Business Studies [Chapter-wise Suggestions]

For Class 11

Chapter - 2: Forms of Business Organization

1. Who elects B.O.D of Joint Stock Company?

Ans: Shareholders elect the Board of Directors of a Joint Stock Company.
2. In which form of business profits are not shared?
Ans: In a sole proprietorship, the owner is solely responsible for all profits, losses, assets, and liabilities.
3. Where a business act as an artificial person what act as an official signature
Ans: As a substitute for the company's signature, the common seal with the company's name engraved on
it is utilised.
4. Write the names of systems which govern membership in Joint Hindu Family business
Ans: 1. The Hindu Undivided Family (HUF) is governed by two schools of Hindu law: Mitakshara Law (Law
of Mitakshara) Except for Bengal and Assam, the Mitakshara Law extends across India.
2. The Dayabhaga Law applies to Bengalis and Assamese who live in the states of Bengal and Assam,
as well as other regions of the world.
5. Enumerate the two conditions necessary for formation of Joint Hindu Family business.
Ans: 1. At least two familial members
2. They will inherit ancestral property
6. What is the minimum no. of persons required to form a co-operative society?
Ans: A minimum of ten people are necessary to form a cooperative (10).
7. Explain the meaning of unlimited liability.
Ans: Unlimited liability refers to a firm's indefinite ability to fulfil its debts or commitments, which extends
beyond the firm's owner(s), partners, or shareholders' investments to their personal assets. An unlimited
liability company, such as a sole proprietorship or a general partnership, assumes this level of risk.
8. Identify a company which has no restriction of on transfer of shares.
Ans: There are no restrictions on the transfer of shares in a public business.
9. Name two types of business in which sole proprietorship is very suitable.
Ans: Tutorial classes and a small cell phone repair company are excellent examples of sole proprietorship
businesses.
10. Write the name of form of business organisation found only in India
Ans: A joint Hindu family business is a type of business that can only be found in India.
11. Name the person who manages a Joint Hindu Family business
Ans: Karta is the person in charge of a Hindu joint family enterprise.
12. Partners in affirm has different roles and liabilities, Identify and explain the type of partner in a
firm from the given examples:
a) Rama is a partner in a business who has no actual interest in business trade or its profits but she
is Paid fee by the firm for lending its name to firm.
Ans: Rama is a nominal partner in a firm who has no genuine interest in the firm's trade or earnings, but is
paid a fee by the firm for providing its name to the firm.

b) In Ram Hari & co. Ltd, Ram & Hari declare Gopal as a partner with knowing that Gopal remain silent
then Gopal will be liable to third parties for any loss.

Ans: Ram & Hari declare Gopal as a partner in Ram Hari & Co. Ltd, knowing that if Gopal remains silent,
Gopal will be accountable to third parties for any losses.
c) What type of partner is Geeta if she only contribute capital, share profit and loss if any?

Ans: Geeta is a sleeping partner if she merely contributes capital and shares profit and loss if any.

d) What type of patner is Giri in Ram Hari & co. w here he is an outsider but represent himself as a
partner.
Ans: Giri in Ram Hari & co, where he is an outsider but represent himself as a partner-Partner by Estoppel

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13. Explain the forms: sole proprietorship, H.U.F & Joint stock company on the basis of following
points: Liability, members & Continuity.

Ans: The difference between sole proprietorship, H.U.F & Joint stock company is given below:

Basis Sole Proprietorship HUF Joint Stock Company

Karta's culpability is
Members' responsibility is
boundless, and his
restricted to the amount of
personal property is
money they contribute to a
used to pay off his
corporation. Members can
Liability Unlimited Liability debts. Coparceners'
only be requested to
liability is restricted to
contribute to the loss up to
their part of the risk,
the amount of unpaid share
which is precisely
that they own.
defined and precise.

In a public corporation, the

To start a joint Hindu minimum number of
family business, at employees is seven, and
least two family the maximum number is
Member Owner is the member
members are required. unlimited; in a private firm,
At the time of birth, one the minimum number of
becomes a member. employees is two, and the
maximum number is 200.

