- NCERT Solutions
- NCERT Class 11
- NCERT Class 11 Business Studies
- Chapter 2: Forms Of Business Organisation
NCERT Solution for Class 11 Business Studies Chapter 2 - Forms of Business Organisation
NCERT Solutions are considered an exceptionally helpful book while preparing for the CBSE Class 11 Business Studies examinations. This study resource contains in-depth knowledge, and the Solutions collated by the subject-matter experts are no different. This chapter is a brief introduction to the concept of NCERT Solutions for Class 11 Business Studies Chapter 2 – Forms of Business Organisation.
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Short Questions for NCERT Business Studies Solutions Class 11 Chapter 2
1. Compare the status of a minor in a Joint Hindu Family Business with that in a partnership firm.
According to Indian Law, a person below 18 years of age is said to be a minor. In a Joint Hindu family, a minor becomes a part of the family business by virtue of taking birth in the family. The minor gets equal ownership and right over the property and business like other family members. But, he has limited liability only up to his share in the property.
In a partnership firm, a minor cannot become a partner according to the Indian Partnership Act 1932. But if all the partners of a firm give their consent, a minor can be inducted, and he can share the profits of the firm, but a minor need not contribute capital or bear any liability if it is sustained by the business. Minors are not considered to be partners. However, after attaining 18 years, they can continue the partnership or withdraw the same.
2. If registration is optional, why do partnership firms willingly go through this legal formality and get themselves registered? Explain.
Registration in the case of a partnership is not mandatory, but it is better to get it registered as there are many negative points of not doing registration. Some points are highlighted below:
1. Partners of a firm that is not registered cannot file a case against a third party; however, other firms can seek legal action against the firm even though it is not registered.
2. A non-registered firm cannot book a case against its partner or partners, and a partner also cannot do the same against the firm.
3. Claims cannot be enforced against a third party in a court of law.
3. State the important privileges available to a private company.
The following are the privileges that are enjoyed by a private company:
1. A private company can be started by 2 members, while a minimum of 7 persons are necessary to start a public company.
2. Two directors are enough for running operations in a private company, while a minimum of 3 is required in a public company.
3. A private company can start a business from the day of receiving the certificate of incorporation. But, a public company has to obtain two certificates, namely, the certificate of commencement and the certificate of incorporation, to start a business.
4. How does a cooperative society exemplify democracy and secularism? Explain.
A cooperative society is managed by people who are selected by all the members through voting. Each member has an equal right to vote, irrespective of the capital they have invested. Thus, it acts as a democracy where all members are treated equally and provides equal rights to all members. Also, there is no discrimination of members based on their caste, religion or sex. All members are free to choose members of the managing committee who they feel are best to represent them. Therefore, it signifies secularism.
5. What is meant by ‘partner by estoppel’? Explain .
Partner by estoppel is referred to as that person who, through his action, behaviour or words, gives the impression to others that he is a partner of that particular firm. Such type of partner is not a partner and is not liable to contribute any capital to the firm, nor is he a part of any profit or loss of the firm. But, the same person will be held liable for the debts that the firm owes. And as such, repaying debts can be made by selling off the private assets of the partner by estoppel in case the firm has insufficient assets or funds.
6. Explain the following terms in brief.
(a) Perpetual succession
(b) Common seal
(d) Artificial person
(a) Perpetual succession : The meaning of perpetual succession is that a company will continue to function till it is not made to dissolve by an act of law. It also means that a company will not stop functioning in the event of death, insolvency or retirement of one or more of its members.
(b) Common seal : Common seal is the official signature of the company that can be used by its board members to sign all the major documents. As the company is an artificial setup created by law, a common seal helps authenticate the documents, which can be used as evidence in a court of law.
(c) Karta: Karta is the head of the Hindu Undivided Family. A Karta title is given to the eldest member of the family. He is the one who has the ultimate decision-making power in the family in terms of business. As a head of the family and business organisation, a Karta is bestowed with unlimited liabilities and supreme decision-making power in the family.
(d ) Artificial person : A company or business entity is referred to as an artificial person because, unlike human beings, it cannot walk, sleep, breathe and eat. However, it is bound by the law as it is created as a legal entity. It can sue or get sued by other firms.
