Sole proprietorship: Meaning, Features, Merits and Demerits. Partnership: Meaning, Features, Merits and Demerits. Joint stock company: Meaning, Features, Merits and Demerits. Co-operatives: Meaning, Features, Merits and Demerits.

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BUSINESS
ORGANISATION
UNIT-2
FORMS OF BUSINESS
ORGANIZATION

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• A business owner’s first decision while starting a business is to decide
what form of business he wants to Start. To choose the business type is
essential because it will determine how much tax needs to be paid, the
quantity of paperwork, individual liability, and how much to invest etc.
• The business formation is regulated by the state law where the company
is established.
Forms of Business Organization
1. Sole proprietorship.
2. Partnership.
3. Joint Stock Company.
4. Cooperatives.
5. Corporations.
6. Hindu Undivided Family (HUF).

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Sole proprietorship
Meaning
• This is the traditional and popular form of
business organization in which an individual
operates a business on their own, without
forming a separate legal entity.
• Its formation is simple, and the owner controls
the complete operations of a business and is
liable for all financial burdens and debts.

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Key Features of a Sole Proprietorship
1.Ownership: The business is owned and operated by a single
individual. This individual is personally responsible for all aspects of
the business.
2.Liability: The owner has unlimited personal liability, meaning they
are personally responsible for all of the business's debts and legal
obligations. This means personal assets may be at risk to satisfy
business debts.
3.Taxation: In most countries, the business income is reported on the
owner's personal tax return. The owner is responsible for paying
income tax on the business's profits.
4.Simplicity: Sole proprietorships are easy to set up and maintain,
with minimal formalities and paperwork.
Types of Sole Proprietorships:
1.Service-Based Sole Proprietorship: This is one of the most common types of sole
proprietorships. It involves providing services as a self-employed individual. Examples
include consultants, freelancers, tutors, and healthcare professionals.
2.Retail Sole Proprietorship: These businesses involve the sale of physical products to
consumers. Small shops, boutiques, and online stores run by a single individual can be
considered retail sole proprietorships.
3.Craftsmanship Sole Proprietorship: Individuals who create and sell handmade or
custom-made goods, such as artists, craftsmen, and jewellery makers, often operate as
sole proprietors.
4.Consulting Sole Proprietorship: Consultants, such as business consultants,
marketing consultants, and IT consultants, often operate as sole proprietors, offering
their expertise to clients.

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5. Professional Practice Sole Proprietorship: Professionals like doctors,
lawyers, accountants, and architects may choose to operate their practices
as sole proprietorships.
6. Home-Based Sole Proprietorship: Many individuals start small
businesses from their homes, such as home-based daycare, online
businesses, or consulting services.
7. Contracting Sole Proprietorship: Contractors in various fields, such as
construction, plumbing, electrical work, and landscaping, often run their
businesses as sole proprietorships.
Advantages of Sole Proprietorships:
1.Ease of Formation: Setting up a sole proprietorship is relatively simple
and inexpensive. In most cases, you only need to register your business
name, obtain any necessary licenses or permits, and you're ready to start
operating.
2.Full Control: As the sole owner, you have complete control over all
aspects of your business, including decision-making, operations, and
financial management. You don't need to consult with partners or
shareholders when making choices.
3.Simplified Taxation: Income generated by the business is typically
reported on the owner's individual tax return, simplifying the tax process.
This can also offer the opportunity to take advantage of certain tax
deductions.

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4. Direct Access to Profits: All profits earned by the business belong to the
sole proprietor. There is no need to share the profits with partners or
shareholders.
5. Flexibility: A sole proprietorship offers flexibility in terms of the types of
business you can operate and how you run it. You can adapt quickly to
changing market conditions and customer needs.
6. Minimal Regulatory Requirements: Compared to other business
structures, there are fewer regulatory and compliance requirements for sole
proprietorships. This means less paperwork and administrative overhead.
7. Low Operating Costs: Sole proprietors can keep costs down because
they don't need to pay fees or salaries to partners or shareholders. They can
also choose to operate from home or in a small office, reducing overhead
expenses.
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8. Quick Decision-Making: With no partners or board of directors to consult, sole
proprietors can make decisions rapidly, which can be crucial in seizing opportunities or
responding to challenges in a dynamic business environment.
9. Privacy: Sole proprietorships offer a higher degree of privacy, as there is no
requirement to disclose financial or business information to the public or shareholders.
10. Easy Dissolution: If you decide to close or sell the business, it is relatively
straightforward to dissolve a sole proprietorship. There are no complex legal procedures
or the need to obtain approval from other owners.

