Question

Arpita used her savings to start a small business in her town. Her business rapidly gained popularity due to its prompt service and the quality of the goods. Arpita is now considering expanding her business, without changing the ownership status.

1. Identify the form of business ownership established by Arpita.  (1)
2. State any one advantage that Arpita enjoyed by using her savings to start the business.  (1)
3. Name any one form of business organisation other than the one formed by Arpita.  (1)
4. Can Arpita invite the public to invest in her business by issuing equity shares? Justify your answer by giving one reason.  (1)

Answer 1

1. Form of business: Sole Proprietorship
2. Advantages of using Arpita’s savings:
   • There is no need to source business finance.
   • Using own funds creates financial discipline/encourages budgeting.
   • There is no stress of repayment/lower financial pressure in the initial stages of the business.
   • There is no need to pay interest to anyone.
   • It increases motivation to succeed as returns/profits will be enjoyed by the owner.
3. Forms of business organisations:
   • Partnership firm
   • Private Ltd. Co.
   • Public Ltd. Co.
4. Arpita cannot invite the public to invest in her business by issuing equity shares.
   Equity shares cannot be issued by a sole proprietorship firm. They can be issued only by a Joint stock Company.