Death, insanity, It will only be

incarceration, decommissioned after a
Company operations
physical illness, and precise procedure known as
are not halted, and
Continuity bankruptcy all have winding up is finished.
business continuity is
an impact on a firm Members may come and
not jeopardised.
and can lead to its leave, but the company
closure. remains in existence.

14. Explain the concept of mutual agency in partnership with suitable example.
Ans: The legal relationship between participants in a partnership in which each has authorisation powers
and the authority to engage the partnership into business contracts is known as mutual agency. To put it
another way, each partnership member has the capacity to make business decisions that commit or tie the
partnership as a whole to a business deal with a third party or entity. Even though the partnership agreement
expressly forbids it, a grocery store partner who purchases a delivery vehicle makes a legally binding contract
in the name of the partnership. On the other hand, if a law firm partner bought a snowmobile for the firm,
such behaviour would be illegal.

15. What is meant by partner by estoppel? OR Mr. Singh is in ‘lighting’ business for the post 15 years.
To help his friend, Mr Yadav, a beginner he projected himself as a partner before Mohd. Abdul, a
whole sale dealer of fancy lights. Mohd. Abdul gave Mr. Yadav the stock without asking for payment
and gave him credit limit of one month. Will Mr. Singh be liable to Md. Abdul if Mr. Yadav does not
pay him on time? Classify Mr. Singh’s role here along with an explanation
Ans: Partner by Estoppel is a legal term that refers to a legally binding partnership that can exist even though
there is no formal partnership agreement in place. A person who advertises himself or herself as a partner in
a firm through conduct or words, or enables himself or herself to be represented as such, is accountable for

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the credit or loans received by the firm on the basis of such representation. Also known as partnership
presumption. The partner does not contribute to the capital or administration of the company, yet his
responsibility is limitless.
16. What is secret partner?
Ans: A secret partner is a person or partner who is not publicly known in a venture or business. He contributes
money to the cause. He's a part of the management team, but only behind closed doors. He also shares in
the profits and losses of the firm. His, and others', responsibilities are infinite.
17. Write a short note on producer co-operative society.
Ans: Producers' Cooperative Societies were formed to safeguard the interests of small farmers. Producers
interested in obtaining inputs for the creation of items to meet consumer demand are among the members.
Profits are divided based on their contributions to the society's overall pool of products produced or sold.
18. Explain a co-operative organisation in democratic setup.
Ans: A cooperative society is a voluntary group of people who get together for the common good of its
members. The cooperative society is governed by the premise of "one man, one vote." Each member has
the same number of votes. As a result, democratic values govern cooperative society.
19. Shiv, Anandi & John were partners John died in a car accident Both Shiv & Anandi decided to
admit his son Ryan who was 16 years old as partner. Can they do so? Justify.
Ans: Yes, they can admit Ryan as a partner to the partnership firm's advantages with the permission of the
partners. A minor is a person who is under the age of eighteen. Because a minor is incapable of forming a
legally binding contract. He is unable to become a partner in a firm. A minor can, however, be added to the
advantages of an established partnership business with the agreement of all other partners. It's unrealistic to
expect him to absorb the losses. His responsibility will be limited to the amount of money he has put into the
business. He will be unable to engage fully in the running of the company.
20. Differentiate between private co. and public company.

Ans: Difference between private company and public company are as following:

Basis for Comparison Public Company Private Company

A publicly traded firm that is owned a privately held and traded

Meaning
and exchanged by the general public. corporation

Minimum member 7 2

Maximum Member unlimited 200

Minimum Director 3 2

Suffix Limited Private limited

Following receipt of a certificate of

Following receipt of the
Start of Business incorporation and a certificate of
certificate of incorporation
company start-up,

Statutory Meeting Compulsory Optional

Issue of Prospectus/
Statement in lieu of Obligatory Not required
Prospectus

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 Public Subscription Allowed Not allowed

2 members must present

Quorum at AGM 5 members must present in person
in person

Transfer of shares Free Restricted

21. Akriti, Sonam & Supreeti were friends who started a partnership business. They did not get their
firm registered as it was optional. Soon, Sonam & Supreeti started having conflicts. Sonam wanted
to approach a lawyer. If you were a lawyer then how would you guide her? OR Mangal, Sazia &
Suqhbeer Singh wish to start a business in partnership. They want to make a partnership deed,
suggest what aspects of the deed should be included in it?
Ans: The term "partnership" refers to a relationship between people who have agreed to split the profits from
a firm that is run by all of them or by one of them acting on behalf of all of them. Although firm registration is
optional, a partnership deed might be produced to avoid problems between partners. The partnership deed
is a written agreement that contains the rules and conditions that govern the partnership.