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Disadvantages of Sole Proprietorships:
1.Unlimited Personal Liability: In a sole proprietorship, the owner and the
business are considered one and the same from a legal standpoint. This
means that the owner is personally responsible for all the business's debts
and liabilities. If the business incurs significant debts or faces legal issues,
the owner's personal assets (such as their home and savings) can be at risk.
2.Limited Access to Capital: Sole proprietors may find it challenging to
raise capital for their businesses. They often have to rely on their personal
savings or loans, as it can be difficult to attract investors or secure business
loans without a separate legal entity.
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3. Limited Expertise and Resources: Running a business alone can be
overwhelming, especially for those with limited expertise in various aspects
of business management, such as finance, marketing, and operations. Sole
proprietors may lack the resources to hire specialists in these areas.
4. Lack of Continuity: Sole proprietorships are tied to the owner's life, and
the business typically dissolves upon the owner's death or retirement. This
lack of continuity can make it difficult to pass the business on to heirs or sell
it as a going concern.
5. Difficulty in Scaling: Expanding and scaling a sole proprietorship can be
challenging because the owner may have limited time, resources, and
expertise to manage a growing enterprise effectively.

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6. Legal Formalities: While sole proprietorships have fewer administrative
requirements compared to other business structures, they may still require
licenses or permits, and the owner must handle all legal and regulatory
compliance matters themselves.
7. Difficulty in Raising Capital: Sole proprietors may find it challenging to
secure funding or attract investors, as potential investors may prefer to
invest in businesses with a more structured and protected legal entity.

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Trade License
Every sole proprietorship,
partnership firm or company doing
business in Bangalore listed under
Schedule X of the Karnataka
Municipal Corporation (KMC)
Act, 1976 should mandatorily apply
for the BBMP trade license.
Such businesses should comply
with the rules and guidelines issued
by the BBMP.
Partnership

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Meaning
• Partnership is a form of business organization in which two or more
individuals or entities come together to manage and operate a business
with a common goal of making a profit.
• Partnerships are a popular choice for
small and medium-sized businesses
due to their flexibility and simplicity.
Key Features of Partnership

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Key Features of Partnership
1. Number of Partners
A partnership firm shall have a minimum of two partners. However, the maximum number of partners can be
50. The limit on the maximum number of partners in this firm is prescribed by the Companies
(Miscellaneous) Rules, 2014. Also, the Government has the power to increase this limit to 100.
2. Partnership Deed
The rights and duties of partners in a partnership firm are governed by a written agreement between them,
known as Partnership Deed. Such a deed shall be signed by all the partners.
3. Sharing of Profits
Sharing of profits is the most fundamental characteristic of a partnership firm. Therefore, all the partners
shall share the profits of the business in the ratio as mentioned in the Partnership Deed. However, in the
absence of a particular ratio, profits shall be shared equally.
Moreover, sharing of profits includes sharing of losses as well.
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4. Unlimited Liability
In a general partnership, the liability of all the partners is unlimited. This means that in case of losses if the
assets of the firm are insufficient to pay off the debts of the firm, the partners become personally liable to
third parties.
5. Business Motive
The motive behind the formation of a partnership firm shall be carrying on a business. In addition, such
business shall be lawful.
Further, the term business includes trade, occupation, and profession.
6. Mutual Agency
There is a contract of mutual agency between the partners of a partnership firm and between a partner and
the firm. It means that all the partners are liable for the acts of each other and similarly, a partner is liable for
the acts of the firm.

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Partnership Deed
Partnership deed is a partnership
agreement between the partners of
the firm which outlines the terms
and conditions of the partnership
between the partners.
Contents of Partnership Deed
•The name of the firm.
•Name and addresses of the partners.
•Nature of the business.
•The term or duration of the partnership.
•The amount of capital to be contributed by each partner.
•The drawings that can be made by each partner.
•The interest to be allowed on capital and charged on drawings.
•Rights of partners.
•Duties of partners.
•Remuneration to partners.
•The method used for calculating goodwill.
•Profit and loss sharing ratio

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Documents required for registration of a
partnership firm
1.Certified original copy of Partnership deed
2.Partner’s documents ( PAN Card and Aadhar or Driving License)
3.Address proof of the firm (Rent agreement and utility bills)
4.GST registration
5.Specimen of an affidavit certifying all the details mentioned in the partnership
deed and documents are correct.
6.Application for registration of partnership i.e. Form 1

