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Karnataka State Syllabus Class 8 Social Science Business Studies Important Questions Chapter 3 Forms of Business Organisations
Which are the different forms of business organizations?
The different forms of business organizations are:
- Sole trading concerns
- Partnership firms
- Hindu undivided family firms
- Co-operative societies
- Joint stock companies.
Which are the privately owned business organizations?
The privately owned business organizations are:
- sole trading Concerns
- partnership firms
- Hindu undivided family firms.
What are sole trading concerns?
A sole trader or sole proprietorship or a sole trading concern is a one-person business in which a single owner manages and controls the entire operation. He or she is liable for all debts and obligations.
What are the features of sole trading concerns?
The main features of sole trading concerns are:
- They are one of the oldest and simplest forms of business organizations.
- They are owned and managed by a single person and the profit or loss is that of the owner only.
- It is considerably easy to start and to conduct its activities. There are least formalities in the formation of a sole trading concern. A sole trader may also close down the business as per his own will.
- The sole trader uses his own skill and capital to carry on the business.
- The owner takes the help of his family members and also appoints some workers.
How do sole trading concerns help the consumers?
Since consumers usually prefer to buy their day-to-day requirements from the nearest shop, sole traders set up their shops wherever consumers are available. Also, since a sole trader comes in direct contact with the consumers he understands their likes and dislikes and supplies goods accordingly.
Mention the merits/advantages of sole trading concerns.
The advantages of sole trading concerns are:
- No legal formalities are required to commence the business.
- The owner enjoys all the profits and bears all the losses.
- There is direct contact with the customers.
- Quick decisions can be taken regarding the business.
- It is easy to maintain business secrets.
Mention the limitations of sole trading concerns.
The disadvantages of sole trading concerns are:
- The capital is limited and they cannot expand the business.
- Since it is run by a single person the managerial ability is limited.
- All the losses are to be borne by a single person.
- Life of the sole trading firms may be short. With the death or insolvency of the sole trader, the trading concern will close.
What is a partnership firm?
A partnership firm is one in which two or more persons join together and carry on the business. According to Section 4 of Indian Partnership Act, 1932, a partnership firm is defined as the relation between the persons who have agreed to share the profits of a business carried on by all or by any of them acting for all.
Mention the different types of partners.
There are different kinds of partners. They are – Active or working partners, Sleeping partners, Nominal partners and Minor partners.
Explain the different types of partners.
The different types of partners are:
- Active or working partners: They contribute fixed amount of capital, and share profits and losses in proportion to their capital contribution and take active part in carrying out the day-to-day affairs of the business.
- Sleeping partners: They contribute capital but do riot take active part in the day-to-day transactions of the firm. The profits and losses are shared in proportion to their capital contribution.
- Nominal partners: They neither contribute capital nor take active part in the day-to-day transactions of the firm. They are not entitled to any share in profit but they are liable for business losses.
- Minor partners: Minors are those who have not yet attained the age of 18. A minor cannot become a partner. But, by mutual agreement of the partners, a minor can be admitted as a partner. The minor partners are eligible for profits but are not liable for defaults or losses.
Who are sleeping or dormant partners?
Sleeping or dormant partners are those who contribute capital but do not take active part in the day-to-day transactions of the firm. They share the profits and losses of the firm in proportion to their capital contribution.
How is a partnership firm formed?
What are the contents of a partnership deed?
A partnership firm is formed through a partnership deed. Generally it is in writing, duly stamped and signed by all the partners. It differs from firm to firm. It contains all the terms and conditions of the partnership.
Generally it contains the name of the firm, names and addresses of partners, the address of the firm, nature of business, address of the branches if any, date of commencement of business, capital contributed by each partner, the ratio of sharing of profits or losses, duties of each partner, division of work among the partners, the conditions under which new partners can be admitted, valuation of goodwill at the time of admission of new partners or at the time of closing the business, and the procedure for resolving the differences among partners.
Mention the merits of partnership firms.
The merits of partnership firms are:
- Easy to form: No legal formalities are required for the formation of partnership firms. Even registration of partnership firms is not compulsory.
- More capital: Partnerships are formed by more than two persons, so the capital investment is more.
- Sharing of business loss: Since all the partners share the losses, the burden of loss is less on individual partners.
- Secrecy of business: Partnership firms need not publish their accounts. Thus, there is scope for maintaining business secrets.
- Better efficiency: Since there is more than one person as partner, division of labour can be easily adopted. So, there is better managerial ability and it increases efficiency.
- Credit worthiness: The liability of partners is unlimited, so it leads to increase in credit worthiness.
- Simple dissolution: Partnership firms can be dissolved easily. Any partner can apply for dissolution by giving fourteen days’ notice or it can be dissolved with the consent of all the partners.
How is the dissolution of partnership firms easy?
Any partner can apply for dissolution by giving fourteen days’ notice or it can be dissolved with the consent of all the partners. Hence it is very easy to dissolve partnership firms.
Mention the demerits of partnership firms.
The demerits of partnership firms are:
- Disunity among the partners may hamper the business and may lead to legal disputes.
- Since the liability is unlimited, it discourages many people from joining as partners.
- It is difficult to transfer the share of partners to others.
- Owing to lack of control by the government and non-publishing of accounts, partnership firms’ misdeeds never come into the public domain. Therefore, they do not get public support.
- Since there is limitation on the number of partners, the capital contribution is also limited.
- Partnership firms lack continuity. Death or insolvency of one of the partners may lead to dissolution of the firm.
How are partnership firms registered?
The Indian Partnership Act of 1932 provides for the registration of partnership firms. But, it is not compulsory. It is left to the discretion of the partners. Registration can be made at any time.
For the purpose of registration a statement in the prescribed form duly filled with correct particulars must be submitted to the Registrar of Firms, appointed by the government, along with the prescribed fee. The Registrar, after satisfying himself that all the provisions have been complied with, issues the ‘Certificate of Registration’.
What are the advantages of registering a partnership firm?
The advantages of registering a partnership firm are:
- A registered firm can file a suit in a court of law against a third party. An unregistered firm cannot do this.
- A registered firm can also file cases against other partners to recover loans they owe to the firm.
- Any partner can file a case against the firm or other partners for the dissolution of the firm or for the settlement of accounts.
Mention any two circumstances under which a partnership can be dissolved.
A partnership is dissolved:
- if any partner withdraws from the partnership or is deceased.
- if the partners become insolvent.
Write briefly about Hindu undivided family business.
The Hindu undivided family concerns are unique to India. They are the firms which consist of all the male members of the Hindu family, descendants from a common male ancestor. Only three successive generations of male members, namely, sons, grandsons and great-grandsons acquire the birth right or interest in the ancestral property.
The eldest or seniormost member of the family manages the business and he is called ‘karta’. The liability of the karta is unlimited, while the liability of other members is limited to the extent of their share in the business.
Who is ‘karta’ in Hindu undivided family, concern?
The eldest and seniormost male member of the family who manages the Hindu undivided family business is called karta.
Multiple Choice Questions
If a single person is the owner, manager, investor and is the bearer of losses, then that firm is a
(A) sole trading concern
(B) partnership firm
(C) Hindu undivided family
(D) joint stock company.
(A) sole trading concern
The partner who neither contributes capital nor participates actively in the day-to-day activities of the firm is called
(A) active partner
(B) sleeping partner
(C) minor partner
(D) Nominal Partner
(D) Nominal Partner
Partnership firms function as per the Indian Partnership Act of
The minor partners of a firm are not liable for
(C) profits and losses
The eldest male member of a Hindu undivided family is called
(B) sole proprietor
Fill In The Blanks
- The business concern that is owned and managed by a single person is called sole trading concern.
- The Indian Partnership Act was passed in the year 1932 to regulate the affairs of partnership firms.
- The maximum number of partners in a firm which carries on banking business is ten.
- The head of the Hindu undivided family business is known as Karta
- The business concern under private business organisation that is found only in India is Hindu undivided family.