A partnership deed generally has the following elements:

• Firm name • Nature of company and location of operation • Duration of business • Each partner's
investment • Profit and loss distribution• The partners' responsibilities and obligations • The partners' salaries
and withdrawals • The terms regulating a partner's admission, retirement, and expulsion

22. Explain limitations of Joint Stock Company.

Ans: The following are the restrictions:
• When ownership as well as management are separated, there is a lack of effort and personal commitment
on the part of the company's executives.

• A company's information is periodically given to the Registrar of Companies, and therefore information is
available to the general public. This restricts a company's operational flexibility and wastes a significant
amount of time, effort, and money.

• Communication and acceptance of various ideas to top, middle, and lower level management may cause
delays in not just making choices but also carrying them out.

• The Board of Directors is made up of the company's owners, the shareholders.

23. Which form of business is suitable for following types of business and why?
(a) Beauty Parlour
Ans: Sole Proprietorship for a Beauty Salon. Created and operated in a simple and cost-effective manner.
On his or her personal tax return, the owner declares profit or loss.

(b) Coaching Centre for science students

Ans: Partnership with a science coaching centre. It's easy to make and run, and it's cheap. On their personal
tax returns, partners record their share of profit or loss.

(c) Hotel
Ans: Joint Stock Companies in the Hotel Industry The limitation on their owners' personal liability for company
debts and court judgements against the firm is the major aspect of LLCs and corporations that attracts small
enterprises. Another issue to consider is income taxes: you can establish up an LLC or a corporation to take
advantage of lower tax rates. Furthermore, an LLC or corporation may be able to offer a variety of fringe
benefits to its employees (including the owners) and deduct the cost as a business expense.

(d) Shopping mall

Ans: JSCs (joint stock companies) are shopping malls. Owners' personal liability for commercial debts is
limited.

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(e) Restaurant
Ans: Sole proprietorship of a restaurant. Created and operated in a simple and cost-effective manner. On
his or her personal tax return, the owner declares profit or loss.

(f) Small repair business

Ans: Sole Proprietorship for a small repair business. Created and operated in a simple and cost-effective
manner. On his or her personal tax return, the owner declares profit or loss.
24. In what type of business, individuals associate voluntarily for profit, having capital dividend into
transferable shares, the ownership of which is the condition of membership? Explain with features
Ans: A joint stock company is a voluntary group of people founded for the purpose of carrying out profit-
making business activities. It has a different legal position from its members and a capital structure that is
divided into transferable shares. A corporation is a legal entity that possesses its own legal identity, perpetual
succession, and common seal. The shareholders are the company's owners, and the Board of Directors is
the company's top management body, which is elected by the shareholders.

The company's capital is divided into smaller units called "shares," which can be freely transferred from one
shareholder to another (except in a private company). The following are the characteristics of a joint stock
company:
• A corporation is a fictitious person. It is a legal creation that exists independently of its members.

• A corporation acquires its own legal personality. The business and its owners are not considered one and
the same by the law.

• Starting a business is a time-consuming, expensive, and difficult process. It is necessary for businesses to
be incorporated.

• It will only be decommissioned after a specialised procedure known as winding up is finished. Members
may come and leave, but the company remains in existence.

• A company's affairs are managed and controlled by the Board of Directors, which appoints top management
for corporate operations.

• A company may or may not have a common seal.

• The risk of a company's losses is shared by all shareholders.

25. If registration is optional, why do partnership firms willingly go through this legal formality?
Explain the reason with procedure to get them registered.
Ans: The registration of a partnership firm is optional. However, it is preferable to have a formal agreement
to avoid problems between partners. The following are the implications of a firm's failure to register:
I. A partner in an unregistered firm cannot sue the firm or other partners;

Ii. The firm cannot sue third parties; and

iii. The firm cannot bring a case against the partners.

