Forms of Business Organization Class 11 Notes: CBSE 11th Business Studies Chapter 2, Download PDF

CBSE Class 11 Forms of Business Organization Notes: Handwritten revision notes for CBSE Class 11 Business Studies Chapter 2, Forms of Business Organization have been presented here for free download in PDF. Students preparing for upcoming annual examinations 2023-2024, can refer to these before beginning with their preparations.

Jul 12, 2023, 16:38 IST

Download PDF for CBSE Class 11 Chapter 2 Forms of Business Organization Notes

Forms of Business Organization Class 11 Notes: This article hands out revision notes for CBSE Class 11 Business Studies Chapter 2, Forms of Business Organization. A PDF download link for the same has been attached here, for your reference. Also, find attached important resources for preparation for the Class 11 annual examinations 2023-2024. These revision notes are presented to you as per the latest CBSE Syllabus 2023-2024 and the latest CBSE Curriculum.

Revision notes present here covers a brief explanation of all the topics and sub-topics, mentioned in the chapters. Every single important detail related to any topic has been presented here. The notes are prepared in a sequence of topics, as laid out in the NCERT textbook so that it becomes easy for students to locate. Revision notes can play a crucial role in your preparation for final examinations. Good revision notes are your last-minute revision partners and can increase your chances of scoring well on the exam.

Revision Notes for CBSE Class 11 Business Studies Chapter 1

Mind Maps for CBSE Class 11 Business Studies 2023-2024(PDF)

MCQs for CBSE Class 11 Business Studies 2023-2024(PDF)

Revision Notes for CBSE Class 11 Business Studies Chapter 2 (Forms of Business Organization)

Forms of Business Organization

Sole Proprietorship
Joint Hindu Family Business
Partnership
Cooperative societies
Joint Stock Company

1.Sole Proprietorship- It is a form of business that is owned, managed, and controlled by an individual who is the sole earner of all the profits and sole bearer of all the losses. The only owner of the business is called the sole proprietor. Shops located in your neighborhood such as grocery shops, dairy, beauty parlors, etc can be examples of this form of business.

Features of Sole Proprietorship:

Ease in formation and closure of business, since there are no legalities involved.
They have unlimited liability since they are the sole bearers of risks
They are the sole earner of profits and sole bearer of risks
Complete control over management and decisions
In the eyes of the law, there’s no separate entity between the sole proprietor and his business
Any mishappening might lead to the closure of the business since there’s a lack of continuity

Merits of Sole Proprietorship

Decisions can be made quickly since there’s no interference
Confidentiality of information can be maintained throughout
All the profits gained go into the pocket of the owner, there’s no need of sharing the profits
It brings a sense of accomplishment
Ease in formation and closure, since there’s no legality involved

Limitations of Sole Proprietorship

Such a business might have a short life since, death, insanity, imprisonment, etc might lead to the closure of business
Resources are limited and becomes difficult for the business to grow
Unlimited liability, since there’s only one risk bearer
Difficulty in managerial ability

2.Joint Hindu Family Business- Form of business organization, limited only to India, where business is owned and carried by members of Hindu Undivided Family. The eldest member of the family, known as Karta is the head. All the members of the business have equal rights over the business and are co- parceners.

Features

Two members of the family who have inherited an ancestral property are eligible for the formation of any Hindu business. It is governed by the Hindu Succession Act of 1956.
All the co-parceners have limited liability, surrounded by their business. The karta has unlimited liability.
Karta is the controller of the business as a whole. His decisions are to be respected by every business member.
The business has a long shelf life since it’s a legacy. Karta's can be changed as per their position in the family. However, it can be terminated on mutual consent of all the partners.
Inclusion of minor members in the business, since a member is eligible for the partnership through birth.

Merits

Fewer conflicts and a flexible decision-making process, since Karta’s decisions are the final ones and can’t be interfered with by any member.
The business is a legacy, it has a long shelf life
Less risk since members are co-parceners and they have to bear risks limited to their business
Increased loyalty, dedication, and cooperation since the business is completely run by members of the same family.

Limitations

Resources are limited since they depend on ancestral property.
The Karta is burdened with unlimited liability
High dominance of karta
Since managerial decisions are made by only one person, management might be ineffective and may lag behind.

