CLASS 11 BUSINESS STUDIES CHAPTER - 2 REVISION NOTES

CLASS 11 BUSINESS STUDIES
CHAPTER - 2 NOTES 

➤ A business enterprises is an organisation which is engage in some business for commercial activity. every business enterprise is a separate and distinct unit of business.
➤ Every business entity adopt some form of business organisation to carry out business activity is business enterprises may be classified into three broad categories:

1. Private sector enterprises

2. Public sector enterprises

3. Joint sector enterprises

➤Forms or types of private sector enterprises 

The private sector enterprises can be function and run by adopting any of the following form

1. Sole proprietorship
2. Joint Hindu family business
3. Partnership
4. Cooperative society
5. Company

➤Sole proprietorship- the business owned manage, control and financed by a single individual is  known as sole proprietorship firm. the main features of sole proprietorship are:

1. Single ownership
2. Individual risk bearing
3. No separate legal entity
4. Freedom of operation
5. Unlimited liability
6. One man control
7. Small size
8. Lack of business continuity
9. Easy Formation and closer

➤Merits of sole proprietorship firm: the main advantage of sole proprietorship form are:

1. Easy to start
2. Flexibility
3. Personal touch
4. Independent control
5. Motivation
6. Sole beneficiary of profit
7. Secrecy
8. Best form for small scale operations.

➤Demerits/disadvantages of sole proprietorship firm: the main drawback of sole proprietorship firm of business are:
1. Limited finance
2. Unlimited finance
3. Limited managerial skill
4. Lack of continuity
5. Limited scope for expansion

➤Joint Hindu family business - the business carried on by the male members of Hindu undivided firm is known as joint Hindu family business. this form of business is governed by Hindu law act. under Hindu law there are two thought governing the joint Hindu family business. these are :

1. dayabhaga system
2. mitakshara system
Features of joint Hindu family business
1. Membership  by birth
2. Management by carter
3. No  limit on number of members
4. Liability limited for accept karta
5. Minor member allowed
6. Rights to members to inspect the accounts
7. Perpetuality
8. Registration not required

➤Merits of joint Hindu family business
1.easy to form and dissolve
2.economic security
3. Family pride
4. Limited liability
5. Protection of minors
6.continuity
7.secrecy

➤Demerits of commit Hindu family business
1. Limited
2. Unlimited liability
3. Karta too powerful
4. Restriction on female members
5. No direct relation between effort and reward
6. Limited managerial ability

➤Partnership - partnership is the relation between two or more person who have agree to share the profit of the business, carried by or by one acting for all.
Features of partnership
1. Name of members
2. Agreement
3. Profit sharing
4. Lawful business
5. Liability
6. Agency relationship
7. Registration
8. Time period
9. Management
10. Non transferable interest

➤Merits of partnership firm
1.easy to form
2.risk sharing
3.motivation
4.flexibility
5.large finance resources
6. Division of work
7. Secrecy
8. More scope for expansion

➤Demerits of partnership firm
1. Unlimited liability
2. Non transferable of shares
3. Uncertainty
4. Lack of public confidence
5. Risk of mutual agency
6. Dispute among partners

➤Types of partnership firm- on the basis of period there are three types of partnership firm:

1. Partnership at will-It is a partnership for infinite period.this type of partnership exists till all  partners are willing to continue it comes to an end when any one partner desires.

2. Particular Partnership. The partnership formed to perform a particular venture is known as particular partnership. It comes to an end when that venture gets over.

3. Fixed Period Partnership. The partnership formed for a fixed period of time is known as fixed period partnership.

➤On the basis of liability there are two types of partnerships:

1. General Partnership. In this type of partnership the liability of all the partners is unlimited. In India all the partnership firms are general partnership firms.

2. Limited Partnership. In this type of partnership liability of all the partners except one is limited to the extent of their contribution in the capital. This type of partnership is not permitted in India.

➤Types of Partners. The partners can be of following types:

1. Active Partner. The partner, who actively participates in the management of partnership firm.

2. Sleeping Partner. The partner who does not participate in the management of partnership firm.

3. Secret Partner. The partner whose identity is not disclosed to oütsider.

4. Nominal Partner. He is not the real partner, he only lends his name to the firm. Nominal partners 

can be of two types: (a) By estoppel, (b) By holding out.

5. Minor Partner. Minor is not allowed to be a partner in partnership firm by Partnership Act. He can only be the beneficiary of partnership firm.

➤Formation of Partnership Firm. Partnership firm is formed by the signing of agreement called partnership deed. Registration of the firm is optional.

➤Registration of the Partnership Firm. To get the firm registered the partners have to apply to registrar in an application form. Along with application following documents have to be submitted:

1. Address of the principal place of work
2. Address of any other place of work
3. Date of admission of partner
4.Names and addresses of the partners
5. Duration of the partnership.