Long Questions for NCERT Business Studies Solutions Class 11 Chapter 2
1. What do you understand by a sole proprietorship firm? Explain its merits and limitation.
A sole proprietorship firm is managed, owned and controlled by a single individual, also known as a sole proprietor. He earns all the profits and is responsible for all losses of the business.
The following are the merits of a sole proprietorship:
1. Sole proprietorship business is easy to set up as it requires very few legal formalities. Similarly, the winding up of the sole proprietorship business is free from hassles.
2. Decision-making is quick, as only one person is responsible for decision-making.
3. The owner is the one who reaps all benefits and also all losses which arise from the business.
The following are the limitations of a sole proprietorship:
1. Amount of capital invested in a business will be less as only one person is running the business.
2. All the responsibilities of the business are managed by one person which can hamper the business due to a lack of expert knowledge.
3. The business is impacted in cases of illness or death of the proprietor. Hence, stability is uncertain.
2. Why is partnership considered by some to be a relatively unpopular form of business ownership? Explain the merits and limitations of partnership.
A partnership is considered as an unpopular form of business ownership due to the factors such as the possible conflict between partners, limitation of resources, unlimited liabilities and the lack of continuity in business.
Here are some of the merits of a partnership:
1. A partnership is easy to form as it involves an agreement between two or more partners, which can be either oral or in a written format. Registration is not compulsory. Also, the closure of a partnership can be done at any time based on mutual agreement between partners.
2. Decision-making involves the opinion of all the partners. This helps in forming a balanced decision regarding business.
3. Sharing of risks is among the partners, hence a certain individual partner does not have to take all the burden
Here are some of the limitations of a partnership:
1. All partners have unlimited liability in a partnership. In case of bankruptcy, the personal assets of the partners can be utilised.
2. A firm has a limited number of partners; hence the finance is limited.
3. As a shared decision-making model is used, every individual will have their own opinion, and that can lead to conflicts.
3. Why is it important to choose an appropriate form of organisation? Discuss the factors that determine the choice of form of organisation.
There are various options or types of business to choose from, and each business will have a different set of requirements and risks involved; also, the growth prospects of a business will vary according to the type of organisation chosen. Thus, it is necessary to choose the suitable one.
The following are the deciding factors of a business:
1. Nature of business: For starting a business, an individual needs to decide the type of business he should start with. For example, if the business deals with direct customer interaction, a sole proprietorship is best, while other business types are suitable where no or less customer interaction is there.
2. Cost: The initial cost of setting up a company is a factor that should be kept in mind. If the budget is less, the best option is to start with a sole proprietorship.
3. Liability: Individuals starting a business should also think about the liability that comes along with a business. Business forms such as sole proprietorship and partnership carry unlimited liability and need to clear debts by selling off personal assets, while a company has a limited liability that is based on its assets.
4. Continuity: Business forms such as partnership and sole proprietorship are impacted by the loss of a partner or the proprietor. Other forms, such as cooperative societies or companies, are not impacted by such factors. If the business is seeking permanency, a company or cooperatives are the best bet.
5. Control: If one wants sole control over the business, then sole proprietorship is best, while partnership or company structure is best if shared decision-making is needed.
6. Managerial ability: If the business is large enough to maintain the business, many skilled professionals are required, then a company form of business is the best option. However, if the business is limited and very little management is required, then sole proprietorship is the best choice.
4. Discuss the characteristics, merits and limitations of a cooperative form of organisation. Also, describe the different types of cooperative societies briefly.
A cooperative is an organisation which is formed by a voluntary association of individuals who join together to protect and promote their common interests.
Characteristics:
1. It is mandatory to register a cooperative society under the Cooperative Societies Act, 1912. It is granted the status of a separate legal entity upon completion of registration.
2. It follows a democratic form of organisation, and a managing committee manages the operations, and this committee is selected by members based on one vote per member.
1. Simple setup as per Cooperative Societies Act, 1912. Easy to form as a minimum of 10 members only is required; all should be adults.
2. A cooperative society is a continuing form of business organisation that is unaffected by insanity, insolvency or death of its members.
