Class 11th Study Material Business Studies PDF

केन्द्रीय शवद्यािय संगठन KENDRIYA VIDYALAYA SANGATHAN शिक्षा एवं प्रशिक्षण का आं चशिक संस्थान, चंडीगढ़ ZONAL INSTITUTE OF EDUCATION AND TRAINING, CHANDIGARH अध्ययन सामग्री / STUDY MATERIAL िैशक्षक सत्र / SESSION – 2023-24...

केन्द्रीय शवद्यािय संगठन KENDRIYA VIDYALAYA SANGATHAN शिक्षा एवं प्रशिक्षण का आं चशिक संस्थान, चंडीगढ़ ZONAL INSTITUTE OF EDUCATION AND TRAINING, CHANDIGARH अध्ययन सामग्री / STUDY MATERIAL िैशक्षक सत्र / SESSION – 2023-24 कक्षा / CLASS – ग्यारहवी ं / XI शवषय / SUBJECT – व्यावसाशयक अध्ययन / BUSINESS STUDIES शवषय कोड / SUBJECT CODE - 054 तैयारकताा - रशव कुमार, सह-प्रशिक्षक (वाशणज्य) PREPARED BY: RAVI KUMAR, TRAINING ASSOCIATE (COMMERCE) शिक्षा एवं प्रशिक्षण का आं चशिक संस्थान, चंडीगढ़ ZONAL INSTITUTE OF EDUCATION AND TRAINING, CHANDIGARH से क्टर 33-सी, चंडीगढ़ / SECTOR-33 C, CHANDIGARH वेबसाइट / WEBSITE : zietchandigarh.kvs.gov.in ई-मेल/ E-MAIL :[email protected] दू रभाष / Phone : 7102-2921841; 2921994  INDEX S. NO. PARTICULARS PAGE NO. 1. SYLLABUS 1 - 14 PART A : FOUNDATIONS OF BUSINESS 2. Ch - 01:NATURE & PURPOSE OF BUSINESS 15 - 27 3. CH - 02: FORMS OF BUSINESS ORGANISATION 28 - 44 4. CH - 03: PUBLIC, PRIVATE AND GLOBAL ENTERPRISES 45 -53 5. CH - 04: BUSINESS SERVICES 54 - 66 6. CH - 05: EMERGING MODES OF BUSINESS 67 - 71 7. CH - 06: SOCIAL RESPONSIBILITY OF BUSINESS AND 72 - 77 BUSINESS ETHICS PART B: FINANCE AND TRADE 8. CH - 07: SOURCES OF BUSINESS FINANCE 78 - 86 9. CH - 08: SMALL BUSINESS AND ENTERPRISES 87 - 93 10. CH - 09: INTERNAL TRADE 94 - 102 11. CH - 10: INTERNATIONAL BUSINESS 103 - 113  SYLLABUS BUSINESS STUDIES (Code No. 054) CLASS – XI (2023-24) Theory: 80 Marks 3 Hours Project: 20 Mark Units Periods Marks Part A: Foundations of Business 1. Nature and Purpose of Business 18 16 2. Forms of Business Organisations 24 3. Public, Private and Global Enterprises 18 14 4. Business Services 18 5. Emerging Modes of Business 10 10 6. Social Responsibility of Business and Business Ethics 12 Total 100 40 Part B: Finance and Trade 7. Sources of Business Finance 30 20 8. Small Business and Enterprises 16 9. Internal Trade 30 20 10. International Business 14 Total 90 40 Project Work (One) 30 20 1 Part A: Foundation of Business:- Concept includes meaning and features Unit 1: Evolution and Fundamentals of Business: Content After going through this unit, the student/ learner would be able to: History of Trade and Commerce in India:  To acquaint the History of Trade & Commerce in India. Indigenous Banking System, Rise of Intermediaries, Transport, Trading Communities: Merchant Corporations, Major Trade Centres, Major Imports and Exports, Position of Indian Sub-Continent in the World Economy. Business – meaning and characteristics.  Understand the meaning of business with special reference to economic and non-economic activities.  Discuss the characteristics of business. Business, profession and employment -  Understand the concept of business, profession and Concept. employment.  Differentiate between business, profession & employment. Objectives of business.  Appreciate the economic and social objectives of business.  Examine the role of profit in business. Classification of business activities -  Understand the broad categories of business activities- Industry and Commerce. industry and commerce. Industry-types: primary, secondary, tertiary  Describe the various types of industries. Meaning and subgroups. Commerce-trade: (types-internal, external;  Discuss the meaning of commerce, trade and auxiliaries to wholesale and retail) and auxiliaries to trade; trade. (banking, insurance, transportation,  Discuss the meaning of different types of trade and warehousing, communication and advertising) – auxiliaries to trade. meaning.  Examine the role of commerce-trade and auxiliaries to trade. Business risk - Concept.  Understand the concept of risk as a special characteristic of business.  Examine the nature and causes of business risks. Unit 2: Forms of Business organizations: Sole Proprietorship - Concept, merits and  List the different forms of business organizations and limitations. understand their meaning.  Identify and explain the concept, merits and limitations of Sole Proprietorship. Partnership-Concept, types, merits and  Identify and explain the concept,merits & limitations of a limitation of partnership, registration of a Partnership firm. partnership firm, partnership deed. Types of  Understand the types of partnership on the basis of duration partners and on the basis of liability.  State the need for registration of a partnership firm.  Discuss types of partners –active, sleeping, secret, nominal 2  and partner by estoppel. Hindu Undivided Family Business - Concept  Understand the concept of Hindu Undivided Family Business. Cooperative Societies - Concept, merits and  Identify and explain the concept, merits and limitations of limitations. Cooperative Societies.  Understand the concept of consumers, producers, marketing, farmers, credit and housing co- operatives. Company - Concept, merits and limitations;  Identify and explain the concept, merits and limitations of Types: Private, Public and One Person private and public companies. Company - Concept  Understand the meaning of one person company.  Distinguish between a private company and a public company. Formation of company - stages, important  Highlight the stages in the formation of a company. documents to be used in formation of a  Discuss the important documents used in the various stages company in the formation of a company. Choice of form of business organization  Distinguish between the various forms of business organisations.  Explain the factors that influence the choice of a suitable form of business organization. Unit 3: Public, Private and Global Enterprises: Public sector and private sector  Develop an understanding of Public sector and private enterprises - Concept sector enterprises. Forms of public sector enterprises:  Identify and explain the features, merits & limitations of Departmental Undertakings, Statutory different forms of public sector enterprises. Corporations and Government Company. Global Enterprises – Feature, Joint Venture  Develop an understanding of global enterprises, public Public Private Partnership - concept private partnership by studying their meaning and features. Unit 4: Business Services Business services - meaning and types.  Understand the meaning & types of business services. Banking: Types of bank accounts - savings,  Discuss the meaning and types of Business service Banking current, recurring, fixed deposit and multiple  Develop an understanding of difference types of bank option deposit account. account. Banking services with particular reference to  Develop an understanding of the different services provided Bank Draft, Bank Overdraft, Cash credit. by banks. E-Banking: meaning, types of digital payments. Insurance - Principles.  Recall the concept of insurance. Types - life, health, fire and marine insurance -  Understand Utmost Good Faith, Insurable Interest, concept. Indemnity, Contribution, Doctrine of Subrogation and Causa Proxima as principles of insurance.  Discuss the meaning of different types of insurance-life, health, fire,marine insurance. 3  Postal Service - Mail, Registered Post,  Understand the utility of different telecom services. Parcel, Speed Post, Courier - meaning. Unit 5: Emerging Modes of Business: E - business: concept, scope and benefits  Give the meaning of e-business.  Discuss the scope of e-business.  Appreciate the benefits of e-business  Distinguish e-business from traditional business. Unit 6: Social Responsibility of Business and Business Ethics: Concept of social responsibility  State the concept of social responsibility. Case of social responsibility  Examine the case for social responsibility. Responsibility towards owners, investors,  Identify the social responsibility towards different interest consumers, employees, government & community. groups. Role of business in environment protection  Appreciate the role of business inenvironment protection. Business Ethics - Concept and Elements  State the concept of business ethics.  Describe the elements of business ethics. Part B: Finance and Trade:- Unit 7: Sources of Business Finance: Concept of business finance.  State the meaning, nature and importance of business finance. Owners’ funds- equity shares, preferences  Classify the various sources of funds into owners’ funds. share, retained earnings.  State the meaning of owners’funds. Borrowed funds: debentures and bonds, loan  State the meaning of borrowed funds. from financial institution and commercial  Discuss the concept of debentures, bonds, loans from banks, public deposits, trade credit, Inter financial institutions and commercial banks, Trade credit and Corporate Deposits (ICD). inter corporate deposits.  Distinguish between owners’ funds and borrowed funds. Unit 8: Small Business and Enterprises: Entrepreneurship Development (ED): Concept,  Understand the concept of Entrepreneurship Characteristics and Need. Development (ED), Intellectual Property Rights. Process of Entrepreneurship Development: Start-up India Scheme, ways to fund start-up. Intellectual Property Rights and Entrepreneurship. Small scale enterprise as defined by MSMED Act  Understand the meaning of small business. 2006 (Micro, Small and Medium Enterprise Development Act). Role of small business in India with special reference to  Discuss the role of small business in India. rural areas. Government schemes and agencies for small scale  Appreciate the various Governmentschemes and industries: National Small Industries Corporation (NSIC) agencies for development of small scale and District Industrial Centre (DIC) with special reference industries. NSIC and DIC with special reference to rural, backward areas. 4  to rural, backward area. Unit 9: Internal Trade: Internal trade - meaning and types services  State the meaning and types of internal trade. rendered by a wholesaler and a retailer.  Appreciate the services of wholesalers and retailers. Types of retail-trade-Itinerant and smallscale  Explain the different types of retail trade. fixed shops retailers. Large scale retailers-Departmental stores,chain  Highlight the distinctive features of departmental stores - concept. stores, chain stores and mail order business. GST (Goods and Services Tax): Conceptand key-  Understand the concept of GST. features Unit 10: International Business: International trade: concept and benefits  Understand the concept of international trade.  