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Types of Partners

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Types of Partnership Firms

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BASED ON DURATION
•Partnership at Will
When the contract between the partners does not specify the time limit, the partnership is at
the will of the partners and continues to operate for an indefinite period. However, the
partners can dissolve such a partnership by way of mutual agreement or by operation of law.
For example, Mr. A, a Chartered Accountant by profession, and Mr. B, a Company
Secretary by profession decide to provide consultancy services together under the firm
name ‘AB Consultancy’. This is a partnership at will.
•Partnership for a Fixed Term
When the duration of the partnership is mentioned in the contract between the partners, it is
known as Partnership for a Fixed Term. It means that the partners have agreed by the
contract as to the duration for which the firm will continue. In addition, the firm dissolves
on the completion of such term or the date mentioned in the contract.
This type of partnership firm is suitable in cases where the accurate duration of a project or
a venture can be determined in advance.
For example, A and B enter into a partnership for 6 months. It is a partnership for a fixed
term.

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BASED ON LIABILITY
•Limited Partnership
Limited Partnership is a type of partnership firm in which there are two types of partners – General Partners and Limited
Partners. General partners have unlimited liability and manage the day-to-day operations of the firm. Therefore, general
partners enjoy control over the activities of the firm while bearing the risk of losses.
On the other hand, limited partners invest their money into the firm only with the motive of earning a return. They do not
actively participate in the decision-making and routine operations of the firm. Moreover, in the event of losses, the limited
partners are liable only up to the extent of their contribution to the firm.
For example, A, B, C, and D enter into a partnership and decide to share the profits in the ratio of 3:3:3:1 respectively. A,
B, and C are general partners and D is a limited partner. A, B, and C manage the operations of the business while D is
associated with the firm only for the motive of earning profit.
•Limited Liability Partnership
Limited Liability Partnership, commonly known as LLP, is a type of partnership firm in which all the partners have limited
liability. It means that in the event of losses, all the partners are liable only up to the extent of their capital contribution.
The Limited Liability Partnership Act, of 2008 governs LLPs in India.
BASED ON PURPOSE
•General Partnership
General Partnership is a type of partnership firm that is formed to generally carry out business activities. It
means the scope of business is not defined in a general partnership.
The rights and duties of the partners are governed by the contract between them, known as a partnership deed.
In addition, there is an implied contract of mutual agency between the partners i.e., they are liable for the acts
of each other.
For example, A, B, and C enter into a partnership and decide to share the profits equally. All of them are liable
for the acts of each other as well as the firm.
•Particular Partnership
Section 8 of the Partnership Act, 1932 contains provisions regarding Particular Partnerships. Accordingly, two
or more persons can enter into a partnership for carrying out a particular adventure or undertaking.
Such partnership firms are temporary in nature and are formed for the achievement of a particular purpose.
The partnership is dissolved, once the purpose is achieved or a project is complete.
However, the partners can mutually agree between themselves to further carry on the partnership after the
completion of the project as well. For example, two contractors enter into a partnership for the construction of
a road. Once the construction of the road is complete, the partnership will be dissolved.

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BASED ON REGISTRATION
Registration of a partnership firm is not mandatory. Therefore, partnership firms can be
further classified into the following two types based on their registration status.
•Registered Partnership
Registered Partnerships are partnership firms that are registered with the Registrar of Firms.
For obtaining a Certificate of Registration, an application shall be made under Section 58 of
the Partnership Act, 1932.
A registered partnership enjoys several benefits such as legal recognition, the right to file a
suit against a third party, higher credibility, etc.
•Unregistered Partnership
Unregistered Partnerships are partnership firms that are not registered with the Registrar of
Firms. Although registration of a partnership firm is not mandatory, a firm that is not
registered suffers from several limitations for example, it cannot file a suit against a third
party for breach of contract.

