BBA Business Organisation Notes Study Material
BBA Business Organisation Notes Study Material :- In This Article You Can Find Meaning Retail trade Wholesaler Business Organisation Notes and Forms of Business organisation,Points for a Good Forms of business Organisation, Merits of Partnership, Salient Features of a Company Means That Its Is Best Topic of Business Organisation Study For Salient Features of a Company BBA 1st Semester Year . Here You Find Topic Wise,Chapter Wise, Subject Wise Study Material BBA And other Links of Related to the Business organisation . How To Learn BBA Business organisation Notes Forms of Business organisation,Points for a Good Forms of business Organisation, Merits of Partnership, You Here . Thanks For Read This Article.
Forms of Business Organisation
The Business Activities are carried on by different forms of business organization or ownerships. Ownership of business organization signifies acquisition of legal control for earning profits from such acquisition.
Forms of organization can be classified into following heads:
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Private Ownership
- Sole-proprietorship.
- Partnership
- Joint Hindu Family business.
- Joint Stock Company.
- Public Company.
- Co-Operative undertaking.
- Co-operative undertaking.
- Join Ownership
- Joint stock company or company ownership.
- Co-operative society or co-operative ownership.
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Public Ownership
- Departmental enterprise.
- Public corporations.
- Government companies.
Points for a Good Forms of business Organisation (BBA Notes)
- Easy formation.
- Extent of liability
- Ease in raising capital.
- Stabiiity continuity.
- Efficient and effective management.
- Business secrecy.
- Freedom from state regulations.
- Tax liability.
- The degree of closeness of relationship between the employers and the employees.
- Transferability of shares.
Factors which you would kept in mind while selecting a form of business organization are:
- Nature of business.
- Area of operation.
- Volume of business.
- Liabilities.
- Financial requirement.
- Degree of entrepreneurial control required.
- Tax liability.
- State regulations.
- continuity.
- Flixibility.
- Relationship between ownership and management.
Merits of Partnership (BBA Notes)
- Ease of Formation : A partnership is easy to form as no cumbersome legal formalities are involved. An agreement is necessary and the procedure for registration is very simple. Similarly a partnership can be dissolved easily at any time without undergoing legal formalities. Registration of the firm is not essential and the partnership agreement need not essentially by in writing.
- Larger financial resources : As a number of persons or partners contribute to be capital of the firm, it is possible to collect larger financial resources than is possible in sole proprietorship. Credit worthiness of the firm is also higher because every partner is personally and jointly liable for the debts of the business. There is greater scope for expansion or growth of business.
- Specialisation and balanced approach: The partnership form enables the pooling of abilities and judgement of several persons. Combined abilities and judgement result in more efficient management of business. Partners with complementary skills may be chosen to avail of the benefits of specialization. Judicious choice of partners with diversified skills balanced decisions. Partners meet and discuss the problems of business frequently so that decisions can be taken quickly.
- Flexibility of operations : Though not as versatile as proprietorship, a partnership firm enjoys sufficient flexibility in its day-to-day operations. The nature and place of business can be changed whenever the partners desire. The agreement can be altered and new partners can be admitted whenever necessary. Partnership is free from statutory control by the government except the general law of the land.
- Protection of minority interest : No basic changes in the rights and obligations of partners can be made without the unanimous consent of all the partners. In case a partner feels dissatisfied, he can easily, retire from or he may apply for the dissolution of partnership.
- Personal incentive and supervision : There is no divorce between ownership and management. Partners share in the profits and losses of the firm and there is motivation to improve the efficiency of the business. Personal control by the partners increases the possibility of success. Unlimited liability encourages caution and care on the part of partners. Fear of unlimited liability discourages reckless and hasty action and motivates the partners to pt in their best efforts.
- Capacity for survival : The survival capacity of the partnership firm is higher than that of sole proprietorship. The partnership firm can continue after the death or insolvency of a partner if the remaining partners so desire. Risk of loss is diffused among two or more persons. In case one line of business is not successful, the firm may undertake another line of business to compensate its losses.
- Better human and public relations : Due to a number of representative (partners) of the firm, it is possible to develop personal touch with employees, customers, government and the general public. Healthy relations with the public help to enhance the goodwill of the firm and pave the way for steady progress of the business.
- Business secrecy : it is not compulsory for a partnership firm to publish and file its accounts and reports. Important secrets of business remain confined to the partners and are unknown to the outside world.
Joint Stock Company (BBA Notes)
- Unlimited liability : Every partner is jointly and severally liable for the entire debts of the firm. He has to suffer not only for his own mistakes but also for the lapses and dishonesty of other partners. This may curb entrepreneurial spirit as partners may hesitate to venture into new lines of business for fear of losses. Private property of partners is not safe against the risks of business.