Describe the scope of international trade to the nation and business firms. Export trade - Meaning and procedure  State the meaning and objectives of export trade.  Explain the important steps involved in executing export trade. Import Trade - Meaning and procedure  State the meaning and objectives of import trade.  Discuss the important steps involved in executing import trade. Documents involved in International Trade;  Develop an understanding of the various documents used in indent, letter of credit, shipping order, international trade. shipping bills, mate’s receipt (DA/DP)  Identify the specimen of the various documents used in international trade.  Highlight the importance of the documents needed in connection with international trade transactions. World Trade Organization (WTO) meaning  State the meaning of World Trade Organization. and objectives  Discuss the objectives of World Trade Organization in promoting international trade. Unit 11: Project Work As per CBSE Guidelines. 5  Suggested Question Paper Design Business Studies (Code No. 054) Class XI (2023-24) March 2024 Examination Marks: 80 Duration: 3 hrs. S. No. Typology of Questions Marks Percentage 1. Remembering and Understanding: Exhibit memory of previously learned material by recalling facts, terms, basic concepts, and answers. Demonstrate understanding of facts and ideas by organizing, 44 55% comparing, translating, interpreting, giving descriptions and stating main ideas. 2. Applying: Solve problems to new situations by applying acquired knowledge, facts, techniques and rules in a different way. 19 23.75% 3. Analysing, Evaluating and Creating: Examine and break information into parts by identifying motives or causes. Make inferences & find evidence to support generalizations. Present & defend opinions by making judgments about information, validity of ideas, or quality of work based on a set of criteria. 17 21.25% Compile information together in a different way by combining elements in a new pattern or proposing alternative solutions. Total 80 100% 6 Unit 13: Project Work PROJECT WORK IN BUSINESS STUDIES FOR CLASS XI Introduction: The course in Business Studies is introduced at Senior School level to provide students with a sound understanding of the principles and practices bearing in business (trade and industry) as well as their relationship with the society. Business is a dynamic process that brings together technology, natural resources and human initiative in a constantly changing global environment. With the purpose to help them understand the framework within which a business operates, and its interaction with the social, economic, technological and legal environment, the CBSE has introduced Project Work in the Business Studies Syllabus for Classes XI and XII. The projects have been designed to allow students to appreciate that business is an integral component of society and help them develop an understanding of the social and ethical issues concerning them. The project work also aims to empower the teacher to relate all the concepts with what is happening around the world and the student’s surroundings, making them appear more clear and contextual. This will enable the student to enjoy studies and use his free time effectively in observing what’s happening around. By means of Project Work the students are exposed to life beyond textbooks giving them opportunities to refer materials, gather information, analyze it further to obtain relevant information and decide what matter to keep. Objectives: After doing the Project Work in Business Studies, the students will be able to do the following:  develop a practical approach by using modern technologies in the field of business and management;  get an opportunity for exposure to the operational environment in the field of business management and related services;  inculcate important skills of team work, problem solving, time management, information collection, processing, analysing and synthesizing relevant information to derive meaningful conclusions  get involved in the process of research work; demonstrate his or her capabilities while working independently and  make studies an enjoyable experience to cherish. 7  CLASS XI: GUIDELINES FOR TEACHERS This section provides some basic guidelines for the teachers to launch the projects in Business Studies. It is very necessary to interact, support, guide, facilitate and encourage students while assigning projects to them. The teachers must ensure that the project work assigned to the students whether individually or in group are discussed at different stages right from assignment to drafts review and finalization. Students should be facilitated in terms of providing relevant materials or suggesting websites, or obtaining required permissions from business houses, malls etc. for their project. The periods assigned to the Project Work should be suitably spaced throughout the academic session. The teachers MUST ensure that the students actually go through the rigors and enjoy the process of doing the project rather than depending on any readymade material available commercially. The following steps might be followed: 1. Students must take any one topic during the academic session of Class XI. 2. The project may be done in a group or individually. 3. The topic should be assigned after discussion with the students in the class and should then be discussed at every stage of submission of the draft/final project work. 4. The teacher should play the role of a facilitator and should closely supervise the process of project completion. 5. The teachers must ensure that the student’s self- esteem should go up, and he/she should be able to enjoy this process. 6. The project work for each term should culminate in the form of Power Point Presentation/ Exhibition/ Skit before the entire class. This will help in developing ICT and communication skills among them. The teacher should help students to identify any one project from the given topics. I. Project One: Field Visit. The objective of introducing this project among the students is to give a first hand experience to them regarding the different types of business units operating in their surroundings, to observe their features and activities and relate them to the theoretical knowledge given in their text books. The students should select a place of field visit from the following: – (Add more as per local area availability.) 1. Visit to a Handicraft unit. 2. Visit to an Industry. 3. Visit to a Whole sale market (vegetables, fruits, flowers, grains, garments, etc.) 4. Visit to a Departmental store. 5. Visit to a Mall. The following points should be kept in mind while preparing this visit. 1. Select a suitable day free from rush/crowd with lean business hours. 2. The teacher must visit the place first and check out on logistics. It’s better to seekpermission from the concerned business-incharge. 3. Visit to be discussed with the students in advance. They should be encouragedto prepare a worksheet containing points of observation and reporting. 8  4. Students may carry their cameras (at their own risk) with prior permission forcollecting evidence of their observations. 1. Visit to a Handicraft Unit. The purpose of visiting a Handicraft unit is to understand nature and scope of itsbusiness, stake holders involved and other aspects as outlined below. (a) The raw material and the processes used in the business: People / parties/ firms fromwhich they obtain their raw material. (b) The market, the buyers, the middlemen, and the areas covered. (c) The countries towhich exports are made. (d) Mode of payment to workers, suppliers etc. (e) Working conditions. (f) Modernization of the process over a period of time. (g) Facilities, security and training for the staff and workers. (h) Subsidies available/ availed. (i) Any other aspect that the teachers deem fit. 2. Visit to an Industry. The students are required to observe the following: (a) Nature of the business organisation. (b) Determinants for location of business unit. (c) Form of business enterprise: Sole Proprietorship, Partnership, Undivided HinduFamily, Joint Stock Company (a Multinational Company). (d) Different stages of production/process (e) Auxiliaries involved in the process. (f) Workers employed method of wage payment, training programmes and facilitiesavailable. (g) Social responsibilities discharged towards workers, investors, society, environment& government. (h) Levels of management. (i) Code of conduct for employers and employees. (j) Capital structure employed- borrowed v/s owned. (k) Quality control, recycling of defective goods. (l) Subsidies available/availed. (m) Safety Measures employed. (n) Working conditions for labour in observation of Labour Laws. (o) Storage of raw material and finished goods. (p) Transport management for employees, raw material and finished goods. (q) Functioning of various departments and coordination among them (Production,Human Resource, Finance and Marketing) (r) Waste Management. (s) Any other observation. 3. Visit to a whole sale market: vegetables/ fruits/ flowers/ grains/ garments etc. The students are required to observe the following: (a) Sources of merchandise. 9  (b) Local market practices. (c) Any linked up businesses like transporters, packagers, money lenders, agents, etc. (d) Nature of the goods dealt in. (e) Types of buyers and sellers. (f) Mode of the goods dispersed, minimum quantity sold, types of packaging employed. (g) Factors determining the price fluctuations. (h) Seasonal factors (if any) affecting the business. (i) Weekly/ monthly non-working days. (j) Strikes, if any- causes thereof. (k) Mode of payments. (l) Wastage and disposal of dead stock. (m) Nature of price fluctuations, reason thereof. (n) Warehousing facilities available/ availed. (o) Any other aspect. 4. Visit to a Departmental store. The students are required to observe the following: (a) Different departments and their lay out. (b) Nature of products offered for sale. (c) Display of fresh arrivals. (d) Promotional campaigns. (e) Spaces and advertisements. (f) Assistance by Sales Personnel. (g) Billing counter at store – Cash, Credit Card/ Debit Card, swipe facility. Addedattractions and facilities at the counter. (h) Additional facilities offered to customers (i) Any other relevant aspect. 