Limitations:
1. Have to follow the rules and regulations set by cooperative departments of the state.
2. Have to submit audit reports of accounts to the government.
3. Management comprises inexperienced people who lack efficiency and may not be well equipped to manage the organisation.
Types of Cooperative Societies:
1. Consumer Cooperative: These are formed in order to make consumer goods available at reasonable rates to their members.
2. Producer Cooperative: The objective is to procure materials and machinery and supply them to the members at low prices.
3. Farmers’ Cooperative: An association of small farmers who join together to maximise their productivity and earning potential.
4. Housing Cooperative: These aim to provide affordable housing solutions to its members.
5. Marketing Cooperative: These cooperatives are formed by farmers, small producers and artisans to promote their services in the market.
6. Credit Cooperative: These cooperatives provide credit to their members at low rates of interest.
5. Distinguish between a Joint Hindu family business and a partnership.
6. Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organisation. Why?
The reason behind choosing sole proprietorship as the business form is due to the many benefits it offers despite limitations in areas of size and resources. The benefits are mentioned below:
1. It is very easy to set up a sole proprietorship business as very few legal formalities are required. Similarly, the winding up of the business is also hassle-free.
2. As the sole decision maker, the sole proprietor enjoys complete hold over the business, which makes decisions quick.
3. Sole proprietor enjoys all the profits earned by the business and, at the same has to bear all the losses.
4. Highly flexible in operations as the sole proprietor is the only person managing the operation.
Application Questions for NCERT Business Studies Solutions Class 11 Chapter 2
1. In which form of organisation is a trade agreement made by one owner binding on the others? Give reasons to support your answer.
In a partnership form of business, a trade agreement made by any one owner becomes legally binding for the other partners. This is due to the fact that every partner is, by rule, both agent and a principal. So each partner acts as an agent of the firm and binds all other partners, and each partner is also principal of the firm, so he is bound by the action of other partners
2. The business assets of an organisation amount to Rs. 50,000, but the debts that remain unpaid are Rs. 80,000. What course of action can the creditors take if (a) The organisation is a sole proprietorship firm (b) The organisation is a partnership firm with Anthony and Akbar as partners. Which of the two partners can the creditors approach for repayment of the debt? Explain, giving reasons.
(a) As the sole proprietor has unlimited liability in the case of a sole proprietorship, creditors can claim the personal assets of the proprietor in case of debt repayment.
(b) The creditors can approach both partners, Anthony and Akbar , and they need to pay as per their share in the partnership. If one of the partners becomes insolvent, then the other partner can be approached for debt repayment.
3. Neha is a sole proprietor. Over the past decade, her business has grown from operating a neighbourhood corner shop selling accessories such as artificial jewellery, bags, hair clips and nail art to a retail chain with three branches in the city. Although she looks after the varied functions in all the branches, she wonders whether she should form a company to manage the business better. She also has plans to open branches countrywide. (a) Explain two benefits of remaining a sole proprietor (b) Explain two benefits of converting to a joint stock company (c) What role will her decision to go nationwide play in her choice of form of the organisation? (d) What legal formalities will she have to undergo to operate the business as a company?
(a) The benefits of remaining a sole proprietor are listed below:
1. All profits of the business are owned by a sole proprietor
2. Independent decision-making can be done in the case of a sole proprietorship
(b) The following are two benefits of converting to a joint stock company.
1. Capital can be expanded by the issue of new shares.
2. The owners’ liability is limited only to the amount invested by them as capital.
(c) A joint stock company will best serve her interest if the plan is to go nationwide.
(d) The following formalities need to be completed for operating a joint stock company:
1. Company promotion
2. Creating necessary documents such as a Memorandum of Association (MoA), Article of Association (AoA) and the mandatory agreement and declaration.
3. Obtaining a certificate of incorporation
4. Obtaining a certificate for commencement of business
Concepts covered in this chapter are as follows:
Given below are the concepts covered in the Chapter 2 of NCERT Class 11 Solutions Business Studies –
- Introduction
- Sole Proprietorship
- Joint Hindu Family Business
- Partnership
- Types of Partner
- Types of Partnership
- Partnership Deed
- Registration of Partnership Firm
- Joint Stock Company
- Types of Companies
NCERT Solutions for Class 11 Business Studies Chapter 2 provides a broad degree of illustrative examples, which helps the students to comprehend and learn quickly. The above-mentioned are the questions and solutions as per the Class 11 CBSE syllabus. For more solutions and study materials of NCERT Solutions for Class 11 Business Studies , visit BYJU’S or download the App for more information and the best learning experience.