- Limited resources : The amount of financial resources in partnership is limited to the contributions made by the partners. The number of partners cannot exceed 10 in banking and 20 in other types of business. Therefore, partnership form of ownership is not suited to undertake business involving huge investment of capital.
- Risk of implied agency : The acts of a partner are binding on the firm as well as on other partners. An incompetent or dishonest partner may bring disaster for all due to his acts of commission or omission. That is why the saying is that choosing a business partner is as important as choosing a partner in life.
- Lack of harmony : The success of partnership depends upon mutual understanding and co-operation among the partners. Continued disagreement and bickering among the partners may paralyse the business or may result in its untimely death. Lack of a central authority may affect the efficiency of the firm. Decisions may get delayed.
- Lack of continuity : A partnership cones to an end with the retirement incapacity, insolvency and death of a partner. The firm may be carried on by the remaining partners by admitting new partners. But it is not always possible to replace a partner enjoying trust and confidence of all. Therefore, the life of a partnership firm is uncertain, though it has longer life than sole proprietorship.
- Non-transferability of interest : No partner can transfer his share in the firm to an outside without the unanimous consent of all the partners. This makes investment in a partnership firm non-liquid and fixed. An individual’s capital is blocked.
- Public distrust : A partnership firm lacks the confidence of public because it is not subject to detailed rules and reguluations. Lack of publicity of its affairs undermines public confidence in the firm.
The foregoing description reveals that partnership form of organization is appropriate for medium-sized business that required limited capital, pooling of skills and judgment and moderate risks like small scale industries, wholesale and retail trade, and small service concerns like transport agencies, real estate brokers professional firms like chartered accountants, doctor’s clinics or nursing homes, attorneys, etc.
Joint Stock Company (BBA Notes Study Material)
With the growing needs of modern business collection of vast financial and managerial resources became necessary. Proprietorship and partnership forms of ownership failed to meet these needs due to their limitations, e.g., unlimited liability, lack of continuity and limited resources. The company form of business organization was evolved to overcome these limitations. Joint stock company has become the dominant form of ownership for large scale enterprises because it enables collection of vast financial and managerial resources with provision for limited liability and continuity of operations.
A joint stock company is an incorporated and voluntary association of individuals with a distinctive name perpetual succession, limited liability and common seal, and usually having a joint capital divided into transferable shares of a fixed value. Chief justice john Marshall of U.S.A defined a company in the famous Dartmouth College case as an artificial being, invisible, only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence and the most important of which are immortality and individuality”. Thus a company is an artificial legal person having an independent legal entity.
Salient Features of a Company (BBA Notes)
- Separate legal entity : A company has an existence entirely distinct from and independent of its members. It can own property and enter into contracts in its own name. it can sue and be sued in its own name. there can be contracts and suits between a company and the individual members who compose it. The assets and liabilities of the company are not the assets and liabilities of the individual members and vice versa. No member can directly claim any ownership right in the assets of the company.
- Artificial legal person : A company is an artificial person created by law and existing only in contemplation of law. It is intangible and invisible having no body and no soul. It is an artificial person because it does not come into existence through natural birth and it does not possess the physical attributes of natural person. Like a natural person, it has rights and obligations in terms of law. But it cannot do those acts which only a natural person can do, e.g., taking an oath in person, enjoying married life, going to jail, practicing profession, etc. A company is not a citizen and it enjoys no franchise or other fundamental rights.
- Perpetual succession : A company enjoys continuous or uninterrupted existence and its life is not affected by the death, insolvency, lunacy, etc. of its members or directors. Members may come and go but the company survives so longs as it is not would up being a creature of law, a company can be dissolved only through the legal process of winding up. It is like a river which retains its identity though the legal process of winding up. It is like a river which retains its identity though the parts composing it continuously change.
- Limited Liability : Liability of the members of a limited company is limited to the value of the shares subscribed to or to the amount of guarantee given by them. Unlimited companies are an exception rather than the general rule. In a limited company, members cannot be asked to pay anything more than what is due or unpaid on the shares held by them even if the assets of the company are insufficient to satisfy in full the claims of its creditiors.
- Common seal : A company being an artificial person cannot sign for itself. Therefore, the law provides for the use of common seal as a substitute for its signature. The common seal with the name of the company engraved on its serves as a token of the company’s approval of documents. Any document bearing the common seal of the company and duly withnessed (signed) by at least two directors is legally binding on the company.
- Transferability of shares : The shares of a public limited company freely transferable. They can be purchased and sold through the stock hange. Every member is free to transfer his shares to anyone without the consent other members.
- Separation of ownership and management : The number of members in a public company is generally very large so that all of them or most of them cannot take active part in the day-to-day management of the company. Therefore, they elect their representatives, known as directors, to manage the company on their behalf. Representative control is thus an important features of a company.
- Incorporated association of persons: A company is an incorporated or registered association of persons. One person cannot constitute a company under the law. In a public company, at least seven persons and in a private company at least two persons are required.