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Advantages of Partnership Firm
1. Easy Formation
Compared to other forms of business such as a Company or an LLP, it is easy to start a partnership firm.
There are very few legal formalities that are involved. In addition, the cost of formation is also low.
2. Pooling of Resources
Two or more persons who are having different sets of resources can join each other and start a business
through a partnership firm. Therefore, a partnership firm allows the pooling of resources.
For example, if Mr. A wants to invest his money into a business and Mr. B possesses excellent management
skills, they can start a partnership together by combining the resources that they are having i.e., capital and
skills.
3. Flexibility
These firms are very flexible as business decisions can be taken easily and quickly. There is no need of
passing a resolution as in the case of a company.
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4. Access to Funds
It is easy for a partnership firm to raise funds from banks and other financial institutions as compared to a
Sole Proprietorship. This is because a partnership is a ‘collection of partners’ and therefore, it enjoys high
credibility.
5. Division of Work
In a partnership firm, work can be divided amongst different partners based on their skills and expertise.
Therefore, it brings the benefits of specialization and work efficiency.
6. Closure
Just like it is easy to start a partnership firm, the process of closure or winding up is also simple. The process
involves very few legal formalities and takes less time.
7. Less Compliance Cost
In comparison to a company, the compliance cost of a partnership firm is very low. A partnership firm
doesn’t need to get its accounts audited by a chartered accountant. In addition to this, MCA compliances are
not required to be done, unlike companies.
However, it shall file an income tax return every year.

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Disadvantages of Partnership Firm
1. Unlimited Liability
The liability of all the partners in a Partnership Firm is unlimited. Therefore, in the event
of losses, third parties can raise a claim against the personal assets of partners if the assets
of the firm are not sufficient to pay off the debts of the firm.
2. Limited Chances of Expansion
It can have a maximum of 50 partners. This restricts the growth and expansion of
partnership firms to a limited extent.
Also, modern-day startups issue securities with different features for meeting their
financial and working capital requirements. For example, debentures, convertible notes,
preference shares, etc. A partnership firm cannot issue these securities.
Further, companies today provide the option of ESOP i.e., Employee Stock Option Plan to
its employees to retain them, but a partnership firm cannot provide such benefits to its
employees.

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3. Undesirable for Investment
Angel investors and venture capitalists do not consider a partnership firm as a lucrative
investment option. This is because if a person wants to hold an interest in a partnership
firm, he shall become a partner, and generally angel investors and venture capitalists do
not want to engage as partners and run the show.
In addition, foreign citizens and entities also consider partnership firms undesirable for
Foreign Direct Investment (FDI) as the records of a partnership firm are not available in
the public domain.
4. Lack of Transparency
There is a lack of public trust in the case of partnership firms as their data like accounts
are not accessible to the general public. Other forms of organizations such as Companies
and LLPs enjoy higher public trust as their data is available in the public domain.
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5. Higher Tax Liability
The rate of income tax applicable on a partnership firm is higher as compared to a Sole Proprietorship. A flat
tax rate of 30% is levied on the income of the partnership firm.
6. No Perpetual Succession
Unlike a Company, a partnership firm is not a separate legal entity and therefore, it does not continue for a
perpetual period. The dissolution of a partnership can take place on the happening of events like the
retirement of a partner, or the death of a partner. Therefore, there is no perpetual succession in a partnership
firm.
7. Restriction on the Transferability of Interest
There is a restriction on the transferability of interest in a partnership firm. A partner may transfer his interest
in a partnership firm to another person with the prior consent of other partners if required as per terms of the
partnership deed. Therefore, taking an exit from a partnership firm may be a complex process at times.

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Joint Stock Company
Meaning
• A Joint Stock Company is a
type of business structure
that is owned collectively by
all shareholders.
• These shareholders own a
share of the company, which
is freely transferable and the
investors have limited
liability.

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Features of Joint Stock Company
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1. Separate legal entity
A company has its own legal identity, which is separate from its shareholders. It is known
as an artificial person and has its rights. Hence, a shareholder can’t bind a company by his
acts, as the members and company are considered as two different individuals in the eyes
of the law. A company can buy its property, borrow money, incur debts, enter into a
contract or even file a case against its shareholders. In the same way, shareholders can also
sue the company, and they won’t be responsible for the debt taken by the company.

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2. Limited liability
One of the most attractive features of a Joint Stock Business is its limited liability. The
liability of the shareholders will be limited to the value of their shares. For example, if a
company makes a loss and cannot pay its creditors, then shareholders won’t pay anything
more than the value of their shares. Shareholders won’t be personally liable, and their
personal property won’t be used to recover the dues of the company.

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3. Transferable shares
Every shareholder will have the right to transfer their shares without
consulting with other shareholders. The shares of the Joint Stock Business are
listed in the stock exchange, hence, they can easily be purchased or sold
through stock exchanges.

