Hello everyone, in the previous topic we were talking about 12 Best Ways to Keep Your Mind Calm. Today we are going to talk about Business Organization, its forms, characteristics, Joint-stock company elements, and the formation of a company.

Business Organization

Introduction

A business organization has a set of goals and objectives to be achieved. A business organization should be structured in the most effective and efficient way to fully utilize its resources which are capital, human resources, knowledge in products and services, and both external and internal information to achieve its strategic goals.

Forms of Business Organization

If one is planning to start a business or is interested in expanding an existing one, an important decision relates to the choice of the form of organization. Here are various forms of business organizations from which one can choose the right one –

Sole Proprietorship

A sole proprietorship is a popular form of business organization and is the most suitable form for small businesses, especially in their initial years of operation. Sole proprietorship refers to a form of business organization that is owned, managed, and controlled by an individual who is the recipient of all profits and bearer of all risks. This is evident from the term itself. The word “sole” implies “only” and “proprietor” refers to “owner”. Hence, a sole proprietor is the one who is the only owner of a business.

Joint Hindu Family Business

A joint Hindu family business is a specific form of business organization found only in India. It is one of the oldest forms of business organization in the country. It refers to a form of organization wherein the business is owned and carried on by the members of the Hindu Undivided Family (HUF). It is governed by Hindu Law. The basis of membership in the business is birth in a particular family and three successive generations can be members in the business.

The business is controlled by the head of the family who is the eldest member and is called “Karta”. All members have equal ownership right over the property of an ancestor and they are known as co-parceners.

Partnership

 The partnership serves as an answer to the needs of greater capital investment, varied skills, and sharing of risks.

The Indian Partnership Act, 1932 defines partnership as “the relation between persons who have agreed to share the profit of the business carried on by all or any one of them acting for all.”

Cooperative Society

The word cooperative means working together and with others for a common purpose. The cooperative society is a voluntary association of persons, who join together with the motive of the welfare of the members. They are driven by the need to protect their economic interests in the face of possible exploitation at the hands of middlemen obsessed with the desire to earn greater profits.

The cooperative society is compulsorily required to be registered under the Cooperative Societies Act 1912. The process of setting up a cooperative society is simple enough and at the most what is required is the consent of at least ten adult persons to form a society. The capital of a society is raised from its members through the issue of shares. Society acquires a distinct legal identity after its registration.

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. A company can be described as an artificial person having a separate legal entity, perpetual succession, and a common seal. The company form of organization is governed by The Companies Act, 2013. Under the Act 2013, a company means a company incorporated under this act or any other previous company law. The shareholders are the owners of the company while the Board of Directors is the chief managing body elected by the shareholders.

Usually, the owners exercise indirect control over the business. The capital of the company is divided into smaller parts called ‘shares’ which can be transferred freely from one shareholder to another person.

Characteristics of Business Organization

Following are the characteristics of business organization-

Sale, Transfer, or Exchange

A business activity involves the sale or exchange of goods and services. They are the essence of business. If there is no sale, transfer, or exchange for a price, it will not consider a business activity. For instance, cooking food for personal consumption is not called business but cooking food and selling it to others for a price is called business.

Risk

Risk is an essential feature of business. The risk involved in the business is of two kinds; the first kind of risk can be forecasted and insured. The second kind of risk cannot be forecasted and insured.

Profit Motive

A business is not charity. The primary objective of business is to earn money and acquire wealth. A business that does not earn profit cannot survive for long. Profit is also essential for the growth and expansion of business. Businesses must earn profit by serving society. If the business is not giving you the required profit then it is the waste of time.

Regular Dealings

Business involves a series of dealings. A single transaction cannot be called business, recurring purchase and sale is the hallmark of business, For instance, if a person sells his old car, it is not business. But if he sells cars on regular basis as its dealer, it will become business.

Growth and Expansion

Business should be started by an entrepreneur with an intention of rapid growth and expansion.

Elements of Joint Stock Company

The basic elements of the concept joint-stock company are given below-

1. A Joint Stock Company, as a legal entity has certain capital assets which are expressed in money.

2. The capital assets are divided into equal parts or shares.

3. Any person i.e. shareholder participates with one or more shares, so with the payment for these shares, the basic capital is being created.

4. The obligations of the joint-stock company are secured with all the assets of the company. The duty of the participants in the creation of the company boils down to paying for the taken share. Shareholders are not responsible for liabilities of the company to third parties; only the company is liable to these, with all its assets.

Formation of Company

The formation of a company is considered to be a long and challenging process because it involves legal formalities and procedures. So to make it simpler and understandable, the process is divided into the following four stages-

Promotion Stage

It is the first stage in the formation of a company process. It involves conceiving a business idea and taking the initiative to form a company so that practical shape can be given to the business activity.

Registration Stage

It is the second stage in the formation of a company process. In this stage, a company gets registered under the Companies Act.

Certificate of Incorporation

After the registration of the company when the required documentation is submitted, the registrar issues a certificate of incorporation certifying that the company is registered under the Companies Act.

Memorandum of Association

The memorandum of association is considered an important document in the process of registration of the company. This document is also referred to as a memorandum.

Articles of Association

These documents provide information regarding the rules and regulations of the company as well as the purpose or goal of the company. This is also considered important in the registration process because it specifies how the tasks in the company are going to be executed.

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