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Forms of Business Organisation Class 11 Notes CBSE Business Studies Chapter 2 (Free PDF Download)
Revision notes.
- Business Studies
- Chapter 2 Forms Of Business Organisation
Revision Notes for CBSE Class 11 Business Studies Chapter 2 - Free PDF Download
CBSE Class 11 Business Studies Chapter 11 Notes by Vedantu are meant to provide the students with a clear and concise understanding of the chapter. In these notes, students will find a comprehensive outline of notes of the chapter with solved exercises to assist them with understanding the chapter better. These revision notes and activities will help students with a radical understanding of the topic. The Chapter 2 Business Studies Notes PDF are created to help students with their preparation for their exams and to help them ace it. Students will be able to download the Class 11 Business Studies Chapter 2 Notes in the PDF format absolutely free of cost.
Revision Notes for CBSE Class 11 Business Studies Chapter 2 - Topics Covered
Following are the topics that are covered in Chapter 2 - Forms of Business Organizations:
Introduction
Sole proprietorship
Joint Hindu family business
Partnership
Types of partner
Types of partnership
Partnership deed
Registration of partnership firm
Joint stock company
Types of companies
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Access Class 11 Business Studies Chapter 2 - Forms Of Business Organization Notes
Forms of business organisation.
There are different forms of business organizations from which a choice has to be made:
Joint stock Company
Cooperative Societies
Sole Proprietorship
It is a form of organisation which is owned, managed and controlled by an individual who bears all the risk and receives all the profit.
Formation and closure: It can be established and closed without any legal formalities.
Liability: The liability of the sole proprietor is unlimited in this form of business organisation.
Sole risk bearer and profit recipient: Being a sole owner, he bears all the risk and receives all the profits.
Control: All the decisions are taken and implemented in the organization by the owner.
No separate entity: Both owner and business are considered as one in the eyes of law.
Lack of business continuity: Business can be continued till the owner wishes to.
Quick decision making: Prompt decision making as all the decisions are to be taken by the owner.
Confidentiality of information: Being a sole owner, it is easy to maintain business secrecy.
Direct incentive: All the profits are enjoyed by the owner as there is no one to share profits.
Sense of accomplishment: Successful business provides satisfaction to the owner and sense of achievement.
Ease of formation and closure: No legal formalities for formation and closure of business which makes it easy to start and end the business.
Limitations
Limited resources: Business can be funded from savings of the owner or money borrowed from friends, relatives.
Limited life of a business concern: Continuity of the business depends on the health and state of mind of the owner.
Unlimited liability: In case business fails repayment of debts, his personal assets are at risk.
Limited managerial ability: One person may not possess the ability to manage all the functions.
Joint Hindu Family Business
It is a form of business which is owned and managed by members of Hindu undivided family, with the possibility of three successive generations as members in the business.
Formation: Hindu Undivided Family is formed with at least two members of a family having ancestral property. It is governed by Hindu Succession Act, 1956.
Liability: All the members of the family except Karta have limited liability up to their share in the business property.
Control: All the activities in the business organization are controlled by Karta.
Continuity: It can be discontinued if all the members of the family agree to do so.
Minor members: Membership in the organization is by birth.
Effective control: Complete control of business with ‘Karta’ thus effective decision making.
Continued business existence: Business continues till all the members wish to continue and control is transferred to the next elder member in case of death of ‘Karta’.
Limited liability of members: Members of the family enjoy liability limited to their share in the business party.
Increased loyalty and cooperation : Family members have a sense of belongingness and loyalty, hence, all work with a common objective of growth.
Limited resources: Business can be funded mainly from ancestral property, hence limiting the financial resources.
Unlimited liability of Karta: The personal property of ‘Karta’ is at risk as he has unlimited liability.
Dominance of Karta: Difference of opinion among members and ‘Karta’ may cause conflict amongst them.
