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Liability

Every company has to repay its liability to its creditors

Every entrepreneur liable to creditor at starting of business

Even in sole proprietorship, the person or company has to

clear his labiality at the time of winding of business

FlexibilitySole proprietorship is best for any alterations or decision

making

In partnership business flexibility is very difficult because it is

depend up on the partners

So it is maximum in sole proprietorship and minimum inpartnership

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Busi ess secrets

Maintaining business secrets in sole proprietorship is very

easy and safe where as in partnership it is difficulty andunsafe

Gover me t rules d regul tions

They are mandatory for running of any company or firm

Sole proprietorship is very free from all rules and regulations

Joint company is governed by rules and regulations of 

government

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Various form of ownershipSole proprietorship

P rtnership

Joint stock comp ny

ooper tive org nisation 

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I.Sole proprietorship` Definition: - The individual form of business organisation is an

organisation at the head which stands and individual as the onewho is responsible, who directs its operations and he alone runsthe risk of failure.

`V arious features of role proprietorship are as follows:-

` Individual ownership

` Unlimited liabilities

` Free from legal formalities

` Limited scope of operation

`Personal interest 

` Freedom to start and to end

` Monopoly on profit 

` Business secrecy

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Merits of sole proprietorship

y Registration of firm is very easy

y It does not have any legal formalities

y It is costly at initially

y It has complete control on entire business

y Business secrets is easily preserved

y It has maximum tax benefits

y It achieves both profits and losses equally

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Merits of sole proprietorship

y Registration of firm is very easy

y It does not have any legal formalities

y It is costly at initially

y It has complete control on entire business

y Business secrets is easily preserved

y It has maximum tax benefits

y It achieves both profits and losses equally

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Demerits

y Limited resources

y Lack or funds

y Chance of unlimited liability

y High risk 

y Sometimes returns should be sacrificed

y Limited managerial ability

y Lack of specialisation

y Chance of uncertainty

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Suitability

y It is suitable for following cases

y Where business is on a small scale

y Where capital requirements is very small

y Where promptness of decisions is very important 

y Where customers demand personal attention

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II. artnership

y Definition: - partnership is the relation between

persons who have agreed to share the profits of a

business carried on by all or any of them action for all.

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Various features of partnership are as follows

y Plurality of persons

y Contractual relationship

y Existence of business

y Profit motive

y Principal agent relationship

y Unlimited liabilityy Restriction on transfer of interest 

y Implied agency

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Merits of partnership

y Easy formation

y More financial resources

y Collective decision making

y Sharing of risk 

y Flexibility

y Complementary skills

y Credit worthiness

y Business secrecy

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Demerits of partnership

Unlimited liability

Uncertain existence

Limited funds

Transfer of shares

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Suitability of partnership

y Partnership form of business is suitable in the

following cases

y Where financial requirement is moderatey When business need persons with complementary skill

y Where business is to be carried on a medium and large

scale

y Where collective decisions are required to be taken

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III.Joint stock company

` Definition:-A company is an artificial person created bylaw having a separate entity with a perpetual successionand a common real.

Various features of joint stock company are as follows:-

` An artificial person created by law

` Separate legal entity

` Perpetual succession

` Common seal

` Limited liability

` Representative management 

` Right to sue

` Transfererability of shares

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Merits of Joint Stock Company:-

` Limited liability

` Diffused risk 

` More financial resources` Transferability of ownership

` Perpetual existence (separate legal for share holders)

` Economies of scale (operating to lead our economy)

` Professional management (ruling by best 

professionals)

` Capital formation (mobilising of funds)

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De Merits of Joint Stock Company:-

y Difficulties in formation (promoters has to spend time

& money)

yLack of personal interest (everybody feel other partnerwill do work)

y Difficult to maintain business secrets

y Delay in decision making and execution

y Excessive regulations

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Suitability of joint stock company

y Joint stock company form of business organisation is

suitable in the following cases:-

yWhen financial requirement is more or business is tobe carried on a very large scale

y When project is very risky and promoters are not 

prepared to bear the risk 

y Where due to nature of business professionalmanagement is needed.

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Legal issues

y Registration with director of industries:-

y It contains two stages for small scale units, they arey Provisional registration

y Permanent registration

y Registering with SSI Unit 

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Benefits of registering:-

y Credit prescription, interest rate

y Excise exemption scheme

y Exemption under direct tax lawsy Statutory support like reservation and interest delayed

y Objectives of registration scheme:-

y To serve the purpose of collection of statistics

y To create nodal centres at the centre, state and district 

levels to promote SSI

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Provisional registration certificate

(PRC):-y Given for pre-operative period only

y Obtains facilities for accommodation, land, other

approvals etc.y Obtains various necessary NOCs and clearances from

regulatory bodies such as pollution control board,

labour regulations etc.

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Permanent registration certificate (PRC):-

y Income tax exemption and sales tax exemption as per

state govt. Policy

y Incentives and concessions in power tariff 

y Price and purchase preference for goods produced

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Licensing

`

` According to section-11 industries development andregulation act (IDR) no industry is to be established

without a license`

` According to IDR  Act, industrial licence would berequired for:-

` Establishment of new undertaking` Substantial expansion

` Production of a new product 

` Changing the location of an industrial undertaking

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Licensing agencies like:-

` Memorandum with Secretariat for industrial

assistance (SIA)

` Carry on business (COB) Licence` Industrial entrepreneur memorandum (IEM)

` Integration of small & large industries

` State regulations

` Environmental clearance

` Regulation of acceptance of loan(accept deposits from

public)

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Factories Act

 ` Objective:- To ensure healthy and safe workingconditionsconditions for workers, the act protects the workersfrom being subject to undue bodily strain or manual

labour

` The main provisions of this act are as follows:-

` Definition of factory

` Health

` Safety of workers

` Welfare of workers

` Duties of the employer

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