The partnership deed is a written agreement that contains the rules and conditions that govern the
partnership.

The following elements are usually included in a partnership deed:

• Name of firm • Nature of business and location of business • Duration of business • Investment made by
each partner • Profit and loss distribution • Partners' duties and obligations • Salaries and withdrawals of
partners • Terms governing admission, retirement, and expulsion of a partner • Interest on capital and interest
on drawings • Procedure for dissolution of a partnership

Firm registration procedure:

1. Submit an application to the Registrar of Firms in the specified form. The following information should be
included in the application:

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• The firm's name • its location • the names of other locations where the firm does business • the date each partner
joined the firm • the partners' names and addresses • the duration of the relationship All of the partners should
sign this application.

2. Make a fee deposit with the Registrar of Firms.

3. Following approval, the Registrar will enter the firm into the register of firms and provide a certificate of
registration.
26. Who have equal ownership right over the property of an ancestor? Highlight with its essential
characteristics.
Ans: A Joint Hindu Family is a type of organisation in which the members of the Hindu Undivided Family own
and operate the business (HUF). Membership in the company is based on birth in a certain family, and three
generations can be members. The eldest member of the family, known as karta, is in charge of the family's
company. Co-parceners are members of a Joint Hindu Family Business who have equal ownership rights
over an ancestor's property.

The following are the characteristics of a joint Hindu family business:

• There is no need for an agreement because membership is by birth.

• All members, excluding the karta, are only liable for their part of the business's co-parcenery property. The
liability of the karta is limitless.

• The family business is controlled by Karta, and his decisions are binding on everybody.

• The business continues even after Karta's death, as the next eldest son becomes Karta.
27. Why cooperative forms of organisation are formed? Explain various types of cooperative
societies.
Ans: A cooperative society is a voluntary group of people who get together for the common good of its
members. They are driven by a desire to protect their economic interests against potential abuse by
middlemen who are just out to make more money. The procedure of forming a cooperative organisation is
straightforward, and all that is required is the approval of at least ten adult individuals. The capital of a society
is raised by issuing shares to its members. Following its registration, the society gains a unique legal identity.

Consumer Cooperative Societies are one type of cooperative society.

 It was established to safeguard the interests of consumers.

 The society aims to eliminate middlemen in order to achieve operational efficiencies. It buys goods in
bulk directly from wholesalers and sells them to members.

 Profits are distributed based on either capital contributions to the society or individual member
purchases.

 Producers' Cooperative Societies are a type of producer cooperative society.

 It was created to protect the interests of small farmers.

 Producers seeking inputs for the creation of commodities to meet consumer wants make up
the members.

 Profits are dispersed based on their contributions to the total pool of goods produced or sold
by the society.

 Marketing Cooperative Societies This organisation was founded to assist small producers in
selling their goods.

 The members are producers who want to get fair pricing for their goods.

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  It combines the production of individual members and engages in marketing operations such
as shipping, storage, packaging, and so on in order to sell the items at the highest possible
price. Profits are distributed according on how much each participant contributed.

 Farmers' Cooperative Societies are founded to defend farmers' interests by offering superior
inputs at a fair cost.

 Members are farmers who want to take up farming activities together.

 The goal is to reap the benefits of large-scale farming while increasing production. Improves
yield and returns to farmers while also addressing the issues that come with farming on
fragmented land holdings.

 Cooperative Credit Societies: It was founded to provide members with quick credit on
affordable terms.

 The members are those who are looking for financial assistance in the form of loans.

 The goal of such organisations is to safeguard members from being exploited by lenders who
charge exorbitant interest rates on loans.

 Cooperative Housing Societies are a type of cooperative housing organisation.

 It was created to assist low-income people in building dwellings at an affordable cost.

 People who want to get a cheaper place to live make up the members of these societies.

 The goal is to solve the members' housing concerns by building houses and allowing them to
pay in instalments.

28. Dhirubhai Chaurasiya operates a textile business. His family is joint and has a lot of ancestral
property. All the 15 family members are a part of this business. He is the eldest male member in the
family so he heads the business. He is liable to all the creditors of the business as he is the decision
maker. Dhirubhai’s grandson has just born a few days ago and he is also the member of the business.
(a) Which form of business is being undertaken by Dhirubhai Chaurasiya?
Ans: Dhirubhai Chaurasiya is involved in a joint Hindu family business.