5. Visit to a Mall. The students are required to observe the following: (a) Number of floors, shops occupied and unoccupied. (b) Nature of shops, their ownership status (c) Nature of goods dealt in: local brands, international brands, (d) Service business shops- Spas, gym, saloons etc. (e) Rented spaces, owned spaces, (f) Different types of promotional schemes. (g) Most visited shops. (h) Special attractions of the Mall- Food court, Gaming zone or Cinema etc. (i) Innovative facilities. (j) Parking facilities. Teachers may add more to the list. II. Project Two: Case Study on a Product. (a) Take a product having seasonal growth and regular demand with which studentscan relate. For example,  Apples from Himachal Pradesh, Kashmir. 10   Oranges from Nagpur,  Mangoes from Maharashtra/U.P./ Bihar/Andhra Pradesh etc.  Strawberries from Panchgani,  Aloe Vera from Rajasthan,  Walnuts/almonds from Kashmir,  Jackfruit from South,  Guavas from Allahabad,  Pineapples from North East India,  Tea from Assam,  Orchids from Sikkim and Meghalaya,  Pottery of Manipur,  Fishes from coastal areas. Students may develop a Case Study on the following lines: (i) Research for change in price of the product. For example, apples in HimachalPradesh during plucking and non-plucking season. (ii) Effect on prices in the absence of effective transport system. (iii) Effect on prices in the absence of suitable warehouse facilities. (iv) Duties performed by the warehouses. (v) Demand and supply situation of the product during harvesting season, pricesnear the place of origin & away. Students may be motivated to find out the importance of producing and selling these products & their processed items along with the roles of Transport, Warehousing, Advertising, Banking, Insurance, Packaging, Wholesale selling, Retailing, Co-operative farming, Co-operative marketing etc. The teacher may develop the points for other projects on similar lines for students to work on. The teacher may assign this project as ‘group’ project and may give different products to different groups. It could conclude in the form of an exhibition. III. Project Three: Aids to Trade Taking any one AID TO TRADE, for example Insurance and gathering information onfollowing aspects: 1. History of Insurance Lloyd’s contribution. 2. Development of regulatory Mechanism. 3. Insurance Companies in India 4. Principles of Insurance. 5. Types of Insurance. Importance of insurance to the businessmen. 6. Benefits of crop, orchards, animal and poultry insurance to the farmers. 7. Terminologies used (premium, face value, market value, maturity value, surrendervalue) & their meanings. 8. Anecdotes and interesting cases of insurance. Reference of films depicting people committing fraudulent acts with insurance companies. 9. Careers in Insurance. Teachers to develop such aspects for other aids to trade. 11 IV. Project Four: Import /Export Procedure Any one from the following 1. Import /Export procedure. The students should identify a product of their city/country which is imported /exported. They are required to find the details of the actual import/export procedure. They may take help from the Chambers of Commerce, Banker, existing Importers/Exporters, etc. They should find details of the procedure and link it with their Text knowledge. The specimens of documents collected should be pasted in the Project file with brief description of each. They may also visit railway godowns/ dockyards/ transport agencies and may collect pictures of the same. Presentation and submission of project report. At the end of the stipulated term, each student will prepare and submit his/ her projectreport. Following essentials are required to be fulfilled for its preparation and submission. 1. The total project will be in a file format, consisting of the recordings of the value of shares & the graphs. 2. The project will be handwritten. 3. The project will be presented in a neat folder. 4. The project report will be developed in the following sequence- □ Cover page should project the title, student information, school and year. □ List of contents. □ Acknowledgements and preface (acknowledging the institution, the newspapers read, T.V. channels viewed, places visited and persons who have helped). □ Introduction. □ Topic with suitable heading. □ Planning and activities done during the project, if any. □ Observations and findings while conducting the project. □ Newspaper clippings to reflect the changes of share prices. □ Conclusions (summarised suggestions or findings, future scope of study). □ Appendix (if needed). □ Teachers report. □ Teachers will initial preface page. □ At the completion of the evaluation of the project, it will be punched in the centre so that the report cannot be reused but is available for reference only. □ The projects will be returned after evaluation. The school may keep the best projects. V. Project Five: A visit to any State Emporium (other than your school state). The purpose of this project is that it leads to - □ Development of deeper understanding of the diversity of products in the states like Assam, Tripura, Nagaland, Mizoram, Manipur, Meghalaya, Sikkim, Arunachal Pradesh, Jammu and Kashmir, Kerala, Chhattisgarh, Telangana, Andhra Pradesh and other statesof the country. □ Sensitization and orientation of students about other states, their trade, business and commerce, □ Understanding the cultural and socio-economic aspects of the state by the students, □ Developing the understanding of role of folk art, artisanship and craftsmanship of the state in its growth and economic development 12  □ Understanding the role of gifts of nature and natural produce in the development of trade, business and commerce □ Understanding the role of vocational skills and abilities on the livelihood of artisans/ craftsman □ Understanding of entrepreneurial skills and abilities of the artisans/ craftsman □ Understanding of the unemployment problem of the state and role of art and craft of the state in generating employment opportunities □ Value aspect – □ Sense of gratitude - by appreciating the contributions made by others in the betterment of our lives. □ Appreciating the dignity of work. □ Sensitivity towards social, cultural, ethnical & religious differences Benefits of social harmony and peace. □ Understanding and appreciating the unity in diversity in India. □ Appreciating differences in race, skin colour, languages, religion, habits, festivals, clothing co-existence Presentation and Submission of Project Report. At the end of the stipulated term, each student will prepare and submit his/ her projectreport. Following essentials are required to be fulfilled for its preparation and submission. 1. Nature of the business organisation (emporium). 2. Determinants for location of the concerned emporium. 3. Is the space rented or owned 4. Nature of the goods dealt in. 5. Sources of merchandise of the emporium. 6. Role of co-operative societies in the manufacturing and/or marketing of themerchandise. 7. Role of gifts of nature or natural produce in the development of goods/ merchandise. 8. Types of buyers and sellers. 9. Modes of goods dispersed, minimum quantity sold and type of carrying bag or package used for delivery of the products sold. 10. Factors determining the pricing at the emporium. 11. Comparison between the prices of goods available at the emporium with the pricesin the open market. Also highlight probable causes of variations if any. 12. Kind of raw material available naturally, used in making the products. 13. The technique used in making the products i.e., handmade or machine made. 14. Has the child labour being used in making the products sold at the emporium? 15. Are the products eco-friendly, in terms of manufacturing, disposal and packing? 16. Seasonal factors if any affecting the business of the emporium. 17. Weekly/ Monthly non-working days. 18. Mode of billing and payments - Cash, Credit Card/ Debit Card, Swipe facility. 19. Does the emporium sell its merchandise in installment / deferred payment basis? 20. Do they provide home delivery and after sales services. 21. Different types of promotional campaigns / schemes. 22. Assistance by Sales Personnel. 23. Export orientation of this emporium and procedure used. 13 24. Policies related to damaged/ returned goods. 25. Any government facility available to the emporium. 26. Warehousing facilities available / availed. 27. Impact of tourism on the business of emporium. 28. Additional facility offered to customers. 29. Any Corporate Social Responsibility (CSR) assumed by the emporium. 30. Contribution made by the emporium to its locality. ASSESSMENT: The marks will be allocated on the following heads. 1. Initiative, cooperativeness and participation 2 Mark 2. Creativity in presentation 2 Mark 3. Content, observation and research work 4 Marks 4. Analysis of situations 4 Marks 5. Viva 8 Marks Total 20 Marks 14  PART A: FOUNDATION OF BUSINESS UNIT 1: EVOLUTION AND FUNDAMENTALS OF BUSINESS CH - 01: NATURE AND PURPOSE OF BUSINESS (MIND MAP) 15  LEARNING OBJECTIVES:  History of trade & commerce in India: Indigenous Banking System; Rise of Intermediaries; Transport; Trading Communities; Merchant Corporations; MajorTrade Centres; Major Imports & Exports; Position of Indian Sub-Continent in theWorld Economy.  Meaning of business with special reference to economic & non-economic activities.  Features & Objectives of business.  Concept & difference of Business, Profession & Employment.  Role of profit in business.  Classification of business activities: Industry & Commerce.  Types of Industry.  Commerce: Trade & auxiliaries to trade.  Concept, Nature & Causes of business risk.  History of Trade and Commerce:- India has Himalayas in the north, bordered by water in south. India got connected to adjoining foreign countries through the network of roads leading to Silk Route. The maritime routes linked the east and west by sea and were used for trade of species known as a Spice Route. Role of business in the development of economy: Business activities have been undertaken since the ancient era. There existed transfer of goods both within and outside the country, and the income received from such economic business activities were used for further investments. Hundi: It is an instrument of exchange used in old times which involved a contract that warrants the payment of money, a promise or order which is unconditional, and can be exchanged through transfer by valid negotiation. In ancient times many trade centres were developed for the import and export of goods like Patliputra, Peshawar, Taxila, Indraprastha, Mithila, Maduram, Surat etc. HUNDI AS PRACTICED BY INDIAN MERCHANT COMMUNITIES Name of Hundi Classification Functions of Hundi Dhani-jog Darshani Payable to any person-no liability over who received payment. Sah-jog Darshani Payable to a specific person, someone ‘respectable’. Liability over who received payment. Firman-jog Darshani Hundi made payable to order. Dekhan-har Darshani Payable to the presenter or bearer. Dhani-jog Muddati Payable to any person—no liability over who received payment, but payment over a fixed term. Firman-jog Muddati Hundi made payable to order following a fixed term. Jokhmi Muddati Drawn against dispatched goods. If goods lost in transit, the drawer or holder bears the coasts & the Drawee carries no liability. 