Horti-Business Management (2+0)

Forms of business organizations

• Business may be started by an individual, group of few people, or a very large number of people. As the business expands and grows in size it may transform into new form of business organization, based on the need. Generally followed common forms of business organization are;
1. Sole Proprietorship - One person is the owner of the firm and he is the manager of the firm.
2. Joint Hindu Family Firm - The business is owned by members of undivided Hindu family. Generally the head of the family is the leader of the management team.
3. Partnership Firm - 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”.
4. Joint stock company: A Joint Stock Company is a voluntary association of persons to carry on business. It is an association of persons who generally contribute money for some common purpose. There are two are two types of joint stock company - Private limited (minimum number of members can be 2 and maximum is 50) and public limited (minimum number of members is 7 and maximum is unlimited).
5. Co-operative Society - Established based on the principles of cooperation. It is a voluntary grouping of individuals who are willing to work together for achieving their common objectives.
• Each of these organizations have their own characteristics based on which they differ in their merits and demerits. These organizations can be described based on their ownership, ability to raise capital, flexibility in management, risk bearing, profit sharing, continuity etc. The choice of business organization has to be made based on the type of business, size of business, amount of capital required, etc.
Characteristics of various forms of business organizations


Traits	Single Proprietor	Hindu Undivided Family	Partnership	Joint stock company/Public Limited Company	Cooperative Society
Ownership	Only one person		Few	Many own shares	Only members
Ease of formation	Easy	Inherited	By mutual agreement	Not easy and company should be Registered under Companies Act	Easy and the society is Registered with Registrar of Cooperative societies.
Ability to raise capital	Less	Less	More	Most	Limited as the society is confined to a locality
Limit of Liability	Unlimited Liability	Limited for coparceners and unlimited for karta	Unlimited	Limited	Limited
Flexibility in management	Flexible	Flexible	Less flexible	Based on rules	Based on rules
Management	one	Karta	All the partners or nay one on behalf of the partner is eligible	Board of Directors	Executive committee elected by the members
Profit sharing	Single	Shared	Shared	Dividends / Share value	Dividends / shared
Continuity	Depends on the individual	Inheritance	Mutual agreement	Continuous	Dissolving the society is difficult

* Karta - Head of the family
** An individual, his sons(s), and his grandson(s) (three generations) can become members of a Joint Hindu Family by birth and they are called “Coparceners”.