Revision: Forms of Business Organisations Commerce ISC (Commerce) Class 11 CISCE

1. A sole proprietorship, also known as a solo tradership, individual entrepreneurship, or proprietorship, is a type of business owned and controlled by one person who is the sole recipient of all earnings or losses and is solely responsible for all risks.
2. The only owner is personally liable indefinitely.
3. All activities are carried out by a single person in a sole proprietorship entity. This sort of sole proprietorship is appropriate for small-scale businesses.
4. Some features of a sole trader are:
   1. Single ownership
   2. No profit sharing
   3. Unlimited liability
   4. No legal formalities to start a business

The sole proprietorship is that form of business ownership that is owned and controlled by a single individual. He receives all the profits and risks all of his property in the success or failure of the enterprise.

• Section 4 of the Indian Partnership Act, 1932, defines partnership as ''Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.'' 
• According to Prof. Handy, "Partnership is the relation existing between persons competent to make contract, who agree to carry on a lawful business in common with a view to earn private gain.

A partnership is a form of business in which two or more persons come together to carry on a business and share its profits and losses as per an agreed-upon partnership deed.

The document containing the partnership agreement among partners is called Partnership Deed.

1. “A Joint Stock Company is a voluntary association of individuals for profit having capital divided into transferable Shares, the ownership of which is the condition on membership.” – Prof. L. H. Haney.
2. “A Company is a person, artificial, invisible, intangible, and existing only in the eyes of the law. Being a mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence.” – Chief Justice Marshal
3. According to The Companies Act 2013, Section 2 (20), the term “Company” means “a Company incorporated under the Companies Act 2013 or any previous Company law.”

According to the Company Act 2013, A public company is a company that is not a private company and has a minimum paid-up capital as may be prescribed by the Act, and has the right to transfer the shares of a company.

• Meaning: A partnership is when two or more people join to run a business and share profits as per a mutual agreement.
• Key Features: Based on agreement, profit-sharing, mutual agency, legal limit of 50 partners, and lawful business only.
• Nature: Treated as separate for accounting, but not legally—partners are personally responsible for the firm’s debts.
• Rights of Partners: Take part in business, share profits, check accounts, get interest on loans, and retire with notice.
• Liabilities: Unlimited; partners must use personal assets if needed and can’t keep personal gains made using the firm’s name/assets.

• Meaning: A written agreement between partners outlining terms—recommended but not compulsory.
• Contents: Includes firm name, partners' details, capital, profit-sharing, interest, salary, etc.
• Purpose: Avoids disputes by clearly defining partners' rights, duties, and liabilities.
• Disputes: Provides rules for admission, retirement, death, and dispute settlement.
• Importance: Ensures smooth functioning, legal clarity, and easy conflict resolution.

• Meaning: A Joint Stock Company is a business organisation where ownership is divided into transferable shares held by shareholders.
• Origin: It emerged during the Industrial Revolution to overcome the limitations of partnerships, such as unlimited liability and limited capital, by raising funds from the public.
• Legal Status: A Joint Stock Company is an artificial legal person with a separate legal identity and perpetual succession, created under company law.
• Merits: It provides benefits like large capital, limited liability, expert management, public confidence, and better scope for expansion.
• Types: Companies can be Chartered, Statutory, or Registered, and further classified as Public, Private, Limited, or Unlimited.