16  Rise of Intermediaries:- Prominent role in promotion of trade. Provide financial security in return of risk taken. Comprises of Commission agent, broker and distributor. Foreign Trade was financed by loans. Later with emergence of credit transaction, exports exceeded import and benefited indigenous banking system. Commercial bank and industrial bank evolved to finance trade and commerce. Agricultural bank evolved to provide short-term and long-term finance to agriculturist. Maritime Trade:- Trade maintained by means of sea is referred to as maritime trade. Maritime trade was another important branch of global trade network. Malabar Coast, on which Muziris is situated. Pepper was particularly valued in the Roman Empire and was known as ‘Black Gold’. It was in the search for an alternate route to India for spices that led to the discovery of America by Columbus in the closing years of 15th century and also brought Vasco-da-Gama to the shores of Malabar in 1498. Calicut was such a bustling emporium that it was even visited by Chinese ships to acquire items, like frankincense (essential oil) and myrrh (fragrant resin used in perfumes, medicines) from the Middle East, as well as, pepper, diamonds, pearls and cotton from India. On the Coromandel Coast, Pulicat was a major port in the 17th century. Textiles were the principal export from Pulicat to Southeast Asia. Merchant Corporation:- Formed to protect the interest of traders. Framed their own rules of membership and code of conduct which kings also accepted. Trade and industrial taxes were major source of revenue. The chief directly deal with king, tax collector and settle market toll on behalf of merchant at fixed sum of money. 17  MAJOR TRADE CENTRES IN ANCIENT TIMES 1. Pataliputra: Known as Patna today. It was not only a commercial town, but also a major centre for export of stones. 2. Peshawar: It was an important exporting centre for wool and for the import of horses. It had a huge share in commercial transactions between India, China and Rome in the first century A.D. 3. Taxila: It served as a major centre on the important land route between India and Central Asia. It was also a city of financial and commercial banks. The city occupied an important place as a Buddhist centre of learning. The famous Taxila University flourished here. 4. Indraprastha: It was the commercial junction on the royal road where most routes leading to the east, west, south and north converged. 5. Mathura: It was an emporium of trade and people here subsisted on commerce. Many routes from South India touched Mathura and Broach. 6. Varanasi: It was well placed as it lay both on the Gangetic route and on the highway that linked North with the East. It grew as a major centre of textile industry and became famous for beautiful gold silk cloth and sandalwood workmanship. It had links with Taxila and Bharuch. 7. Mithila: The traders of Mithila crossed the seas by boats, through the Bay of Bengal to the South China Sea, and traded at ports on the islands of Java, Sumatra and Borneo. Mithila established trading colonies in South China, especially in Yunnan. 8. Ujjain: Agate, carnelian, muslin and mallow cloth were exported from Ujjain to different centres. It also had trade relations through the land route with Taxila and Peshawar. 9. Surat: It was the emporium of western trade during the Mughal period. Textiles of Surat were famous for their gold borders (zari). It is noteworthy that Surat hundi was honoured in far off markets of Egypt and Iran. 10. Kanchi: Today known as Kanchipuram, it was here that the Chinese used to come in foreign ships to purchase pearls, glass and rare stones and in return they sold gold and silk. 11. Madura: It was the capital of the Pandayas who controlled the pearl fisheries of the Gulf of Mannar. It attracted foreign merchants, particularly Romans, for carrying out overseas trade. 12. Broach: It was the greatest seat of commerce in Western India. It was situated on the banks of river Narmada and was linked with all important marts by roadways. 13. Kaveripatta: Also known as Kaveripatnam, it was scientific in its construction as a city and provided loading, unloading and strong facilities of merchandise. Foreign traders had their headquarters in this city. It was a convenient place for trade with Malaysia, Indonesia, China and the Far East. It was the centre of trade for perfumes, cosmetics, scents, silk, wool, cotton, corals, pearls, gold and precious stones; and also for ship building. 14. Tamralipti: It was one of the greatest ports connected both by sea and land with the West and the Far East. It was linked by road to Banaras and Taxila. 18 All human being, wherever they are, required to perform some or the other activity to satisfy their needs. They pursue different occupations to earn a livelihood and to get some psychological satisfaction. Activities which human beings undertake are known as human activities. Classification of Activities Economic Activities Non-Economic Activities 1. Economic Activities: Economic activities are any activities that are carried out with the goal of earning money and livelihood. For example, a worker working in a factory, a teacher teaching in school etc. It is majorly of three types: Economic Activities Business Profession Employment 2. Non-Economic activities: Activities which are performed out of love, affection, sympathy, etc & without the aim of earning profit are called non-economic activities. For example -Social work, religious activities etc. Business:- Any economic activity that is undertaken regularly and continuously to satisfy the societal needs as well as to earn profit through the mechanism of sale and purchase of goods and services is called a Business. Characteristics of Business Activities: 1. An economic activity: Business consists of sale or exchange of goods and services with the primary objective of earning money. Hence, it is an economic activity. 2. Sale or exchange of goods and services for creating value: In business there should be transfer or exchange of goods or services for value. Production of goods for the purpose of personal consumption is not termed as business. 3. Dealings in goods and services on a regular basis: To constitute a business there should be dealings in goods and services on regular intervals. Doing one single transaction does not constitute business. For example selling your old books or furniture and purchasing a new one is not termed as business. 4. Production or procurement of goods and services: In every business enterprise before the consumption, production takes place. As a result, a business either manufactures the goods on its own or purchases them from producers, and then sells them to end customers. 19  5. Profit earning: The primary objective of every business is to earn more and more profit. No business can survive without earning profit. Hence all the efforts of the businessman are directed towards the earning of sufficient profit. 6. Uncertainty of return: It’s not certain how much profit a business is going to earn, as there is a possibility of losses as well because of the changing environment. Every business has to handle both losses as well as profits. 7. Element of Risk: Every business is exposed to certain risks, these risks can either be due to natural factors, human factors, financial factors, or personal factors. Therefore, both profit and losses walk hand in hand and every business has to take some risk in order to survive. Profession: Any economic activity which is carried out by a person with specialised knowledge & skills in order to serve society is called Profession. Employment: Any economic activity which involves doing work for someone else in consideration of money is termed as Employment. Comparison of Business, Profession and Employment Basic Business Profession Employment 1. Mode of Entrepreneur’s decis- Membership of a professional Appointment letter & establishment ion & other legal body & certificate of practice. service agreement. formalities,if necessary. 2. Nature of Provision of goods & Rendering of personalised, Performing work as per work services to the public. expert services. service contract or rules of service. 3.Qualification No minimum Qualifications, expertise & Qualification & training qualification is training in specific field as as prescribed by the necessary. prescribed by the Employer. professional body is a must. 4. Reward or Profit earned. Professional fee. Salary or wages. return 5. Capital Capital investment Limited capital needed for No capital required investment required as per size & establishment nature of business. 6. Risk Profits are uncertain & Fee is generally regular and Fixed and regular pay; no irregular; risk is present certain; some risk or little risk 7. Transfer of Transfer possible with Not possible. Not possible. interest some formalities 8. Code of No code of conduct is Professional code of conduct Norms of behaviour laid conduct prescribed is to be followed. down by the employer are to be followed 9. Example Shop, factory Legal, medical profession, Jobs in banks, insurance chartered accountancy. companies, government departments. 20  Multiple Objectives of Business Economic Objectives Social Objectives Human or Personal Objectives Multiple Objectives of Business: 1. Economic Objectives 2. Social Objectives 3. Human or Personal Objectives. 