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4. Perpetual Succession
A company and its shareholders are considered as two different individuals,
and it is established by law; hence only the law can bring it to an end. There
won’t be any interruption due to the death, retirement, or insolvency of any
shareholder; it won’t affect the existence of the company.
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5. Common seal
Although a company is considered to have its own separate identity as an
artificial person, it can’t put its signature as a real person. The common seal
acts as the official signature of a company, and it binds the company to its
acts. The law requires every company to have its common seal, and it must be
affixed on all important documents. Any document that doesn’t have the
common seal of a company won’t be binding to the company.

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6. Publication of financial statements
A Joint-stock company should publish its audited financial statement so that
it can provide information to the shareholders about the company’s revenue,
expenses, debt, and profitability.
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7. Separation of ownership and
control
A company will have multiple
shareholders, who will be considered
the owners of the company, but they
won’t be able to take part in day-to-
day activities. Ownership will be
with shareholders, but control will be
in the hands of the board of
directors, who will be elected by
shareholders as their representatives.

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Types of Joint Stock Company
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A. ON THE BASIS OF INCORPORATION
1. Chartered Company
Chartered Company is not formed in present days; they used to be formed before 1844. A
Chartered Company is a company that is incorporated by the king or the head of the state. These
kinds of companies are usually found in countries that have a monarchy; chartered companies used
to have exclusive rights and privileges as they used to come into existence with the help of the
power rooted in the hands of a king. Examples of Chartered companies are the Bank of England,
The East India Company, and the British and South Africa Company.
2. Statutory company
Statutory companies are those that are established by a specific act of the Parliament. Such an
entity’s power, task, and responsibilities are all stated through the act. These kinds of companies
come into existence to carry on some business that is important for a nation.
3. Registered Company
For companies that are incorporated under the Companies Act, its formation and regulations are
governed by the Companies Act.

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B. ON THE BASIS OF OWNERSHIP
1. Government Company
It is a corporation in which the central or state government, or a
combination of the two, owns at least 51% of the stock.
2. Non-Government Company
Private people or institutions own the bulk of the stock.
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C. ON THE BASIS OF LIABILITY
1. Limited Liability Company:
This is the most frequent type of business ownership. The liability is limited to the
value of the shares held by the shareholders.
2. Unlimited Liability Company:
Shareholders’ responsibilities in such a firm include personal property and assets.
3. Company Limited by Guarantee
In the event of liquidation, the shareholders must pay a set amount. The amount is
specified in the Memorandum of Association.

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D. ON THE BASIS OF THE NUMBER OF MEMBERS
1. Public Company:
A publicly traded corporation can have as many members as it wants, in most
cases. Shares of the corporation may be bought and sold at any time. These
businesses can also publicize the issuance of shares or debentures.
2. Private Company:
A private limited company meets the following three requirements: a) it has a
set number of members as determined by the applicable Companies Act; b) it
has restrictions on the transfer of shares; and c) it is not permitted to issue
shares or debentures to the general public.
Merits of Joint Stock Company
1. Large financial resources
There are different types of organizations apart from Joint Stock Companies, namely partnership, and a sole
proprietorship, but only through Joint Stock Company one can accumulate large financial resources. The
reason being a Joint Stock Company is capable of raising funds by issuing shares and debentures which can
be bought by people.
2. Limited liability
Having limited liability encourages people to invest in a company as they will get a share of the profit if the
company grows, but they won’t have to pay anything more than the value of their shares. It also allows the
management of the company to take risks and undertake big operations.
3. Diffused risk
As a company has a large number of shareholders, risk will be borne by all the shareholders; hence the
burden of risk isn’t huge for an individual. It also encourages the investors to invest more, as they won’t be
the only ones who will be taking risks. While the same can’t be said for sole proprietorship or partnership
business.

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4. Scope for growth and expansion
As a company has large financial resources, it can operate on a large scale, and expansion
can be done through issuing new shares and debentures, there’s a huge scope for growth
and expansion.
5. Stability
Perpetual Succession and having a separate legal identity makes a company stable as it
offers continuous existence.
6. Professional management
A Joint Stock Company usually employs experts to manage its business, as there are so
many people whose money is at stake. The board of directors is elected by shareholders as
their representatives, and they are mostly people who have years of experience. Hence, the
company can utilize their specialization in the most effective and efficient manner.
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7. Public Confidence
Joint Stock Company comes into existence through law and is supervised by legal
authorities. Hence, there is no chance for fraud and misconduct. Its accounts are audited
by auditors, and financial statements are published yearly, which helps in creating
confidence in the public about the functionality of the company.
8. Good Investment
Investing in Joint Stock Companies can be a great medium to grow funds, as it is being
supervised by legal authority, professional management uses their skills and knowledge,
and these shares offer limited risk.

