This document discusses different forms of business organization including sole proprietorships, partnerships, and joint stock companies. Sole proprietorships are owned and managed by a single individual and have unlimited liability. Partnerships involve two or more individuals who pool resources to start a business and share profits, but also have unlimited liability. Joint stock companies have limited liability for shareholders, separate legal entity status, and ownership divided into transferable shares. The choice of business organization depends on factors like size, control, structure needs, and tax implications.

1. Business Organization forms and
structures
Dr. Satish Kumar

2. BUSINESS ORGANIZATION
 To carry out any business and achieve its objective of earning profit it is
required to bring together all the resources and put them into action in a
systematic way, and coordinate and control these activities properly. This
arrangement is known as business organization.
BM103 Financial Accounting

3. CHOICE OF BUSINESS ORGANIZATION DEPANDS ON
 Your Vision regarding the size and nature of your business.
 The level of control you wish to have.
 The level of “structure” you are willing to deal with.
 The business’s vulnerability to lawsuits.
 Tax implications of the different organizational structures.
 Your need for access to cash out of the business for yourself.
BM103 Financial Accounting

4. BM103 Financial Accounting
FORMS OF BUSINESS ORGANISATION
 Sole proprietorship
 Partnership
 Joint Stock Company

5. BM103 Financial Accounting
SOLE PROPRIETORSHIP
 No Separation of Ownership and Management:
 Single Ownership
 Less Legal Formalities
 No Separate Entity
 One-man Control
 Unlimited Liability
.
• In Sole proprietorship, the business is carried on by a single individual.
•This type of entity is suitable for small businesses.
•One person will have the decisive authority and owns all the assets and liabilities of
the business owns it.
The business is not separate from the Owner who has unlimited liability. Therefore
Sole Proprietorship may be the simplest type but it also the riskiest business entity.
FEATURES:

6. BM103 Financial Accounting
ADVANTAGES AND DISADVANTAGES OF SOLE
PROPRIETORSHIP
ADVANTAGES
 Easy to Form and Wind Up
 Quick Decision and Prompt Action
 Maintenance of Business Secrets
 Direct incentive
DISADVANTAGES
 Limited resources:
 Limited managerial ability
 Unlimited liability
 Limited life of a business concern.

7. BM103 Financial Accounting
PARTNERSHIP
‘Partnership’ is an association of two or more persons who pool their
financial and managerial resources and agree to carry on a business,
and share its profit. Partnership form of business organization in India is
governed by the Indian Partnership Act 1932.
FEATURES:
•Two or More Persons
•Contractual Relationship
•Sharing Profits and Business
•Voluntary Registration
•Unlimited Liability

8. BM103 Financial Accounting
ADVANTAGES AND DISADVANTAGES OF
PARTNERSHIP FIRM
ADVANTAGES
 Ease of formation and closure
 Balanced decision making
 More funds
 Sharing of risks
 Benefits of Specialisation
DISADVANTAGES
 Unlimited liability
 Possibility of conflicts
 Lack of public confidence

9. BM103 Financial Accounting
JOINT STOCK COMPANY
A company is an association of persons formed for carrying out business activities
and has a legal status independent of its members. The company form of organization
is governed by The Companies Act, 1956. A company can be described as an
artificial person having a separate legal.
FEATURES:
•Artificial person
•Separate legal entity
•Perpetual succession:
•Compulsory registration under The Companies Act, 1956
•Limited liability
•Capital is divided in to shares
•Sharing of profits
•The management and control of the affairs of the company is
•undertaken by the Board of Directors

10. BM103 Financial Accounting
ADVANTAGES AND DISADVANTAGES OFJOINT
STOCK COMPANY
ADVANTAGES
 Limited liability
 Transfer of interest
 Perpetual existence
 Scope for expansion
 Professional management
DISADVANTAGES
 Complexity in formation
 Delay in decision making:
 Conflict in interests

11. Comparison of Three Types of Business Entities
Sole Proprietorship Partnership Company
Examples M/s ABC General Store A & company ABC Limited
ABC Private Limited
Owner Sole Partners Shareholders
Number of
owners/Sharehol
ders
01 Min: 2; Max: 20 Min: 7 Max: No limit
Min : 2, Max: 50 in
PVT ltd.
Management
Control
Proprietor Partners BOD
Liability Unlimited Unlimited Limited
Legal
Registration
No Provision Voluntary Compulsory
Flexibility Maximum Depends on Partners Comparatively less
Source of Equity
Funds
Proprietor brings in the
funds
Partners bring in the
funds
Shareholders bring in
the funds.
BM103 Financial Accounting