1. Economic Objectives:- Under economic objectives, the following objectives are included: (i) Survival: The basic purpose of every organisation is to survive and exist in the competition market for a long period of time & it is possible only when it is able to cover its cost and earn profit. (ii) Profit: The most important objective of every organisation is earning adequate amount of profit. Profit is essential for survival, growth and expansion of business. (iii) Growth: The success of any organisation is measured by the growth rate and growth is measured in terms of sales, number of branches etc. 2. Social Objectives:- (i) Supply of Desired Quality of Products: Customer prefer to buy the products only when they are of satisfactory quality and are available at a reasonable price. Today’s customer is a quality conscious customer and he expects value for money. (ii) Avoidance of Unfair Trade Practices: Anti-social or unfair trade practices include black marketing, adulteration, hoarding, overcharging, etc. Exaggerating in advertisement s about the uses of products is also an unfair trade practice. (iii) Employment Generation: The business man must create employment opportunities and help in overcoming this basic problem of developing countries. The business employs people to perform different types of work. (iv) Social Service or Community Service: The big companies can help in social service programmes run by NGOs and Government organisations by contributing large amount of funds in the form of donations, charity, etc. (v) Avoidance of Pollution: As a businessman has added to spreading of pollution, so it becomes the moral duty of the businessman come forward and help in solving the problem of pollution. 3. Human or Personal Objectives:- (i) Providing good working condition. (ii) Payment of competitive and satisfactory wages and salaries. (iii) Personal growth and development of employee by imparting training to employees. (iv) Peer recognition and respect by encouraging employees to take initiative and participating in decision-making. 21 Role of Profit in the Business: (i) Survival: A business and businessman cannot survive for a long time without earning adequate profit. Profit is a source of income for a businessman which becomes his means of livelihood. (ii) Expansion and Growth: The business is expanded only when it is earning sufficient amount of profit. When profit is large, a part of it can always be reinvested for expansion or diversification of production and other operations of the business. (iii) Symbol of efficiency or an Index of Performance: Profits indicate whether a business is being managed efficiently or not. Higher profits indicate the efficiency of management and lowest profit indicate inefficiency of management. (iv) Reward for bearing the risk: Profit is considered as a price or reward paid to a businessman for bearing the risk. The desire to earn profit motivates the businessman to bear the uncertainties and unexpected risks. (v) Helps to gain reputation of goodwill: A profit earning company always has a better reputation in the market as compared to companies which are running in loss. Classification of business activities:- The business activities are mainly classified into: A. Industry B. Commerce  Trade  Auxiliaries to Trade Chart Showing Business Activities 22 A. Industry:- It is basically concerned with the production of goods and services for an economic motive. It is further divided into following categories: 1. Primary Industry. 2. Secondary Industry. 3. Tertiary Industry. 1. Primary Industry: It includes all those activities which are concerned with the extraction & production of natural resources and development of plants, etc. It is further divided into two parts: (a) Extractive industries: These industries provide some basic raw materials that are mostly products of the natural environment. It includes farming, mining, etc. (b) Genetic industries: These industries do breeding of plants and animals for their use in further reproduction. Example- Cattle breeding, Poultry farms etc. 2. Secondary industries:- These industries are concerned with further processing of the material extracted at the primary sector so as to convert them into a finished product. Example, Mining of iron ore etc. It is further divided into two parts: (a) Manufacturing industries: These industries engage in producing goods through processing of raw materials and creating utilities. It is further divided into four parts: (i) Analytical Industry: These industries separate and bifurcate different elements from the basic material, so as to produce various by-products from the same element. For example, petrol, diesel etc. all are made from one basic material that is crude oil. (ii) Synthetic Industry: These industries bring together materials and ingredients from varied sources and combine them to form a new product. For example, the cement industry. (iii) Processing Industry: These industries are involved in the extraction and processing of resources and raw materials, so as to produce semi-finished or finished products. For example, the Sugar industry, Paper industry, Textile industry etc. (iv) Assembly Industry: These industries bring together different components of various firms to form a new product. For example, different components of various industries are brought together to assemble them and convert it into a television, computer, car etc. (v) Construction industries: These industries are involved in the construction sector, and it involves constructive works such as building dams, bridges, buildings, etc. 3. Tertiary industry:- These industries provide support services to primary and secondary industries so that they can perform their work without any hindrances. For Example, Banking industry, Transportation industry, Communication industry, etc. 23 B. Commerce:- Commerce includes all the activities which are required for the exchange of goods and services. It also involves all the activities that assists in removal of hindrances of people, place, time, finance, risk, information faced during the exchange of goods and services. 1. Removing the hindrance of person- by marking goods available to consumers from the producers. through trade. 2. Transportation removes hindrance of place- by moving goods from the place of production to the markets for sale. 3. Storage and warehousing activities remove the hindrance of time- by facilitating holding of stock of goods to be sold as and when required. 4. Insurance removes hindrance of risk of loss or damage of goods due to theft, fire, accidents etc. 5. Banking removes hindrance of finance- by providing funds to a businessman for acquiring assets, purchasing raw materials and meeting other expenses. 6. Advertising removes hindrance of information- by informing consumers about the goods and services available in the market. Classification of Commerce:- It includes two types of activities: (a) Trade. (b) Auxiliaries to Trade. Trade The buying and selling of goods and services with an aim to earn profit is termed as trade. The people who are involved in trade are referred to as traders. Trade can be bifurcated as: (a) Internal Trade and, (b) External Trade. (a) Internal Trade: - It refers to buying and selling of goods or services within the geographical boundaries of a country. (i) Wholesale trade: It refers to buying and selling of goods and services in large quantities. (ii) Retail Trade: It refers to buying and selling of goods and services in small quantities. (b) External Trade: - It refers to buying and selling of goods or services beyond the geographical limits of the country. It involves: 24  (i) Imports: It refers to the purchase of goods and services from other countries. (ii) Exports: Selling goods and services to other countries. (iii) Entreport: Importing goods and services from one country & exporting to some third country. Auxiliaries to Trade:- Auxiliaries to trade assists the buying and selling of the goods and services by removing the hindrances of place, people, time, finance, risk and information. The auxiliaries to trade are: (a) Transport and Communication: Transportation helps in the movement of raw material and finished products from the place of production to the place of consumption. Communication enables easy interaction by one party with another, who is far away from each other. It assists in removal of the hindrance cause due to place. (b) Banking and finance: It helps business activities to overcome the problem of finance by lending loans and credit facilities since business can't survive if funds are not available for procuring material. It assists in removal of the hindrance cause due to finance. (c) Insurance: It provides protection to businesses from various types of risks such as due to fire, theft etc. It assists in curbing hindrances of risk. (d) Warehousing: It helps business firms to overcome the problem of storage and facilitates the availability of goods. It assists in curbing hindrances of time. (e) Advertising and Public Relations: It helps them to increase the sales and widen the customer base by promoting business products or services at a wide spectrum. It is a tool to influence customers. It assists in curbing hindrances caused due to information. (f) Middlemen: These people act as mediators between the producer and consumers. These include wholesalers, retailers etc. It assists in curbing hindrances of persons. Business Risk:- The risk caused due to inadequate profits or losses as a result of uncertainties or unexpected events is called business risk. Nature of Business Risks:- (i) Risk is an essential part of every business: Every business has some risk. No business can avoid risk, although the amount of risk may vary from business to business. Risk can be minimised, but cannot be eliminated. (ii) Business risks arise due to uncertainties: Uncertainty refers to the lack of knowledge about what is going to happen in future. Natural calamities, change in demand and prices, changes in government policies and prices, improvement in technology, etc., are some of the examples of uncertainty which create risks for business because the outcomes of these future events are not known. (iii)Degree of risk depends mainly upon the nature & size of business: Nature of business (i.e., type of goods & services produced and sold) and size of business (i.e., volume of production & sale) are the main factors which determine the amount of risk in a business. For ex, a business dealing in fashionable items has a high degree of risk. 25 Similarly, a large- scale business generally has a higher risk than what a small scale has. (iv) Profit is the reward for risk taking: ‘No risk, no gain’ is an age-old principle which applies to all types of business. Greater the risk involved in a business, higher is the chance of profit. An entrepreneur undertakes risks under the expectation of higher profit. Profit is thus the reward for risk taking. Causes of business risks: (a) Natural causes: These are due to natural causes such as floods, earthquakes, etc. Every person has little control or no control over these causes. (b) Human causes: These causes include unexpected events caused by man, such as negligence of employees, power failure, employee’s or customer’s dishonest practices etc. (c) Economic causes: The economic causes involve the changes and variations taking place in the economy such as uncertainties due change of technology and method of production, political disturbances, change in prices, tax rates etc. (d) Other causes: All those causes which cannot be considered under the above causes are the other causes, such as exchange rate fluctuations etc. Factors for Starting a business: 1. Selection of type of business: First step is to decide the nature and size of business which person wants to do. It depends upon customer requirements inthe market and also the knowledge that person has about the product. A person can enter primary, secondary or tertiary industry, based on the possibility of profit, demand, customer preference etc. 2. Size of Business: Every person has to decide whether it wants to operate on a large scale or at a medium scale. It depends upon demand for the product & the necessary capital that person has. If a person is optimistic about all the factors, he can open up his business on a large scale & vice- versa. 