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Questions and Answers
What does the term 'business' refer to?
What does the term 'business' refer to?
An organization or enterprising entity engaged in commercial, industrial, or professional activities.
Which of the following is a type of business entity?
Which of the following is a type of business entity?
- Sole Trader
- Corporation
- Partnership
- All of the above (correct)
What is a sole trader?
What is a sole trader?
The simplest and oldest form of business organization, owned by one person.
A sole trader has a division of labor.
A sole trader has a division of labor.
What is one merit of being a sole trader?
What is one merit of being a sole trader?
What is the purpose of the Memorandum of Association (MoA)?
What is the purpose of the Memorandum of Association (MoA)?
What defines a partnership according to the Indian Partnership Act, 1932?
What defines a partnership according to the Indian Partnership Act, 1932?
What is a partnership deed?
What is a partnership deed?
Which of the following is a demerit of partnership?
Which of the following is a demerit of partnership?
What is a corporation?
What is a corporation?
Which of the following is NOT a merit of corporate structure?
Which of the following is NOT a merit of corporate structure?
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Study Notes
Business Types
- Sole Trader: An individual who is the sole owner and operator of the business.
- Merits: Easy to start and close, personal customer contact, prompt decision-making, high degree of flexibility, minimal government interference.
- Demerits: Unlimited liability, no division of labor, more competition.
- Partnership: A group of two or more individuals who agree to share the profits of a business.
- Merits: Easy to form, larger capital availability, division of labor, flexibility.
- Demerits: Difficult to form, limited liability, potential for conflict, limited growth.
- Corporation: A legal entity separate from its owners, with limited liability for shareholders.
- Merits: Limited liability, perpetual existence, access to capital, professional management, transferability of ownership.
- Demerits: Double taxation, complexity and cost, regulatory scrutiny, loss of control.
Corporation Registration
- Steps for Registration: Choosing a company name, obtaining a digital signature certificate and DIN, drafting the company's MoA and AoA, filing registration documents, paying fees, acquiring a certificate of incorporation, applying for PAN and TAN, and opening a bank account.
- Memorandum of Association (MoA): Defines the company's scope and objectives.
- Articles of Association (AoA): Outlines the company's internal management rules.
Partnership Deed
- Partnership Deed: A written agreement outlining the terms and conditions of the partnership, including the roles and responsibilities of each partner.
- Partner Types:
- Active Partner: Actively involved in running the business.
- Sleeping Partner: Contributes capital but does not participate in management.
- Nominal Partner: Acts as a figurehead, without active involvement.
- Partner Types:
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