(b) Identify the features of this form of business based on the information given.
Ans: The following are the features of a joint Hindu family company based on the previous information:

• As 15 family members are involved in the business and have a lot of ancestral property, there should be at
least two individuals in the family and ancestral property to be inherited by them.

• Except for the karta, all members' responsibility is restricted to their share of co-parcenery property. The
karta has unrestricted liability to all business creditors since he is the decision maker.

(c) Textile business is part of which type of industry according to you?

Ans: Textile business is part of Agro based industries.
29. 'Reva Chemicals' is a partnership firm. Sona and Mona one two partners in this firm. It is recorded
in the Partnership Deed that Sona's liability is unlimited, whereas Mona's is limited. Sona wants to
set up the Anti-Pollution plant in his factory, but Mona does not let him do so. Almost all the
transactions of this firm are done through the internet. The firm Sells its goods to other Business
units only. The firm gets its Research and Development work done by another firm, who is a specialist
of such work.
i. Describe the type of partnership.
Ans: It's a limited partnership in which at least one partner's liability is limitless, but the others may have
limited liability. Limited partners have no management powers and are unaffected by the firm's or other
partners' activities. A partnership of this nature must be registered.

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ii. identify the two values being overlooked.
Ans: The following are the two ideals that are being overlooked:
• Government rules are being broken;

• The social responsibility clause is not being followed.

iii. Name the type-business being done by the firm

Ans: It is a B2B (Business to Business) transaction. Short for business-to-business electronic commerce,
B2B e-commerce (sometimes written as e-Commerce, e-Commerce, or similar variants) is the sale of items
or services between businesses over the internet using an online sales portal. In general, it is utilised to help
businesses become more efficient. Instead of manually processing orders over the phone or by e-mail,
ecommerce allows orders to be processed digitally.
30. Ravi, Pradeep, Satyender and Dharmender are partners in a partnership firm. Ravi and Satyender
take active part in the operation of business whereas Pradeep has contributed in Capital but do not
take part in day to day activities of the business. Dharmender is a nominal partner. All four make
partnership for a specified time period and also make written agreement to govern the partnership
but they does not get the firm registered.
a. What is meant by nominal partner?
Ans: A nominal partner is one who permits a firm to use his or her name. He neither contributes to the capital
nor participates in the administration of the company. He usually does not share profits or losses, and his
liability is infinite.

b. Which type of partnership is there between the partners in above?

Ans: The partners have formed a general partnership. In a general partnership, the partners' responsibility
is limitless and joint. The partners have the right to participate in the firm's management, and their actions
are binding on both the partners and the firm.

c. What is written agreement between the partners called?

Ans: The partnership deed is a written agreement between the partners. The partnership deed is a written
agreement that contains the rules and conditions that govern the partnership.

d. What type of partners Pradeep and Ravi are?

Ans: Ravi is a hands-on partner. Active partners are individuals who actively participate in the firm's business
on behalf of their fellow partners. They invest money and participate in the operation of the company. He
shares in the partnership's profit and loss. His legal responsibility is limitless.
Pradeep is my sleeping companion. Sleeping partners are those who do not participate in the day-to-day
operations of the company. They invest capital but do not participate in the management of the company. He
shares in the partnership's profit and loss. His legal responsibility is limitless.

e. Give two merits of getting firm registered.

Ans: The following are two advantages of registering a business:
• An unregistered firm's partner cannot sue the firm or other partners;
• The firm cannot sue third parties.
31. Explain different types of Partnership on the basis of duration and liability?
Ans: Types of Partnership are as follows:

On the basis of duration: It can endure as long as the partners want it to, and it will terminate when one of
them gives written notice of his or her intention to leave the relationship. A partnership created for the aim of
completing a specified project, such as the construction of a structure or the performance of a time-limited
activity.

On the basis of Liability: Partners have unlimited and joint liability; they have the right to participate in the
firm's management, and their acts bind them as well as the firm.
The limited partners have no authority over the firm or the other partners, and their acts have no legal
consequences for the firm or the other partners. It is necessary to register such a partnership.