Forms of Business Organizations Quiz

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10 Questions

Sole proprietorship is the most suitable form of business organisation for large corporations.

False

A cooperative society is an example of a form of business organization.

True

Sole proprietors have limited liability, meaning they are not personally responsible for the debts of the business.

False

A sole proprietor is not the owner of the business.

False

In a sole proprietorship, the owner does not need to comply with any legal formalities to start the business.

True

The word 'sole' in 'sole proprietorship' means 'shared'.

False

The sole proprietor has no control over making decisions in the business and needs to seek approval from others.

False

Joint Hindu family business is not one of the forms of business organisations mentioned in the text.

False

According to the law, there is a clear distinction between the sole trader and the business in a sole proprietorship.

False

The death or bankruptcy of the sole proprietor in a sole proprietorship will not have any impact on the continuity of the business.

False

Study Notes

Choosing the Right Form of Business Organisation

  • The choice of business organisation depends on weighing the advantages and disadvantages of each type against one's own requirements.
  • Various forms of business organisations include: sole proprietorship, joint Hindu family business, partnership, cooperative societies, and joint stock company.

Sole Proprietorship

  • Sole proprietorship is the simplest form of business organisation and is suitable for small businesses, especially in their initial years.
  • It is a popular form of business organisation and is common in areas of personalised services and small scale activities.
  • A sole proprietor is the only owner of a business, responsible for all profits and risks.

Characteristics of Sole Proprietorship

  • Formation and closure: easy to start and close a business, with hardly any legal formalities required.
  • Liability: sole proprietors have unlimited liability, making them personally responsible for debts.
  • Sole risk bearer and profit recipient: the sole proprietor bears all the risks of failure and enjoys all the benefits of success.
  • Control: the sole proprietor has absolute control over the business and makes all decisions.
  • No separate entity: the law does not distinguish between the sole trader and the business.
  • Lack of business continuity: the business is affected by the death, insanity, imprisonment, physical ailment, or bankruptcy of the sole proprietor.

Merits of Sole Proprietorship

  • Offers many advantages, including ease of formation and closure, absolute control, and unlimited profit potential.

Test your knowledge on different forms of business organizations like sole proprietorship, partnership, cooperative societies, and more. Learn about the advantages and disadvantages of each type to make an informed decision for your business.

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