Limited managerial skills: Karta may not have knowledge and expertise of all the functions performed in the business.
According to partnership Act 1932, partnership is the relation between persons who have agreed to share the profits of the business carried on by all or any one of them acting for all.
Formation: Business is established as per the provisions of partnership Act 1932.
Liability: All the partners in the business have unlimited liability.
Risk bearing: All the risk in the business is shared by all the partners.
Decision making and control: All the decisions are taken in after the consent of all the partners and each partner shares responsibility of running business.
Continuity: Continuity depends upon the partnership deed among the partners at the time of its formation.
Number of partners: Minimum 2 and maximum 50 members [as per the Companies (miscellaneous) Rules 2014}, or maximum could be 100 ( according to Companies Act, 2013).
Mutual agency: Each partner is the owner as well as the agent of the firm and agent to other partners.
Ease of formation and closure: Business can be established and closed with the consent of all the partners as the registration is optional.
Balanced decision making: All the decisions are taken by consent partners as partners undertake responsibilities as per their expertise.
More funds: Funds are provided by all the partners, which increases the scope for large-scale business operation.
Sharing of risks: Business risk and responsibilities are shared among all the partners.
Secrecy: It is easy to maintain business secrecy as there is no need to submit financial results.
Unlimited liability: Each partner’s liability is extended to their personal property.
Limited resources: Availability of Finance is limited due to the restriction of number of partners.
Possibility of conflicts: All the partners may have different opinions which create conflict among them.
Lack of continuity: Any conflict between partners or death of a partner may bring business to an end.
Lack of public confidence: It is difficult for an outsider to ascertain true financial position as there is a lack of availability of financial reports.
Types of Partners
Active partner: A partner who contributes capital, shares profits and losses, participates in management and has unlimited liability.
Sleeping or dormant partner: Partner who contributes capital, shares profits and losses and has unlimited liability but does not participate in management.
Secret partner: This partner participates in management operations secretly, but does contribute in profits and losses.
Nominal partner: Partner who does not contribute capital and does not share profit and losses but allows partnership business to project him or her as partner.
Partner by estoppel: An individual who is not a partner but projects himself/herself as a partner to an outsider and has unlimited liability.
Partner by holding out: An individual who is not a partner but is projected as a partner by other partners of the partnership firm and his liability is unlimited.
Minor as partner:
An individual of age below 18 years can be admitted with mutual consent of all other partners but legally he is not a partner.
Partnership can be categorised on the basis of duration and liability:
Classification on the basis of duration
Partnership at will: Partnership continues till the partners agree to do so.
Particular partnership: The partnership formed for a specific task for project or for a specific period of time. It comes to an end after completion of task or expiry of time.
Classification on the basis of liability
General partnership: Partnership where all partners have joint and unlimited liability
Limited partnership: Partnership where all partners have limited liability and at least one partner must have unlimited liability.
A written document where all the terms and conditions of partnership are mentioned. It generally has following clauses:
Name of firm
Nature of firm
Duration of partnership
Duties and obligations of partners
Valuation of assets
Interest on capital and interest on drawings
Profit-loss sharing ratio
Salaries and withdrawals of the partners.
Preparation of accounts and their auditing.
Procedure for dissolution of firm
Method of solving disputes.
Registration
It is optional for a partnership firm to get registered with the registrar of firms of the state in which form is situated.
Consequences of non registration
In case of non registration, a partner cannot file a case or file suit against other partners or the partnership firm.
Firm cannot sue third parties.
The form cannot file a case against one or more partners of the firm.
Procedure for getting firm registered
Submission of application in prescribed form with the Registrar of Firms.
Fee deposition with the Registrar.
Receiving certificate of registration after the Registrar is satisfied.
Cooperative Society
An organisation of voluntary people working for a common purpose with an aim to protect economic and social interests of the members. It must be registered under the Cooperative Societies Act, 1912.
Voluntary membership: Any individual irrespective of caste, gender, religion with common interest is free to join or leave a cooperative society as and when he/she desires.
Legal status: Cooperative society has separate identity status distinct from its members, and the registration of such society is also mandatory.
