legal forms of the firm
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Legal Forms of the Firm
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Sole proprietorship
Partnership firm
Joint Stock Company
Cooperative society
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Sole proprietorship
Features:
1. Sole ownership
2. No separate entity of the firm
3. No difference between manager and owner4. Unlimited liability
5. All profits or losses to proprietor
6. Less legal formalities
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Advantages1. Easy and simple formations
2. Direct control
3. Promptness in Decision Making
4. Direct motivation and incentive to work5. Maintenance of secrecy
6. Personal touch with customer
7. Economy in Management
8. Minimum Gov. Regulations
9. Socially significant
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Disadvantages
1. Limited financial resources
2. Limited managerial ability
3. Unlimited liability
4. Uncertainty of continuity5. Diseconomies of small scale
6. Limited growth
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2. Partnership
The Indian Partnership Act, 1932, Section 4
Partnership as an association of two or morepersons who have agreed to share the profits of abusiness which they run together . This businessmay be carried on by all or any one of them
acting for all.
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Features1. More persons
2. Profit and loss sharing
3. Contractual relationships
4. Existence of Lawful Business
5. Utmost good faith and honesty
6. Unlimited Liabilities (LLP- Limited liabilityPartnership)
7. Restrictions on transfer of share
8. Principal agent relationship
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Advantages1. Easy formation2. Larger Financial resources
3. Flexibility
4. Combined abilities and balanced judgement
5. Combined abilities and balanced judgement6. Direct motivation7. Division of risks8. Business secrecy9. Protection of minority interest10. Encouragement of mutual trust and
interdependence
11. Easy dissolution
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Disadvantages Unlimited Liabilities
Limited Resources
Instability
Non Transferability of Interest Lack of Public Confidence
Risk of Implied Authority
Lack of Centralised Authority
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3. Joint Stock Company
It is an artificial person created by Law, with adistinctive name, a common seal and perpetualsuccession of members. It can sue and be suedin its own name.
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Features Artificial legal person
Separate legal entity
Perpetual Succession
Limited liability Common Seal
Transferability of shares
Separation of ownership and management
Incorporated association of persons
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Distinction between Private andPublic Companies Numbers of members Name
Numbers of directors
Article of association
1. Memorandum of association2. Article of association
3. Prospectus
Public subscription
Prospectus Allotment of shares
Commencement of business
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Transfer of shares
Share warrants
Statutory meeting and reports
Directors Managerial remuneration
Index of members
Filing of balance sheet