3. Location of business enterprise: It's another important factor while starting a business. The location of business is dependent on the easy availability of raw material & labour, banking services, transportation services nearby etc. Any mistake in this can result in high losses to business. 4. Financing the proposition: For every business, availability of capital or funds is an important factor while starting a business. Because capital is needed in each activity and aspect of business, such as in investment in fixed assets, stocks, meeting day to day expenses, etc. 5. Physical facilities: Availability of Machines, Equipment & Building is also considered while starting a business. The extent of physical facilities depends upon the nature and size of business & availability of funds. 6. Competent and committed workforce: Every business needs competent workforce to run its business operations smoothly. Proper planning and training should be done for hiring employees at the right position and at the right time and cost. 7. Launching the enterprise: After all these steps, a person can go ahead with starting a business. It can be a partnership firm, a sole proprietorship firm, a company etc. 8. Tax planning: Because of increasing tax laws in the country every business has to do proper tax planning in advance to save itself from any problem in future. 26 USEFUL LINKS: https://diksha.gov.in/play/collection/do_31310347535117516811487?contentId=do_31308586845424844812738 VIDEO LINK https://diksha.gov.in/play/collection/do_31310347535117516811487?contentId=do_313076836461264896111262 MULTIPLE QUESTIONS LINK https://diksha.gov.in/play/collection/do_31310347535117516811487?contentId=do_3130689 3007678668818934 SHORT QUESTIONS LINK https://diksha.gov.in/play/collection/do_31310347535117516811487?contentId=do_3130690 96755183616111230 LONG QUESTIONS LINK  SELF ASSESSMENT: 1. State the meaning of business. 2. How would you classify business activities? 3. Distinguish between business, profession & employment. 4. What are the various types of industries? 5. State the causes of risks involved in business? 6. What is the role of profit in business? …………………....……..…….. End of Chapter …..…………………………….. 27 CH-02: FORMS OF BUSINESS ORGANISATION (MIND MAP) 28  LEARNING OBJECTIVES:  Identify different forms of business organization.  Meaning, features, merits and limitations of different forms of business organization i.e.Sole Proprietorship, Partnership, Co-operative Organisation & Joint Stock Company.  Meaning & features of Hindu Undivided Family Business.  Types of partners & partnership.  Types of co-operative organisation.  Concept of partnership deed & registration of partnership.  Types & formation of company.  Distinguish between various forms of organization.  Discuss the factors determining choice of an appropriate form of business organisation.   A business enterprise is an organization which is engaged in some businesses or commercial activities. Business enterprise may be classified into three broad categories: Business enterprise Private sector enterprises Public sector enterprises Joint sector enterprises 1. Private sector enterprises: The business enterprises which are owned, controlled and managed by private individuals are known as Private sector enterprise. Like- Reliance India Limited, Tata Company, Wipro etc. 2. Public sector enterprises: The business enterprises which are owned, controlled and managed by the central and state government are known as Public sector enterprise. Like - SAIL (Steel Authority of India Limited), Gail (Gas Authority of India Limited), LIC etc. 3. Joint sector enterprises: The business enterprise which is owned, controlled and managed jointly by private entrepreneur and government are known as Joint sector enterprise. Like- Maruti Udyog Ltd., Cochin Refineries, etc. Forms of Private Sector Enterprises: The private sector enterprise can function and run by adopting any of the following forms: Forms of Private Sector Enterprises 1. Sole proprietorship 5. Joint Stock Company 2. Joint Hindu Family Business 4. Co-operative Societies 3. Partnership 29  1. SOLE PROPRIETORSHIP:- It is a form of organisation which is owned, managed and controlled by an individual who bears all the risk and receives all the profit. Features: (a) Formation and closure: It can be established and closed without any legal formalities. (b) Liability: The liability of the sole proprietor is unlimited in this form of business organisation. (c) Sole risk bearer & profit recipient: Being a sole owner, he bears all the risk & receives all the profits. (d) Control: All the decisions are taken and implemented in the organization by the owner. (e) No separate entity: Both owner and business are considered as one in the eyes of law. (f) Lack of business continuity: Business can be continued till the owner wishes to. Merits:- (a) Quick decision making: Prompt decision making as all the decisions are to be taken by the owner. (b) Confidentiality of information: Being a sole owner, it is easy to maintain business secrecy. (c) Direct incentive: All the profits are enjoyed by the owner as there is no one to share profits. (d) Sense of accomplishment: Successful business provides satisfaction to the owner & sense of achievement. (e) Ease of formation & closure: No legal formalities for formation & closure of business which makes it easy to start and end the business. Limitations:- (a) Limited resources: Business can be funded from savings of the owner or money borrowed from friends, relatives. (b) Limited life of a business concern: Continuity of the business depends on the health and state of mind of the owner. (c) Unlimited liability: In case business fails repayment of debts, his personal assets are at risk. (d) Limited managerial ability: One person may not possess the ability to manage all the functions. Suitability: Sole proprietorship is suitable:- Where the personal attention to customer is required as in tailoring, beauty parlour. Where goods are unstandardized like artistic jewellery. Where modest capital and limited managerial skills are required as in case of retail store.  2. JOINT HINDU FAMILY BUSINESS: It is owned by the members of undivided joint Hindu family and managed by the eldest member of the family known as ‘KARTA’. It is governed by the provisions of Hindu law. The basis of membership is birth in a particular family. 30 Features: (a) Formation: Hindu Undivided Family is formed with at least two members of a family having ancestral property. It is governed by Hindu Succession Act, 1956. (b) Liability: All the members of the family except Karta have limited liability up to their share in the business property. (c) Control: All the activities in the business organization are controlled by Karta. (d) Continuity: It can be discontinued if all the members of the family agree to do so. (e) Minor members: Membership in the organization is by birth. Merits: (a) Effective control: Complete control of business with ‘Karta’ thus effective decision-making. (b) Continued business existence: Business continues till all the members wish to continue and control is transferred to the next elder member in case of death of ‘Karta’. (c) Limited liability of members: Members of the family enjoy liability limited to their share in the business party. (d) Increased loyalty and cooperation: Family members have a sense of belongingness and loyalty, hence, all work with a common objective of growth. Limitation: (a) Limited resources: Business can be funded mainly from ancestral property, hence limiting the financial resources. (b) Unlimited liability of Karta: The personal property of ‘Karta’ is at risk as he has unlimited liability. (c) Dominance of Karta: Difference of opinion among members and ‘Karta’ may cause conflict amongst them. (d) Limited managerial skills: Karta may not have knowledge and expertise of all the functions performed in the business.  3. PARTNERSHIP: According to partnership Act 1932, partnership is the relation between persons who have agreed to share the profits of the business carried on by all or any one of them acting for all. Features: (a) Formation: Business is established as per the provisions of Partnership Act 1932. (b) Liability: All the partners in the business have unlimited liability. (c) Risk bearing: All the risk in the business is shared by all the partners. (d) Decision making and control: All the decisions are taken in after the consent of all the partners and each partner shares responsibility of running business. (e) Continuity: Continuity depends upon the partnership deed among the partners at the time of its formation. (f) Number of partners: Minimum 2 and maximum 50 members {as per the Companies (miscellaneous) Rules 2014}, or maximum could be 100 (according to Companies Act, 2013). (g) Mutual agency: Each partner is the owner as well as the agent of the firm & agent to other partners. 