Limited liability: Members have liability limited to their capital contribution.
Control: All the decision making power is in the hands of an elected managing committee which are chosen by members with one man one vote concept.
Service motive: Society is formed with the motive of providing mutual help to team members.
Equality in voting status: Each member has equal right to vote and elect members of the managing committee.
Limited liability: The liability of members is limited to their capital contribution.
Stable existence: Cooperative societies keep on going irrespective of situations of death, bankruptcy or insanity of its members.
Economy in operations: The members of the society work voluntarily which helps in reducing costs.
Support from government: Government provides support to societies in the form of lower taxes, interest rates and subsidies.
Ease of formation: No legal formalities are involved in formation of societies.
Limited resources: Capital contribution by the member is the only source of finance, and low dividend also discourages members for the provision of finance to the society.
Inefficiency in management: Members working on voluntary basis may lack necessary expertise and skills, leading to inefficiency in operations and management.
Lack of secrecy: Difficult to maintain secrecy as members disclose all information related to work of the society in the meeting.
Government control: Societies need to follow rules and regulations as stated by the government and submit audited financial reports of the society. However, such government intervention affects the freedom of work for such societies.
Differences of opinion: Difference of opinion as a result of individual interest over the welfare may lead to conflicts amongst members.
Types of cooperative societies
Consumer’s cooperative societies: Societies formed for providing good quality services and products at a reasonable rate, to protect the interest of consumers.
Producer’s cooperative societies : Societies formed for providing good quality and low priced raw materials and other inputs, to protect the interest of producers.
Marketing cooperative societies: Societies for providing services related to marketing of products by small producers.
Farmer’s cooperative societies: Societies formed for providing farmers with better inputs at reasonable rates to improve productivity.
Credit cooperative societies: Societies established to provide financial assistance to its members at very reasonable terms.
Cooperative housing societies: Societies formed for constructing houses for its members at reasonable cost.
Joint Stock Company
The Companies Act, 2013 defines, "A company as an artificial person having a separate legal entity, perpetual succession and a common seal."
Features of a Joint Stock Company
Artificial person: A company is created by law and has legal status but it does not function like human beings. All business activities are done by the board of directors in the name of the company.
Separate legal entity: A company has its own identity distinct from its owner with the incorporation of a company.
Formation: Company is formed by fulfilling all the legal formalities as stated under Companies Act, 2013.
Perpetual succession: A company is created by law and can be wound up by law only. Existence of the company is not affected by the status of members.
Control: Business affairs of a company are managed and controlled by the Board of Directors.
Liability: A company has limited liability i.e., liability only to the extent of the capital contribution.
Common seal: As a company is an artificial legal person, it cannot have a sign on its own/ Hence common seal acts as the official signature for a company. All the official documents must have a common seal for legal binding.
Risk bearing: The risk of loss is shared by all the shareholders in proportion to their investment in the company.
Limited liability: Shareholders liability is limited to the investment in the company, thus, there is no risk of losing personal assets.
Transfer of interest: Shares can easily be sold in the market or can be converted into cash.
Perpetual existence: Company's existence is not affected by the status of shareholders, company continues to exist.
Scope for expansion: Companies can raise large amounts of funds from the public as well as borrowings from financial institutions or banks.
Professional management: large-scale operation requires management by professionals and specialised individuals.
Complexity in formation: Formation of a company requires fulfilling of documentation and legal formalities which makes the procedure lengthy and complex.
Lack of secrecy: All financial information is disclosed to the general public that there is no confidentiality or secrecy.
Impersonal work environment: Business affairs are managed by professionals not owners, thus, it lacks personal contact with employees and customers.
Numerous regulations: A company involves various rules and regulations which reduces freedom to work and involves a lot of money, time and effort.
Delay in decision making: Decision making needs to follow a set of hierarchy which may cause delay in taking decisions and actions.
Oligarchic management: Shareholders have very little control over the running of business, thus, the directors take all the decisions which may at times get influenced by their personal interest.
Conflict in interests: It is difficult for management to satisfy everyone as there are too many stakeholders with diverse interests.
Types of Companies
Private Company
A company must have minimum 2 or maximum 200 members.
Right to transfer shares is restricted.
