Classification of Private

Organization

By:- Ranjana Singh

 Forms of Private Sector Enterprises

Individual/Sole Proprietorship
Joint Hindu Family
Partnership
Cooperative Society
Company
 Forms of Private Business Organization

Individual Ownership Collective Ownership

(Association of Persons

Sole Proprietor Partnership Joint Hindu Family Cooperative Society Company

 Making Choice of Proper form of
Organization
Nature of Business- Trading, Manufacturing, Commercial
or Service.
Expected life span of business
Requirements of capital for the business and the available
sources of finance.
Expected Volume of business.
Area of Operations- whether local, national or
international.
Extent of government control and the freedom desired by
the entrepreneurs.
Continued

Legal formalities for establishing and organizing

the business.
Rights and responsibilities (including personal
liability) of the owners .
Opportunities and requirements for decision
making.
Tax advantage under different types of
organization.
 Sole Proprietorship

Features
1. Individual Ownership
2. Individual Management & Control
3. Individual Financing
4. Individual Accountability
5. Unlimited Liability
6. Minimum Government Regulations
7. Business secrecy
8. Quick decision
9. Flexibility
10. Personal touch
 Disadvantages
1. Limited resources
2. Limited Managerial Ability
3. Unlimited liability
4. Uncertain future
5. No economies of large scale and specialization.
 The Joint Hindu Family Firm

Governed by Hindu Law.

If the business set-up by a person is carried on by male

members of his family after his death, it is case of JHF/HUF.

Meaning of HUF: According to Hindu Law

A family which consists of all persons lineally descended
from a common ancestor and include their wives and
unmarried daughters

The son, grandson and great grandson become joint owners of

ancestral property by reason of their birth in the family.
Continued

They are called Coparceners-in-interest.

Business is ordinarily managed by the father or other senior

member of the family and he is called Karta or Manager.

JHF can enter into partnership with others but outsiders can
not become the members of Joint Hindu Family.

Death of a member does not dissolve the business.

Dissolution is only possible through mutual agreement.

 Types of JHF Business

(1) Mitakshara: Only male members born in the family are

eligible to get equal share in the property of the family. This
system exists in India except West Bengal and Assam.

(2) Dayabhagha: Under this both male and female members

get the share in the property of family. This form exists in
West Bengal and Assam. From June 22, 1994, the female
members also have the co-parcenercy right in Maharashtra.
 Evaluation

This form of business organizations losing

ground with the gradual end of the Joint Hindu
Family System.

Being replaced by Sole proprietorship or

Partnership Firm.
 Partnership Organisation

Governed by Partnership Act 1932.

According to Section 4 of the Indian Partnership Act,

1932:-
Partnership is the relation between two or more
persons who have agreed to share the profits of a
business carried on by all or any of them acting for
all.
 Essential Character
Profit motive
Existence of Business (Business which are included
in Sec 2(b) of Companies Act)
Principal Agent Relationship
Two or more Persons
Agreement (Section 5, Partnership is Voluntary and
Contractual in nature)
Unlimited Liability
Joint Ownership and Control
Non Transferability of the Shares
Duration of the Partnership
 Partnership Deed
Important points to be covered:-
1. The nature of business
2. Name of business and the town and place where
it will be carried on.
3. Amount of capital to be contributed by each
partner
4. Whether loans will be accepted from partners &
at which rate.
5. Duties, powers and obligations of all the
partners.
6. Method of preparing accounts and management
for audit.
7. Private drawings and interest charged on it.
8. Retirement and dues to be paid on retirement etc.
 Types of Partnership:-

General Partnership (Partnership at will &

Particular Partnership)

Limited Partnership (Not found in India and

is found in European Countries and USA)
 Types of Partners

Active Partners
Sleeping Partners/Dormant Partners
Nominal Partners
Partners in profit only
Partner by estoppel/holding out
Minor Partner(Section 30 of Indian
Partnership Act 1932)