31 Merits: (a) Ease of formation and closure: Business can be established and closed with the consent of all the partners as the registration is optional. (b) Balanced decision making: All the decisions are taken by consent partners as partners undertake responsibilities as per their expertise. (c) More funds: Funds are provided by all the partners, which increases the scope for large-scale business operation. (d) Sharing of risks: Business risk and responsibilities are shared among all the partners. (e) Secrecy: It is easy to maintain business secrecy as there is no need to submit financial results. Limitations: (a) Unlimited liability: Each partner’s liability is extended to their personal property. (b) Limited resources: Availability of Finance is limited due to the restriction of number of partners. (c) Possibility of conflicts: All the partners may have different opinions which create conflict among them. (d) Lack of continuity: Any conflict between partners or death of a partner may bring business to an end. (e) Lack of public confidence: It is difficult for an outsider to ascertain true financial position as there is a lack of availability of financial reports. Types of Partners:- (a) Active partner: A partner who contributes capital, shares profits and losses, participates in management and has unlimited liability. (b) Sleeping or dormant partner: Partner who contributes capital, shares profits and losses and has unlimited liability but does not participate in management. (c) Secret partner: This partner participates in management operations secretly, but does contribute in profits and losses. (d) Nominal partner: Partner who does not contribute capital and does not share profit and losses but allows partnership business to project him or her as partner. (e) Partner by estoppel: An individual who is not a partner but projects himself/ herself as a partner to an outsider and has unlimited liability. (f) Partner by holding out: An individual who is not a partner but is projected as a partner by other partners of the partnership firm and his liability is unlimited. 32  Types of Partners Partner Contribution Of Capital Management Profit/Loss Sharing Liability 1. Active Yes Yes Yes Unlimited 2. Sleeping Yes No Yes Unlimited 3. Secret Yes Yes, but secretly Yes Unlimited 4. Nominal No No Generally Yes Unlimited 5. Partner by No No No Unlimited Estoppel 6. Partner by No No No Unlimited Holding out Minor as partner: An individual of age below 18 years can be admitted with mutual consent of all other partners but legally he is not a partner. Types of partnership: Partnership can be categorized on the basis of duration and liability: Classification on the basis of duration: (i) Partnership at will: Partnership continues till the partners agree to do so. (i) Particular partnership: The partnership formed for a specific task for project or for a specific period of time. It comes to an end after completionof task or expiry of time. Classification on the basis of liability: (i) General partnership: Partnership where all partners have joint and unlimited liability. (ii) Limited partnership: Partnership where all partners have limited liability & at least one partner must have unlimited liability. Partnership deed: A written document where all the terms & conditions of partnership are mentioned. It generally has following clauses: (a) Name of firm. (b) Nature of firm. (c) Duration of Partnership. (d) Duties and obligations of Partners. (e) Valuation of Assets. (f) Interest on capital and interest on drawings. (g) Profit-loss sharing ratio. (h) Salaries and withdrawals of the Partners. (i) Preparation of accounts and their auditing. (j) Procedure for dissolution of firm. (k) Method of solving disputes. Registration: It is optional for a partnership firm to get registered with the registrar of firms of the state in which firm is situated. In case a firm does not get registered, it is deprived of many benefits. 33 The consequences of non-registration of a firm are as follows: (a) A partner of an unregistered firm cannot file a suit against the firm or other partners, (b) The firm cannot file a suit against third parties, and (c) The firm cannot file a case against the partners. Procedure for getting firm registered: (i) Submission of application in prescribed form with the Registrar of Firms. (ii) Fee deposition with the Registrar. (iii) Receiving certificate of registration after the Registrar is satisfied.  4. CO-OPERATIVE SOCIETY: An organisation of voluntary people working for a common purpose with an aim to protect economic and social interests of the members. It must be registered under the Co-operative Societies Act, 1912. Features: (a) Voluntary membership: Any individual irrespective of caste, gender, religion with common interest is free to join or leave a co-operative society as and when he/she desires. (b) Legal status: Co-operative society has separate identity status distinct from its members, and the registration of such society is also mandatory. (c) Limited liability: Members have liability limited to their capital contribution. (d) Control: All the decision making power is in the hands of an elected managing committee which are chosen by members with one man one vote concept. (e) Service motive: Society is formed with the motive of providing mutual help to team members. Merits:- (a) Equality in voting status: Each member has equal right to vote and elect members of the man- aging committee. (b) Limited liability: The liability of members is limited to their capital contribution. (c) Stable existence: Cooperative societies keep on going irrespective ofsituations of death, bank- ruptcy or insanity of its members. (d) Economy in operations: The members of the society work voluntarily which helps in reducing costs. (e) Support from government: Government provides support to societies in the form of lower taxes, interest rates and subsidies. (f) Ease of formation: No legal formalities are involved in formation of societies. Limitations:- (a) Limited resources: Capital contribution by the member is the only source of finance, and low dividend also discourages members for the provision of finance to the society. (b) Inefficiency in management: Members working on voluntary basis may lack necessary expertise and skills, leading to inefficiency in operations and management. (c) Lack of secrecy: Difficult to maintain secrecy as members disclose all information related to work of the society in the meeting. (d) Government control: Societies need to follow rules and regulations as stated by the government and submit audited financial reports of the society. However, such government intervention affects the freedom of work for such societies. 34 (e) Differences of opinion: Difference of opinion as a result of individual interest over the welfare may lead to conflicts amongst members. Types of Cooperative societies:- (i) Consumer’s cooperative societies: Societies formed for providing good quality services and products at a reasonable rate, to protect the interest of consumers. (ii) Producer’s cooperative societies: Societies formed for providing good quality and low priced raw materials and other inputs, to protect the interest of producers. (iii) Marketing cooperative societies: Societies for providing services related to marketing of products by small producers. (iv) Farmer’s cooperative societies: Societies formed for providing farmers with better inputs at reasonable rates to improve productivity. (v) Credit cooperative societies: Societies established to provide financial assistance to its members at very reasonable terms. (vi) Cooperative housing societies: Societies formed for constructing houses for its members at reasonable cost.  5. JOINT STOCK COMPANY:- The Companies Act, 2013 defines, "A company as an artificial person having a separate legal entity, perpetual succession and a common seal." Features of Company/ Joint Stock Company:- (a) Artificial person: A company is created by law and has legal status but it does not function like human beings. All business activities are done by the board of directors in the name of the company. (b) Separate legal entity: A company has its own identity distinct from its owner with the incorporation of a company. (c) Formation: Company is formed by fulfilling all the legal formalities as stated under Companies Act, 2013. (d) Perpetual succession: A company is created by law and only law can bring an end to its existence. Existence of the company is not affected by the status of members. (e) Control: Business affairs of a company are managed and controlled by the Board of Directors. (f) Liability: A company has limited liability i.e., liability only to the extent of the capital contribution. (g) Common seal: As a company is an artificial legal person, it cannot have asign on its own. Hence common seal acts as the official signature for a company. All the official documents must have a common seal for legal binding. (h) Risk bearing: The risk of loss is shared by all the shareholders in proportion to their investment in the company. Merits:- (a) Limited liability: Shareholders liability is limited to the investment in the company, thus there is no risk of losing personal assets. (b) Transfer of interest: Shares can easily be sold in the market or can be converted into cash. (c) Perpetual existence: Company's existence is not affected by the status of shareholders, company continues to exist. 35  (d) Scope for expansion: Companies can raise large amounts of funds from the public as well as borrowings from financial institutions or banks. (e) Professional management: large-scale operation requires management by professionals and specialised individuals. Limitations:- (a) Complexity information: Formation of a company requires fulfilling of documentation and legal formalities which makes the procedure lengthy and complex. (b) Lack of secrecy: All financial information is disclosed to the general public that there is no confidentiality or secrecy. (c) Impersonal work environment: Business affairs are managed by professionals not owners, thus, it lacks personal contact with employees and customers. (d) Numerous regulations: A company involves various rules and regulations which reduces freedom to work and involves a lot of money, time and effort. (e) Delay in decision making: Decision making needs to follow a set of hierarchy which may cause delay in taking decisions and actions. (f) Oligarchic management: Shareholders have very little control over the running of business, thus, the directors take all the decisions which may attimes get influenced by their personal interest. (g) Conflict in interests: It is difficult for management to satisfy everyone as there are too many stakeholders with diverse interests. On the basis of the number of shareholders, enterprises can be classified into 3 kinds of companies: 1. Public Company: A public company means a company which is not a private company. As per The Companies Act, a public company is one which: (a) has a minimum of 7 members and no limit on maximum members; (b) has no restriction on transfer securities; and (c) is not prohibited from inviting the public to subscribe to its securities. However, a private company which is a subsidiary of a public company is also treated as a public company. 