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Forms of Ownerships

ByMr. Pathan A. B.

LecturerMGM`s Polytechnic, Aurangabad.

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Forms of Ownerships

Ownership of an organization gets decide on the base of capital.

To start a business enterprise the most important thing is the capital.

Depending upon capital provided to an organization, there are some types of ownership.

1. Single ownership (Private Undertaking)2. Partnership3. Joint Stock Companies4. Cooperative organization.5. State and central Government owned.

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1. Single ownership• It is called a single ownership when an individual

exercises and enjoys these rights in his own interest.

• A business owned by one man is called single ownership.

• Single ownership does well for those enterprises which little capital and lend themselves readily o control by one person.

• Example:-printing press, auto repair shop, wood working plants, a small fabrication shop, small

engineering firms etc.

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1.1 Advantages• Easy to establish as it does not require to

complete any legal formality.• Expenses in starting the business are minimal.• Owner is free to make all decisions.• It is simple, easy to operate and extremely

flexible.• Owner enjoys all the profits.• Owner can keep secrecy as regards the raw

material used, method of manufacture etc.

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1.2 Disadvantages• The owner is liable for all obligation and debts of

the business.• The business may not be successful if the owner

has limited money, lacks ability and necessary experience to run the business.

• If the business fails, creditors can take the personal property as well as business property of the owner to settle their claims.

• There is limited opportunity for employees as regards monetary rewards such as profit sharing, bonuses etc. and promotions.

• Single ownership firm has limited life.

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1.3 Applications• For retail trades, service concerns and small

engineering firms which require relatively small capital to start with and to run.

• Business which do not involve high risks of failure.

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2. Partnership• Partnership may be defined as the relation

between persons who have agreed to share the profits of a business carried out by all or any of them acting for all.

• They put together their property, ability, skill, knowledge etc. for the purpose of making profits.

• Duties of partners are:- 1. Partners should be just and faithful to one

another.2. cooperate and accommodate each other3. respect the views of one another4. have confidence in each other and better mutual

understanding.

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2.1 Advantages• Large capital is available to the firm.• The firm possesses much better talents, judgment

and skills.• Incentive of success is high.• Partners have full control of the business and

possess full rights to all profits.• Partnership firms can borrow money quite easily

from the banks.• For all losses, there are more than one person to

share them.

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2.2 Disadvantages• Danger of disagreement and distrust among the

partners.• Authority being divided among the partners.• All partners suffer because of the wrong steps

taken by one person.• Partnership lacks permanence and stability; it has

limited life.• Partnership may dissolve if a partner dies.

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2.3 Applications• Law firms• Retail trade organization.• Medical clinics• Small engineering firms

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3. Joint Stock Company• A joint stock company is an Association of individuals

called share holders who join together for profit and agree to supply capital divided into shares that are transferable for carrying on a specific business.

• A joint stock company consists of more than twenty persons for carrying any business other than the banking business.

• These persons give a name to the company, mention the purpose for which it is formed and state the nature and the amount of capital to be issued etc. and submit the proposal to the Registrar of Companies.

• As the registrar issues a certificate in this connection, the company starts operating.

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3.1 Types of joint stock company1. Private limited company2. Public limited company1. Private limited company:-• Capital is collected from the private partners.• Restricts the right to transfer shares, avoids

public to take up shares.• Minimum members involved are 2 and maximum

are 50.• Less documentation is involved.• The company need not circulate the Balance

sheet, profit and loss account etc. among its members but it should hold its annual general meeting & place financial statements in the meeting.

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2. Public Limited Company• Capital is collected from the public by issuing

shares having small face value (Rs. 100, 50, 20).• Minimum members involved are 7 and maximum

is no limit.• Directors of the company are subject to rotation.• It has to send financial statements to all members

and to the Registrar.

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3.2 Advantages • A huge sum of money can be raised.• Shares are transferable.• Company`s life is not affected by the death of

any share holders.• Risk of loss is divided among many share holders.

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3.3 Disadvantages • Company is managed by big share holders only.• People can commit frauds with the company.• Divided responsibility.• Team spirits with which partnership works, is

lacking in a joint stock company.• It is difficult to maintain secrecy as in partnership.

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3.4 Applications

• Steel mills• Fertiliser factories• Engineering concern etc.

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4. Cooperative Organization• Cooperative society is a commercial enterprise

owned and managed by and for the benefit of customers or members of the same enterprise.

• Members pay fees or buy shares of the cooperative and profits are periodically redistributed to them.

• In a cooperative, there are share holders, board of directors and the elected officers similar to the corporation.

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4.1 Types of co-operative societies

1. Consumers Co-operative Society.2. Producers Co-operative Society.3. Housing Co-operative Society.4. Co-operative Marketing Society.5. Co-operative Credit Society.6. Co-operative Farming Society.

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4.2 Advantages• Daily necessities of life can be made available at

lower rates.• No one person can make huge profits.• Common man is benefited by cooperatives.• Goods required can be purchased directly from

the manufacturers and therefore can be sold at less rates.

• It promotes cooperation, mutual assistance and the idea of self help.

• Black marketing are eliminated.

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4.3 Disadvantages• Members who are in position may try to take

personal advantage.• Conflict may arise among the members on the

issue of sharing responsibility and enjoying authorities.

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5.State and central Government

owned.• It is also called Public Sector.• A public enterprise owned and managed by the

state.• Public enterprises are controlled and operated by

the Government to produce and supply goods and services required by the society.

• There is no death of capital.• Business expansion is not difficult.• Promote rapid economic development.

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5.1 Advantages• It helps in the growth of those industries which

require huge amount of capital.• It encourages industrial growth of under

developed regions in the country.• Profits earned by the public sector may be used

for the general welfare of the community.• Capital, raw material, fuel, power and transport

are easily made available to them.

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5.2 Disadvantages• Heavy administrative expenses.• Workers avoid work.• Delay in decision making.• More wastage and inefficiency is there.• Too much interference by the Government and

politicians.