3.Partnership- It is defined as the relation between people who have decided on sharing the profits earned and bearing the risks involved, together. It is governed by the Indian Partnership Act, of 1932. Partnership solves the problems of limited resources, low capital investment, bearing of risks, and lack of skills.

Features

It is formed through a legal agreement between the partners
All partners have unlimited liability, which can be paid off through their personal assets.
Profits are shared equally/mutually and risks are bore equally by all the partners
Decision-making, management, and control are mutually taken and done by all the partners
The partnership can collapse if there’s a conflict between partners. Death/Retirement/imprisonment of a partner might lead to the closure of the business, but it can be continued at the will of the rest of the partners
The minimum number of people required to form a partnership is 2 and the maximum is 100. As per Rule 10 of the Companies Rules 2014, the maximum number of partners can be 50
Every partner is both an agent and a principal

Merits

Formation and closure are easy. Only an agreement between the partners is required for the same.
Decision-making can be balanced since every partner might have a different area of expertise and work can be divided accordingly.
More funds can be used since the number of people involved are high
The decreased burden of bearing risks since they are equally shared by all the partners
The partnership does not have to submit its reports and thus it ensures the confidentiality of information

Limitations

Liabilities on partners are unlimited and they might have to use their personal debts for its payment
If the size of the business is large, limited resources become an issue since only a particular number of partners can be involved in a business
There are high chances of conflicts
It might not be continued after retirement, the death of a partner
Since a partnership firm does not have to submit its reports in public, its true financial status remains confidential. This can bring a lack of public confidence in the firm

Types of Partners

Active partner- Partners who take actual control over the operations of the business, in the absence of other partners are called active partners.
Sleeping or dormant partner- Partners who do not take part in the day-to-day activities of the firm, but are involved in capital investment, profit, and loss of the business, are called sleeping or dormant partners.
Secret partner- The partner whose association with the firm is unknown to the public is called a secret partner.
Nominal partner- The partner who allows the use of his/her name but does not take part in the management, capital investment, bearing of losses, repayment of debts, etc are called nominal partner.
Partner by estoppel- The partner who through their initiative/conduct/behavior gives a sense of being partners in a firm are called partners by estoppel.
Partner by holding out- A partner who is not a partner of the firm but knowingly allows himself/herself to be represented as a partner is called a partner by holding out.

Types of partnerships

Classification on the basis of duration

Partnership at will- Such a partnership is carried on the will of the partners and can be terminated by mutual consent.
Particular Partnership- A partnership formed for a particular project or activity is called a particular partnership. It gets terminated as soon as the task is accomplished.

Classification on the basis of liability

1.General partnership- In this liability of the partners is unlimited and joint. Registration of the firm is not mandatory and partners enjoy all the rights of the partnership. It gets dissolved on retirement/death/insolvency of a partner.

2. Limited partnership- Here, the liability of one member is unlimited and the rest might have limited liability. Limited partners do not enjoy the rights of the partnership and it can’t be dissolved on retirement/death/insolvency of a partner. Registration is mandatory.

Partnership Deed- An agreement that specifies the rules and conditions that govern a partnership is called a partnership deed. It is not mandatory, but advisable. It can be written as well as oral. It includes the following points:

Name of firm
Nature of business and location of the business
Duration of business
The investment made by each partner
Distribution of profits and losses
Duties and obligations of the partners
Salaries and withdrawals of the partners
Terms governing admission, retirement, and expulsion of a partner
Interest in capital and interest in drawings
Procedure for dissolution of the firm
Preparation of accounts and their auditing
Method of solving disputes

Registration- Entering the name of the firm with the Registrar of Firms is called Registration. It works as proof of the existence of the firm. The process of registration is:

Submission of application in the prescribed form to the Registrar of Firms.
Deposit of required fees with the Registrar of Firms.
The Registrar after approval will make an entry in the register of firms and will subsequently issue a certificate of registration.

4.Cooperative Society- Voluntary association of people who have come together for the welfare of its members is called a Cooperative society. The cooperative society is compulsorily required to be registered under the Cooperative Societies Act 1912.

Features:

Membership is voluntary. A member can be a member only if he/she wants to and can leave as per their desire.
A cooperative society has to be registered legally.
Liability on all of its members is equal to their capital investment. Low risk.
Democratic in nature. Control lies with the managing committee, formed on the basis of a voting system.
The motive of its formation is the service and welfare of its members.

Merits: