Welcome dear students! Today we are going to learn about Emergence_of_Different_Business_Organisations from Class 8 Social_Science. After studying this chapter you would know the types of business organisations. You will understand the features, advantages and disadvantages of partnership firms. You will know the partnership registration procedure. And you will know about Hindu undivided family business concerns. Today we see different forms of business organizations. They may be classified into four types. They are business organizations in the private sector, business organizations in the public sector, joint sector business organizations, and public utilities. In this chapter and the next one we shall learn briefly about the small scale business organizations and large scale business organizations that come under the Private sector. The small scale business organizations under private sector are mainly divided into three types. They are sole trading concerns, partnership firms, and Hindu undivided family firms.
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Let us begin with sole trading concerns. It is run by a single person. He is the owner, and the manager. He enjoys all the profits and fully responsible for losses. He is the sole investor of capital to run the business. Now let us look at its features. It is one of the oldest and simplest forms of business organizations. It is owned and managed by a single person. It is easy to start a business. These concerns are run by the sole traders for profits. The sole trader uses his own skill and responsible for all the losses. There are no legal constraints to close or to start the business concerns. He takes the help of his family members or appoints some workers to help him in business. Generally they are small in size. But now a days they run on large scales also. Let us list the advantages of sole trading concerns. First, no legal formalities are required to commence the business. Second, it can be started by own capital. Third, no difficulties arise in day to day running of the business. Fourth, the owner enjoys all the profits and bears all the losses. Fifth, they directly come into contact with the consumers. Sixth, they render some social services also. Seventh, they provide employment to some people. Eighth, they help in distribution of wealth. Ninth, they understand the likes and dislikes of the customers and supply goods accordingly. Tenth, they pay taxes to the government.
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However, sole trading concerns are not free from some disadvantages. They are first, capital is limited and they cannot expand the business. Second, the managerial ability is limited. Third, two heads are always better to take decisions. Fourth, all the losses are to be borne by a single person. Fifth, with the death or insolvency of the sole trader, the trading concerns may have to be closed. The limitations of the sole trading concerns lead to the formation of partnership firms. In these firms two or more persons join together and carry out the business. Partnership firms Act was passed in 1932. According to the section 4 of partnership act the 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 any of them acting for all. The maximum number of partners are ten if they carry out the financial business or twenty in case of carrying out general partnership business.
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There are several types of partners, but generally we find active or working partners, sleeping partners, nominal partners and minor partners. Active partners 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 contribute capital but do not take active part in day to day transactions of the firm. The profits and losses are shared in proportion to their share of the capital. Nominal partners neither contribute capital nor take active participation in day to day transactions of the firm. They are not entitled for any share in profit but they are liable for business losses. Minor partners are those who have not yet attained the age of 18 years. A minor cannot become a partner. But by mutual agreement of all the partners a minor can be admitted as a partner. The minor partners are eligible for profits but not eligible for defaults or losses. When a new partnership is started the minor cannot be admitted. In addition to these types, there are secret partners, limited partners and partial partners. Partners are eligible only for profits.
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There shall be a deed of partnership. 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 firm. Generally it contains the name of the firm, names and addresses of partners, the addresses of the firm, nature of business, address of the branches if any, date of the commencement of business, shares of capital by each partner, the ratio of sharing profits and losses, duties of each partner, division of work among partners, the conditions to be followed at the time of admission of a new partner, calculation of goodwill in case of death or retirement of a partner, at the time of admission of a partner or at the time of closing the business, the procedure to be followed whenever differences arise among the partners. Now let us look at the merits of partnership firms. First, easy to form. No legal formalities are required for the formation of partnership firms. Even the registration of partnership firm is not compulsory, therefore the partnership firms are started easily. Second, more capital. Partnerships are formed by more than two persons, so the capital investment is more. Third, greater efficiency. There are more than one person as partners. Division of labour can easily be adopted, so there is better managerial ability and it increases efficiency. Fourth, trust worthiness. The liability of partners is unlimited so it leads to increase in trust worthiness. Fifth, sharing of business loss. All the partners have to share the profits and losses. The loss is not borne by one but it is shared among all the partners. Sixth, secrecy of business. The partnership firms need not publish their accounts. Thus there is a scope for maintaining secrets of business. Seventh, simple dissolution. Partnership firms can be dissolved easily. Any partner can apply for dissolution by giving fourteen days notice or with the consent of all the partners it can be dissolved.
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Let us also understand the demerits of partnership firms. First, sometimes the disunity among the partners may hamper business and it leads to disputes. Second, since the number of partners is limited, the capital investment is also limited. Third, liability is unlimited, so it discourages many people to join as partners. Fourth, reckless and foolish decisions of some partners may lead to heavy setbacks. Fifth, partnership firms lack stability, the death or insolvency of any partner may lead to dissolution. Sixth, it is difficult to transfer the share of partners to others. Seventh, owing to lack of control by the government and publishing of accounts, partnership firms can not gain public support. Eighth, the secrecy of the business can not be maintained since there are two or more than two partners. Now let us discuss the registration of partnership firms. There is no provision for registration of sole trading concern. 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 fees. The Registrar checks, and issues a certificate called Certificate of Registration.
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What are the advantages of registration of firms? First, a registered firm can file a suit in the court of law against third party, in case the loan amount is more than Rs. 100. But it is not possible in case of an unregistered firm. Second, a registered firm can file a case against the other partners against the loans they owe to the firm. Third, however third parties can file a case against an unregistered firm or against its partners for the recovery of loans. Fourth, any partner can file a case against the firm or other partners for the dissolution of the firm or for the settlement of accounts. Finally, we come to Hindu undivided family business concerns. They are found only in India. They are in accordance with Hindu Law. They are the firms which consist of all the male members of the Hindu family, who are the descendants from a common male ancestor. Only three successive generations of male members namely, father, sons, grandsons and great grandsons acquire the birth right or hold on the ancestral property. The eldest or senior most member of the family manages the business and he is called Karta. The liability of Karta is unlimited. While the liability of other members is limited to the extent of their share in the business.
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Now, dear students, let us move on to the exercises. I will read each question and provide the complete answer for you. Please listen carefully and note them down. Part one, fill in the blanks with suitable words. Question one. The concern that is owned and managed by a single person is called sole trading concern. Question two. The Indian Partnership Act was passed in the year 1932 to regulate the affairs of the partnership firms. Question three. The Maximum number of partners in a firm which carries out banking business is ten. Question four. The Head of the Hindu undivided family business is known as Karta. Question five. The only business concern under private business organization found in India is Hindu undivided family business concern. Part two, answer the following questions in one or two sentences each. Question six. Which are the small scale business organizations? The small scale business organizations under the private sector are mainly divided into three types: sole trading concerns, partnership firms, and Hindu undivided family firms. Question seven. How do sole trading concerns help the consumers? They directly come into contact with the consumers, understand their likes and dislikes and supply goods accordingly, render social services, provide employment, and help in the distribution of wealth. Question eight. What are partnership firms? According to section four of the partnership act, 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 any of them acting for all. Question nine. Who are sleeping partners? Sleeping partners contribute capital but do not take active part in day to day transactions of the firm. The profits and losses are shared in proportion to their share of the capital. Question ten. Dissolution of partnership firm is easy, how? Partnership firms can be dissolved easily because any partner can apply for dissolution by giving fourteen days notice or with the consent of all the partners it can be dissolved.
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Part three, answer the following questions. Question eleven. Mention any four merits of sole trading concerns. Four merits are: no legal formalities are required to commence the business, it can be started by own capital, no difficulties arise in day to day running of the business, and the owner enjoys all the profits and bears all the losses. Question twelve. Mention any four limitations of sole trading concerns. Four limitations are: capital is limited and they cannot expand the business, the managerial ability is limited, all the losses are to be borne by a single person, and with the death or insolvency of the sole trader, the trading concerns may have to be closed. Question thirteen. How are partnership firms started? Explain briefly. Partnership firms are started when two or more persons join together to carry out business. They prepare a partnership deed in writing, duly stamped and signed by all partners, which outlines capital shares, profit and loss ratios, duties, and conditions for admission or retirement. Registration is optional under the Indian Partnership Act of 1932. Question fourteen. Who are the different types of partners? The different types generally found are active or working partners, sleeping partners, nominal partners, and minor partners. In addition, there are secret partners, limited partners, and partial partners. Question fifteen. Mention any four merits of partnership firms. Four merits are: easy to form with no legal formalities required, more capital is available as it is formed by more than two persons, greater efficiency due to division of labour, and trustworthiness increases because the liability of partners is unlimited. Question sixteen. Mention any four demerits of partnerships firms. Four demerits are: disunity among partners may hamper business and lead to disputes, capital investment is limited, unlimited liability discourages many people to join, and reckless decisions of some partners may lead to heavy setbacks. Question seventeen. What are the advantages of registering a partnership firm? The advantages are: a registered firm can file a suit against a third party for loans over one hundred rupees, it can sue other partners for loans owed to the firm, any partner can sue for dissolution or settlement of accounts, and it provides legal standing for business claims. Question eighteen. Explain briefly about Hindu undivided family business. Hindu undivided family business concerns are found only in India and operate according to Hindu Law. They consist of all male descendants from a common male ancestor across three successive generations: father, sons, grandsons and great grandsons. The eldest member, called the Karta, manages the business with unlimited liability, while other members have liability limited to their share in the business.
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Part four, activity. Question one. Collect two advertisements and study them in the context of your lesson. For this activity, you should collect two real business advertisements from newspapers or magazines. Identify whether the business is a sole trading concern, a partnership firm, or another type. Note down the features mentioned in the advertisement, such as ownership structure, services offered, and contact details. Relate these observations to the characteristics of business organisations we studied in this chapter. That brings us to the end of our chapter on the emergence of different business organisations. We have covered sole trading concerns, partnership firms, their registration, and Hindu undivided family businesses. Make sure to revise the definitions, lists of advantages and disadvantages, and the exercise answers thoroughly. Thank you for listening! Keep revising and practicing. Goodbye! [CHAPTER_COMPLETE]