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Demerits of Joint Stock Company
1. Conflicts of interest
Conflicts of interest are the most obvious drawback of a Joint Stock Company, as there are
various groups in a company who have different powers, voting rights, and shares. The
decisions of majority shareholders influence the operations and decisions of minority
shareholders might not be considered, which might raise a conflict. Apart from that, there
might be conflicts between shareholders and management as well, which will end up
creating misunderstandings and disputes.
2. Delay in decision making
There are times when a business needs to take a quick decision in order to grab an
opportunity, but in a Joint Stock Company, it’s not possible. This can be one of the biggest
drawbacks of a Joint Stock Company; when all the important decisions are either made by
the board of directors through Annual General meetings, this delay in decision making
might make them lose a big opportunity.
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3. Separation of ownership and control
As shareholders can’t participate in day to day activities of a company, there
is no guarantee that the management is working efficiently.
4. Complex procedure
The formation of a company is a time-consuming, expensive, and as well as
complicated process. There are many legal documents that need to be filled
and submitted to the registrar. The procedure that is required to be followed
to form a company is extremely long; one cannot commence business until
they receive a certificate of incorporation and a certificate to commence
business.

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5. Lack of secrecy
Maintaining secrecy in a Joint Stock Company is difficult, as it is mandatory to publish
financial statements, minutes of meetings, and various reports to the registrar. And every
issue is discussed in the meeting of the board of directors, even employees might leak out
confidential information, so trade secrets can’t be maintained.
6. Corruption and Fraud
Not every Joint Stock Company follows ethical practices; some might present a fake
bright image of their company in order to gain the public’s confidence to attract their
capital. Sometimes a company can even form groups to get a monopoly and have power
over the voting rights and can manipulate the decisions for their selfish reasons.
Cooperatives
A cooperative form of
business organization is a
type of business entity that
is owned and operated by a
group of individuals for
their mutual benefit where
individuals voluntarily
come together to meet their
common economic, social,
and cultural needs.

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features of Cooperatives
1.Voluntary Membership: Members join the cooperative voluntarily, and they
have the freedom to leave the cooperative if they wish.
2.Democratic Control: Each member has equal voting rights, regardless of the
number of shares or capital contributed. Decisions are made democratically,
typically on a one-member-one-vote basis.
3.Limited Interest on Capital: The cooperative usually provides a limited return
on the capital invested by its members. Profit distribution is often based on the
level of participation or patronage.
continuation…
4. Service Motive: Cooperatives are often formed with the primary objective
of providing services to their members rather than maximizing profits.
5. Open Membership: Cooperatives are generally open to all individuals
willing to use their services and accept the responsibilities of membership.
6. Mutual Assistance: Members work together to achieve common goals,
and there is a spirit of mutual assistance and cooperation.

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Types of Cooperatives
1.Producer Cooperatives: Formed by producers to collectively
process, market, or sell their products.
continuation…
2. Consumer Cooperatives: Owned and controlled by consumers
who buy goods or services from the cooperative.

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continuation…
3. Worker Cooperatives: Owned and managed by the employees,
who also share in the profits.
continuation…
4. Credit Cooperatives: Provide financial services to members,
such as savings and loans.

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continuation…
5. Housing Cooperatives: Members collectively own and manage
residential property.
Merits of Cooperatives
1.Democratic Management: Members have equal say in decision-
making, fostering a sense of equality and democracy.
2.Stability and Continuity: Cooperatives often have a stable
existence as members are less likely to leave, ensuring continuity.
3.Profit Sharing: Profits are shared among members based on their
level of participation, fostering a sense of ownership.
4.Social Benefits: Cooperatives often contribute to the social and
economic development of the community.
5.Economies of Scale: By pooling resources, cooperatives can
achieve economies of scale in production and marketing.

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Demerits of Cooperatives
1.Limited Capital: Capital generation may be limited as members
might be reluctant to invest more due to the limited return.
2.Potential for Conflict: Democratic decision-making can lead to
conflicts among members.
3.Limited Professional Management: Lack of professional
management expertise may hinder the efficient operation of the
cooperative.
4.Risk of Exploitation: In some cases, there may be a risk of
members exploiting the cooperative for personal gain.
5.Limited Access to Capital Markets: Cooperatives may face
challenges in accessing capital markets compared to other forms of
business.