Funds cannot be generated from the general public.
Uses 'Private Limited' after the company name.
Public Company
Minimum 7 members with no limit on maximum members.
Free to transfer shares.
Issue shares to the general public.
Uses 'Public Limited' after the company name.
Difference between Public and Private Company
Choice of form of business organisation.
Cost and ease in setting up the organisation: It is easy to start sole proprietorship with minimum cost and legal requirements whereas formation of a company is a complex task with lengthy legal procedure. But partnership has the advantage of less legal requirements with low cost.
Liability: In sole proprietorship and partnership, the liability of owner or partners is unlimited but in cooperative societies and companies, members have limited liability.
Continuity: In sole proprietorship and partnership, continuity is affected by death and insolvency of the owners but cooperative societies, companies and Hindu undivided family enjoy perpetual existence.
Management ability: In sole proprietorship, it is difficult that the owner may have expertise in all functions but in other forms of business, division of work is possible which leads to better decision making.
Capital consideration: In case of large scale of operation, company form is more suitable but in case of small scale of operation, partnership or sole proprietorship can be chosen.
Degree of control: If the owner wants all the control in his hand the sole proprietorship may be preferred but if the owner is ready to share control, then he can adopt partnership or company form.
Nature of business: For trading and services, sole proprietorship and partnership form can be chosen. For manufacturing, a company form of organisation can be adopted.
Revision Notes for CBSE Class 11 Business Studies Chapter 2 - Benefits of Revision Notes
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Revision Notes for CBSE Class 11 Business Studies Chapter 2 - Key Takeaways
In this chapter students will look into sole proprietorship, Joint Hindu Family, Partnership, cooperative society and joint-stock company. In this revision notes of Class 11 CH 2 Business Studies by Vedantu, students will understand the merits, demerits and various characteristics of each type of Organisation. Each of these organizations is compared against each other for students to understand the advantage each type of organization has over another. The various types of organization have different kinds of features, and they are distinct from one another, and Notes of Chapter 2 of Business Studies includes all the important details.
Types of Organizations
Sole Proprietorship - In this type of organization , there is the only person who is the sole owner and recipient of all profits and losses earned by the organization and also the bearer of all risks. Here, there are no separate laws to govern sole proprietorship, and the owner is liable for all of their actions. The owner is also solely responsible for the ownership and also for running the business. In this type of organisation, the owner doesn't have to consult anyone before making their decision. They are able to keep their business ideas a secret and maintain overall secrecy.
Joint Hindu Family - This type of organization is where membership of members is granted only if they are born in the family. This is a business model that is based on family, and the heirs are directly successive from their father. This type of organization holds a lot of values and specific discipline that cannot be broken. The head of the family is called Karta. This type of organization requires only two members and ancestral property. The liability of the partners is limited only by the share that they hold.
Partnership - This implies the relationship between partners that have agreed to share the profits of the business and its losses. This was governed by the Indian Partnership Act of 1932. Here the partners of the firm have unlimited liability and are liable for all the decisions taken. The Partners share the profits in a ratio agreed upon beforehand. Lack of continuity or death can bring this Partnership to an end. Partners can oversee the various functions according to their expertise. The capital is contributed by all the partners.
Cooperative Society - This is a voluntary association of people to overlook the welfare of the members. This type of organization oversees the economic interests of the members and to avoid the exploitation by the middleman. This society can enter into contracts; they can sue and be sued. The liability of the members of the society is limited to how much they contribute to the capital. The principle of one man one vote exits as each member has equal voting rights.
Joint Stock Company - This type of organization is a creation of the law and is independent of its members. The company acquires a separate legal entity, and the law doesn't have the business and the owners as one. The formation of the company is time-consuming, expensive and very complicated. the shareholders are liable to the extent of unpaid shares paid by them.
Revision Notes for CBSE Class 11 Business Studies Chapter 2 - Extra Questions and Answers for Practice
1. What do you mean by ‘Partner by Estoppel’?
Ans. Partner by estoppel means such a person who by his action or words plays under the impression that he or she is the partner in the particular firm.
2. What is an artificial person?
Ans. A company or business entity is referred to as an artificial person as unlike human beings it cannot walk, sleep, breathe and eat. However, it is bound by the law as it is created as a legal entity. It can sue or get sued by other firms.
