • • • Nature of business Scale of operations Financial requirement Degree of direct control exercised by owners • Degree of risk and liability • Stability of business • Legal procedure/Government/Control
doc_943562402.pptx
Structure of Business BBA1
Business Activities
On the basis of Size
On the basis of Ownership
On the basis of Function
Small Scale
Large Scale
Private
Public
Industry
Commerce
Sole Proprietorship
Departmental Undertaking
Consumer Goods
Partnership
Public Corporation
Capital Goods
Joint Hindu Co.
Government Company
Joint Stock Co.
Co-operative Society
Industries
Primary
Secondary
Tertiary
Extractive
Genetc
Manufacturing
Construction
Banking Insurance Warehousing Advertising Transportation
Directly consumed (Fish, coal)
Nurseries Farming Poultry/Dairy farming Animal Husbandry Pisciculture
Consumer Goods Intermediate Goods Capital Goods
Raw Material For others (Minerals)
Commerce
Trade
Auxiliary Activities
Internal
External
Transportation
Wholesale
Import
Warehousing
Retail
Export
Insurance
Entreport
Banking
Advertising
Private Sector Enterprise
• Owned, managed and controlled by private entrepreneur(s). • Tata, Birla, Reliance
– Sole proprietorship – Joint Hindu Family – Partnership – Co-operative Society – Company
Sole Proprietorshi - Features
• • • • • • Individual ownership Individual management and control Individual financing Individual accountability Unlimited liability Minimum government regulation
Sole Proprietorship - -Advantages
• • • • • • • • Easy formation Full control Quick decisions Flexible management Full secrecy Sole beneficiary of profits Suitable for small scale operations Easy dissolution
ole Proprietorship - -Limitations
• • • • • Limited financial resources Limited managerial skills Unlimited liability Lack of continuity Not suitable for large scale operations
• In 1937, what business Shivkisan Agarwal started in Rajasthan?
Joint Hindu Family Business
• Unique to India
– Dayabhaga – Mitakashara
• Business owned by members of a Joint Hindu Family • Originally, 3 successive generations in the male line • Governed by Hindu law; no contract or registration
Partnership
• “Partnership is the relation between two or more persons who have agreed to share the profits of a business carried on by all or any of them acting for all.” The Indian Partnership Act, 1932
Partnership - Features
• • Partnership
– Two or more persons (Companies Act, Sec 11) – Competent to contract (Indian Contract Act, 1872)
Partnership agreement
• Partnership deed (Indian Stamp Act, 1889)
• • • • • • •
‘Business’ must exist Sharing of profits Mutual agency relationship Unlimited liability Joint ownership and control Non-transferability of share Duration of partnership
Partnership - Registration
• Registrar of Firm of the area where
– business situated – proposed to be situated
• ‘Register of Firms’ • Is it compulsory?
– No suit by a partner against the firm or the other partner. – No suit by the firm against the third parties – No right to claim set off in excess of Rs 100
Partnership - Duration
• Partnership at Will • Particular Partnership
Partnership - Types
• Actual partner
– active
• Sleeping/dormant partner
– Non-active
• Nominal partner
– Lends name
• Partner in profits only
– Shares the profits only and not losses
• Partner by Estoppel or Holding out • Sub-partner
– A third person with whom a partner agrees to share his profits
Partnership - Advantages
• • • • • • Easy formation More financial resources More managerial skills Flexible management Balanced business decisions Sharing of risks
Partnership - Limitations
• • • • • • Uncertainty of existence Risks of implied authority Risks of conflicts Lack of institutional confidence Limited capital Unlimited liability
Co-operative Organization
• Transformed the socio-economic conditions of the rural population • Bring people desirous to have an economic activity together, sharing the functions in such a way that it benefits them individually as well as collectively • Dairy cooperatives– Amul pattern societies
• • • •
Promoters Collection of share capital General Body Registered with state co-operative department • State government + NABARD + NCDC share capital and credit facility
Few Famous Cooperatives
• Gujarat Cooperative Milk Marketing Federation (GCMMF) • National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) • Indian Farmers Fertiliser Cooperative Ltd (IFFCO)
Structure of Cooperatives
FEDERATION (State Level)
UNION (District Level)
DCS (Village Level)
FARMERS
Impact of Cooperatives
• • • • Widespread throughout the country 5,00,000 societies operating Covers more than 50% rural adults Blessing and encouragement of central and state governments • One central place for procurement, distribution, marketing and collection of dues • Efficient distribution networks • Collective gurantee for credit given to cooperatives
Criticism of Cooperatives
• Bureaucratic approach • Political interference/control
Company
• • • • • • • Governed by The Companies Act, 1956 An artificial person created by law Separate legal entity Perpetual existence Common seal Limited liability Free transferability of shares
An Artificial Person
• • • • • • Creation of law Governed by Memorandum of Association Has nationality Can own and hold property in its name Can sue/sued in its own name Can enter into contracts
Separate Legal Entity
• Company may enter into contract with its members and vice-versa. Thus, a member can be both a debtor and a creditor of the company at the same time. • Its members can not be held responsible for acts of company. • Members can not claim ownership rights in company’s assets. • Creditors can recover dues only from company and not from members/directors.
Perpetual Existence
• Existence not affected by
– Death, unsoundness of mind, insolvency of members – Transfer of shares by members
• Continues for indefinite period
Common Seal
• Official signature of the company
Limited Liability
• A company limited by shares • A company limited by guarantee
Free Transferability of Shares
• Possessed by public companies and not by private companies
Merits of a Company
• • • • • • • • • • Large financial resources Limited liability Dispersal of ownership Free transferability of shares Stability of existence Scope for expansion and growth Efficient, democratic management Public confidence Dispersal of ownership Assumption of social responsibilities
Limitations of a Company
• • • • • • • • • Lengthy and expensive procedure for formation More government regulations Lack of personal interest Delay in decision making and action Conflict of interests Oligarchic management Speculation by Directors Growth of monopolistic tendencies Influencing government decisions
Suitability
• Large scale activity • Heavy investment • Limited liability of members
Company Types
• Chartered • Statutory • Registered/incorporated
– Private – Public
Private Company
• • • • Minimum paid-up capital Rs 100,000 Maximum members 50 (minimum 2) Share transfer restricted by Article of Association Can not
– issue share or debenture – accept money except form members, directors or their relatives
• If limited by shares/guarantee – Private Limited at the end of its name • At least 2 directors
Public Company
• • • • Minimum paid-up capital Rs 500,000 At least 7 members Share transfer not restricted Can
– issue share or debenture – accept money from public
• If limited by shares/guarantee – Limited at the end of its name • At least 3 directors
Factors Affecting the choice of form of Business
• • • • Nature of business Scale of operations Financial requirement Degree of direct control exercised by owners • Degree of risk and liability • Stability of business • Legal procedure/Government/Control
doc_943562402.pptx