➤If registrar is satisfied with the above information, then the certificate of registration is issued.
Cooperative Organisations- The cooperative society is the voluntary association of persons who join together for mutual help.

➤Features of Cooperative Organisation- The common characteristics of cooperative organisation are:

1. Voluntary association
2. Equal voting rights
3. Service motive
4. Separate legal entity
5. Distribution of surplus.

➤Merits of Cooperative Organisation-  

1. Easy to form

2. Limited liability
3. Continuity
4. Democratic set-up
5. Open membership
6. Economical
7. State patronage
8. Social utility

➤Demerits/Disadvantages of Cooperative Organisation- 

  1. Limited capital
  2. Inefficient management
  3. Lack of motivation
  4. Conflict among members
  5. Excessive government control

➤Types of Cooperative Organisation- The cooperative organisations can be classified into following categories:

1. Consumers' cooperative. This is the association of consumers, who join together to get steady supply of essential goods at reasonable cost.

2. Producers' cooperative. It is the association of small producers who join together to get raw materials, inputs, machinery, latest technology which they cannot afford individually.

3. Marketing cooperative. It is the association of producers who find it difficult to get a market for their products, they join together to get smooth distribution of their products at competitive prices.

4. Cooperative credit/society. It is an association of persons who find it difficult to get loan. They join together to save themselves from the exploitation of money lenders and get loans at reasonable rate of interest.

5. Cooperative farming society. It is the association of farmers, who join together to get the benefits of mechanised farming.

6. Housing cooperative society. It is the association of people seeking residential accommodation, they join together to get house on easy terms and instalments.

➤Joint Stock Company- It is an artificial person having separate legal entity, perpetual succession and common seal. The main features of Joint Stock Company are:

1. Separate legal entity
2. Artificial person
3. Registration
4. Perpetual succession
5. Common seal
6. Transfer of interest
7. Separation of ownership and control
8. Limited liability.

➤Merits of Joint Stock Company- The main benefits of J.S.C. are:
1. Limited liability
2. Large capital
3. Continuity
4. Efficient management
5. Growth and expansion
6. Public confidence.
7.Easy transferability of shares
8. Democratic management
9. Dispersal of ownership
10. Social responsibility.

➤Demerits of Joint Stock Company- The major drawbacks of J.S.C. are:

1. Lengthy and expensive legal formalities
2. Lack of motivation
3. Delay in decision
4. Excessive government control
5. Disputes among various groups
6. Economic oligarchy
7. Unhealthy speculation
8. Social evils
9. Pressure on government decisions.

➤Types of Companies. The main types of companies are:

1. Private company
2. Public company

➤Stages in formation of a company are the following:

1. Promotion
2.Incorporation
3. Capital subscription stage
4. Commencement of business.

➤Promotion- Promotion stage includes all the steps right from discovery of idea to starting the company till it is formed. The steps in the promotion stage are:

1. Identification of business opportunities
2. Feasibility studies
3. Name approval
4. Fixing up signatories to members
5. Appointment of professionals
6. Preparation of necessary documents.

➤Incorporation Stage- It refers to the registration of a company with the registrar. Steps in incorporation stage are:

1. Filing of necessary documents
2. Payment of fees
3. Registration
4. Certificate of Incorporation.

➤Capital Subscription and Commencement of Business. This stage is only for public limited company. The steps involved in commencement stage are

:
1. SEBI approval
2. Prospectus or statement in lieu of prospectus 3. Minimum subscription
4. Application to stock exchange
5. Allotment of shares
6. Commencement of Business; submission of documents

➤Important Persons and Documents Involved in Formation of a Company: Promoters performs all the steps in the promotion stage. He only brings the business enterprise in existence.

➤Important Documents Used in the Formation of a Company- The main documents used in the formation of a company are:

➤Memorandum of Association. It is the charter of the company. It contains the process and objectives of the company. It also defines the scope and limitations of the company.

➤The main contents of the memorandum of association are: 

1. Name clause
2. Situation/Domicile clause
3. Objects clause
4. Liability clause
5. Capital clause
6. Association clause.

➤Articles of Association. It is the byelaws of the company. It contains the internal rules and regulations of the company. The main contents of articles of association are:

1. Amount of share capital and different classes of shares

2. Procedure for making allotment
3. Procedure for issuing share certificates
4. Procedure for transfer of share capital
5. Procedure for forfeiture of shares.

➤Prospectus. Prospectus is the circular or invitation given to the general public to subscribe to the shares of the company or invest money in the company.

➤Choice of Form of Business Enterprise. Factors which help in selecting suitable form of business are:

1. Nature of business
2. Financial requirement
3. Control
4. Legal formalities
5. Degree of Risk
6. Managerial requirement
7. Flexibility of operation
8. Duration of business