3. Explain the types of Cooperative Studies.
Ans.
1. Consumer Cooperative: These are formed in order to make consumer goods available at reasonable rates to their members.
2. Producer Cooperative: The objective is to procure materials and machinery and supply them to the members at low prices.
3. Farmers’ Cooperative: An association of small farmers who join together for maximizing their productivity and earning potential
4. Housing Cooperative: These aim towards providing affordable housing solutions to its members.
5. Marketing Cooperative: These cooperatives are formed by farmers, small producers, and artisans to promote their services in the market.
6. Credit Cooperative: These cooperatives provide credit to their members at low rates of interest.
Tips to Study Business Studies
Students are required to follow these suggested tips which will help the students to study business studies:
The concepts discussed in business studies must be understood by the students well, this will help them to solve the questions and answers properly. Thus first have conceptual clarity and then proceed on with the questions and answers
Study Hight Order Thinking Skills questions this will help the student logically grasp the chapters of Business Studies.
Take the help of the NCERT Notes and Revision Material.
Solve sample question papers before the exam.
Hope the students have gained enough help and insights from this revision material. We have provided the pdf to the revision notes which can be downloaded free of cost and referred before the Business Studies exam.
Students can also solve the extra questions and answers provided in this article. You can also take note of the suggested tips on how you can study Business Studies in CBSE Class 11 .
FAQs on Forms of Business Organisation Class 11 Notes CBSE Business Studies Chapter 2 (Free PDF Download)
1. What are the Types of Partners?
The types of partners are as follows.
Active Partner - This person takes action in the business on behalf of the partners of the company.
Sleeping Partner - This is a partner that doesn't take part in the day to day activities.
Secret Partner - Here the partner's identity is kept a secret.
Nominal Partner - This partner allows the use of their name in the firm.
Holding Out Partner - This person knowingly allows the use of his name in the firm.
2. What are the Types of Partnerships?
The types of partnerships are based on duration and liability. On the basis of duration, there are two types:
Partnership at Will - This will go on as long as the partners want it too or unless someone withdraws.
Particular Partnership - This partnership is formed because of the accomplishment of some project.
Based on liability, the different types of partnership are:
General Partnership - The liability of partners is unlimited and joint.
Limited Partnership - Here, one partner has unlimited liability, whereas the rest have limited liability.
3. What are the forms of business Organisation Class 11?
The different forms of business organisations that one may choose from are:
Sole Proprietorship: owned, controlled and managed by a single individual.
Joint Hindu Family Business: organized by two or more male members from one Hindu joint family.
Partnership: an association of people agreeing to distribute the profits of a business managed by all.
Co-operative Societies: a cooperative form of business with the main aim of mutual help.
Joint Stock Company: association of persons for gaining profit and capital divided as transferable shares. Visit the page Class 11 Business Studies Chapter 2 on Vedantu for complete solutions at free of cost from the Vedantu website and the Vedantu app.
4. What do you mean by business enterprise?
Business enterprise refers to any endeavour wherein the main aim is profit instead of the mere employment of oneself or others. It involves the task of offering goods and services including industrial, financial as well as commercial facets.
5. What are the types of partners?
Active Partner: participating in management.
Dormant Partner: not participating in management.
Secret Partner: association with the business is unknown to outsiders.
Nominal Partner: lends their name for the advantage of the business.
Partner by Estoppel: give the impression that they are one of the partners.
Partner by Holding Out: is not a partner, but knowingly lets himself be represented as one.
6. Who are Coparceners Class 11 business studies?
Coparceners are members of a Hindu Undivided Family business other than the Karta. It must consist of propositus along with three lineal descendants. They must have the same rights of ownership over their ancestral property. Visit the page Class 11 Business Studies Chapter 2 on Vedantu for complete solutions at free of cost from the Vedantu website and the Vedantu app.
7. What are the types of partnership in class 11 business studies?
Based on time period the following are the three types of partnership firm
Partnership at will
Particular partnership
Fixed period partnership
Based on the liability of members, the following are the two types of partnership:
General partnership
Limited partnership
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