1. •Natureof Business
•Forms of Business
Organizations

2.  Human activities involve efforts under taken
1. to satisfy human needs,
2. to earn one‟s livelihood,
3. to derive mental satisfaction.
Economic activities are undertaken by people
to earn one‟s living and for production of
wealth.
 Non-economic activities are social activities
which people undertake to derive personal
satisfaction.

3.  Activities connected with the production or
purchase and sale of goods or services with
the objective of earning profit are called
Business activities.
 Mining, manufacturing, trade, transportation,
insurance, banking are business activities.
 Thus business may be defined as an
economic activity involving regular
production or purchase and distribution of
goods and services with the objective of
earning profits.

4.  Business is an economic activity.
 It includes the activities of production or
purchase and distribution.
 It deals in goods and services.
 It implies regularity of transactions.
 It aims at earning profits through the
satisfaction of human wants.
 It involves risk; it is not certain that adequate
profit will be earned.
 It creates utilities.

5.  Improvement in standard of living
 Proper utilization of resources
 Better quality & large variety of goods
 Creates utilities
 Employment opportunities
 Workers' welfare

6. There are various forms of business.
 Sole Proprietorship
 Joint Hindu Family Firm
 Partnership Firm
 Joint Stock Company
 Co-operative Society

7.  Ease of formation
 Adequacy of Capital
 Limit of Liability
 Direct relationship between
Ownership, Control and Management
 Continuity and Stability
 Flexibility of Operations

8.  A sole proprietorship or one man‟s business
is a form of business organization owned and
managed by a single person.
 He is entitled to receive all the profits and
bears all risk of ownership.

9.  Business is owned and controlled by one person.
 Risk borne by a single person & hence benefit.
 Liability of the owner is unlimited
 No separate legal entity apart from that of the
proprietor, and so the business lacks perpetuity.
 No legal formalities are necessary, but there may
be legal restrictions on the type of business.
 The proprietor has complete freedom of action
 The proprietor may take the help of members of
his Family in running the business.

10. Advantages Disadvantages
 Ease of formation  Limited resources
 Motivation  Limited Managerial
 Freedom of Action Ability
 Unlimited Liability
 Quick Decision
 Lack of Continuity:
 Flexibility.  No Economies of Large
 Personal Touch Scale
 Business Secrecy
 Social Utility

11.  The Joint Hindu Family, also known as Hindu
Undivided Family (HUF) is a non-corporate
form of business organization.
 It is a firm belonging to a Joint Hindu Family.
 It comes into existence by the operations of
law and not out of contract.

12.  The business is managed by the Karta or the
manager.
 Except the Karta, no other member of the family has
any right of participation in the management of a JHF.
 members of the family cannot question the authority
of the Karta.
 If the Karta has misused the funds, the co-parceners
get to the extent of their share in the property.
 For managing the business, the Karta has the power
to borrow funds.
 co-parceners are liable only to the extent of their
share in the business towards the debt.
 The death of any member of the family does not
dissolve the business of the family
 Dissolution of the Joint Hindu Family can take place
only though mutual agreement

13.  Advantages  Disadvantages
 Stability  No Encouragement
 Knowledge and  Lazy and Inactive
experience  Members Initiative
 No Interference  Duration
 Maximum Interest  Abuse of Freedom:
 Specialization
 Discipline
 Credit Worthiness:

14.  Section 4 of the Partnership Act, 1932 defines
Partnership as “the relation between persons
who have agreed to share the profits of a
business carried on by all or any of them
acting for all”

15.  Simple procedure of formation
 Capital
 Control
 Management
 Duration of partnership
 Unlimited Liability
 No separate legal entity
 Restriction on transfer of share.

16.  Advantages  Disadvantages.
 Ease of formation  Great risk
 large resources  Lack of harmony
 better organization  Limited resources
 greater interest  Tendency to play
 prompt decisions safe
 Balanced  No legal entity
 Flexibility  Instability
 Diffusion of risk  Lack of public
 Protection to confidence
minority interest  Sustainability
 Influence of
unlimited liability

17.  A Joint Stock Company form of business
organisation is a voluntary association of persons
to carry on business.
 Normally, it is given a legal status and is subject
to certain legal regulations.
 It is an association of persons who generally
contribute money for some common purpose.
 The money so contributed is the capital of the
company.
 The persons who contribute capital to the
proportion is entitled is called his share.

18.  Artificial Person
 Separate Legal Entity
 Common Seal
 Perpetual Existence
 Limited Liability
 Transferability of Shares
 Formation
 Membership
 Management
 Capital

19.  Advantages  Disadvantages
 Limited Liability  Formation is not easy
 Continuity of  Control by a Group
existence  Speculation &
 Benefits of large Manipulation
scale operation  Excessive govt control
 Professional Mgt  Delay in Policy
 Social Benefit Decisions
 R and D  Social abuses

20.  It functions under the Cooperative Societies
Act, 1912 and other State Co-operative
Societies Acts.
 The co-operatives are formed primarily
to render services to its members.
 Generally it also provides service to the
society.
 The main objectives of co-operative society
are: (a) rendering service rather than earning
profit, (b) mutual help instead of
competition, and
 (c) self help in place of dependence.

21.  Consumer co-operatives
 Producers co-operatives
 Marketing co-operatives
 Housing Co-operatives
 Credit Co-operatives
 Forming Co-operatives

22.  Voluntary association
 Membership
 Body corporate
 Service Motive
 Democratic Set up
 Sources of Finances
 Return on capital

23.  Advantages  Disadvantages
 Easy Formation  Limited Capital
 Limited liability  Problems in
 Open Membership Management
 State Assistance  Lack of Motivation
 Middleman‟s Profit  Lack of Co-opn
Eliminated  Lack of Secrecy
 Management  Dependence on
(democratic) Government
 Winding up

24.  Many charity-based business organisations
are run as „not for profit‟ operations
 They typically receive donations
or funds from groups or government
 Any financial surplus is ploughed back into
the business
 The organisation does not aim
to generate profits

25.  These forms refer to such aspects as
ownership, risk bearing, control and
distribution of profit.
 Any one of the above mentioned forms may
be adopted for establishing a business
 usually one form is more suitable than other
for a particular enterprise.
 The choice will depend on various factors like
the nature of business, objective, capital
required, scale of operations, control, legal
requirements and so on.