2. Private Company: A private company means a company which: (a) restricts the right of members to transfer its shares; (b) has a minimum of 2 and a maximum of 200 members, excluding the present and past employees; (c) does not invite public to subscribe to its securities and It is necessary for a private company to use the word private limited after its name. If a private company contravenes any of the aforesaid provisions, it ceases to be a private company and loses all the exemptions and privileges to which it is entitled. The following are some of the privileges of a private limited company as against a public limited company: (i) A private company can be formed by only two members whereas seven people are needed to form a public company. (ii) There is no need to issue a prospectus as public is not invited to subscribe to the 36  shares of a private company. (iii) Allotment of shares can be done without receiving the minimum subscription. A private limited company can start business as soon as it receives the certificate of incorporation. (iv) A private company needs to have only two directors as against the minimum of three directors in the case of a public company. However the maximum number of direc- tors for both types of companies is fifteen. (v) A private company is not required to keep an index of members while the same is necessary in the case of a public company. Difference between Public Company and Private Company Basis Public company Private company 1. Members Minimum - 7 Minimum - 2 Maximum – unlimited. Maximum - 200. 2. Minimum number of Three. Two. directors 3. Index of members Compulsory. Not compulsory. 4. Transfer of shares No restriction. Restriction on transfer. 5. Invitation to public Can invite the public to Cannot invite the public to to subscribe to shares subscribe to its shares or subscribe to its securities. debentures. 3. One Person Company or OPC: According to Sec.2 (62) of the Companies Act, 2013, ‘company which has only 1 person as a shareholder’. Rule number 3 of the Companies (Incorporation) Rules, 2014 says that: (i) Only a natural person who is an Indian citizen & an Indian resident can form 1 person company. (ii) It cannot execute non-banking financial investment pursuits. (iii) It is paid-up share capital which is not more than ₹ 50 Lakhs. (iv) Its aggregate annual turnover of 3 years does not cross ₹ 2 Crores.  Formation of Company: Formation of a Company is a time-consuming process that requires the completion of numerous legal formalities and processes. There are three important steps in this process: A. Promotion: B. Incorporation: C. Subscription of Capital: Unlike a public limited company, which is forbidden from raising funds from the public, a private corporation is not required to produce a prospectus or complete the formalities of a minimum subscription. A. Promotion of company: It entails conceptualizing a business idea and taking the initiative to start a company so that the available business opportunity can be put into practice. 37 Promoter: The term Promoter is defined in Section 2 (69) of the Companies Act 2013 as  who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or  who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or  in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act: Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity. Functions of Promoter: 1. Identification of business opportunity: The opportunity could be in the form of developing a new product or service,making a product available through a new channel, or any other investment opportunity. The technical and economic feasibility of the opportunity is next assessed. 2. Feasibility studies: Converting all potential business ideas into actual projects may not be viable or lucrative. As a result, the promoters do extensive feasibility assessments. The feasibility studies listed below may be carried out: ○ Technical feasibility: An excellent idea may be technically impossible to implement. It could be due to a lack of readily available raw materials like material, labour, location, infrastructure or technology. ○ Financial viability: Every company activity necessitates the use of capital. The promoters must calculate the amount of money needed to pursue the recognised business idea. If money cannot be secured, the project must be abandoned. ○ Economic feasibility: The project might be technically and financiallypossible, but it may have a slim possibility of being profitable. Hence this step focuses on the cost-benefit analysis of the company to find outits future viability. 3. Name approval: The promoters must choose a name for the company and file an application for approval to the registrar of companies in the state where the firm's registered office will be located. If the proposed name has been rejected, an alternate name may be accepted. In the application to the Registrar of Companies, three names are submitted in priority order. 4. Fixing up Signatories to the Memorandum of Association: The members who will sign the proposed company's Memorandum of Association must be decided by the promoters. Those who sign the memorandum are also the company's first directors. Their signed consent to serve as Directors and to purchase the company's qualification shares is required. 5. Appointment of professionals: The promoters select specialists such as mercantile bankers, auditors, and others to assist them in preparing the essential documents that must be filed with the Registrar of Companies. 6. Preparation of necessary documents: The promoter takes measures to prepare necessary legal documents that must be submitted to the Registrar of Companies for the company to be registered under the law. The Memorandum of 38  Association, Articles of Association, and Consent of Directors are the documents required. Documents required to be submitted: There are six documents in total, they are: 1. Memorandum of Association: It identifies the company's goals. The Memorandum of Association is duly stamped, signed, and witnessed. In the case of a public business, it must be signed by at least seven members. For a private business, however, two members' signatures are sufficient. No corporation can legally engage in activities that are not outlined in its memorandum of association. The following clauses are included in the MoA: ○ Name Clause: This section contains the name of the business that has already been approved by the Registrar of Companies. ○ Registered office clause: It specifies the state in which the company's registered office is proposed to be located. Although an exact address is not required, it must be provided to the Registrar within thirty days of the company's formation. ○ Object’s clause: This specifies the reason for the company's formation. A firm is not legally permitted to engage in any action that is not relatedto the objectives set forth in this clause. ○ Liability clause: This clause restricts the members' liability to the amount owed on the shares they own. ○ Capital clause: This clause establishes the maximum amount of capital that the company may raise through the issuance of shares. The proposed company's permitted share capital, as well as its partition intothe number of shares with a fixed face value, is defined. ○ Subscription Clause: The subscription provision, which is the sixth and last clause of the MOA, shall declare the subscribers' intent to incorporate the company and agree to take shares in the firm based on the number stated in the Memorandum. 2. Articles of Association: They are the rules that govern a company's internal management. These regulations are an addendum to the Memorandum of Association; they should not conflict with or supersede anything in the Memorandum of Association. According to Section 2(5) of the Companies Act, 2013, "articles" refers to a company's articles of organization as initially drafted, as amended from time to time, or as implemented in accordance with any previous company law or this Act. 3. Consent of Proposed Directors: In addition to the Memorandum and Articles of Association, everyone nominated as a director must sign a written permission stating that they accept to function in such capacity and agree to purchase and pay for qualification shares. 4. Agreement: Another document that must be presented to the Registrar for the company to be registered under the Act, is the agreement that the firm forms with an individual as a Director or a full-time Director or Manager. 39 5. Statutory Declaration: A declaration confirming that all legal conditions for registration have been met must be presented to the Registrar along with the above-mentioned documents for the company to be legally registered. 6. Receipt of Payment of Fee: The necessary payments for the company's registration must be paid. The amount of such fees will be determined by the company's authorized share capital. Position of Promoter: A firm's promoters have a fiduciary relationship with the company, which they must not abuse. They can only make a profit if it is publicly revealed; they cannot make any hidden gains. In the event of non-disclosure, the company has the right to cancel the contract & reclaim the money paid to the promoters. It can also sue for damages or losses incurred because of material information not being disclosed. Promoters do not have the legal right to claim expenses incurred in the company's promotion. The company, on the other hand may choose to reimburse them for their pre-incorporation costs. The corporation may also pay the promoters a lump-sum payment or a commission on the purchase price of property obtained through them or on the shares sold as compensation for their efforts. The corporation may also provide them stock or debentures or give them the opportunity to buy the securities later. B. Incorporation The application must be filed with the Registrar of Companies in the state where the company's registered office will be located. A registration application must be accompanied by specified papers. They areas follows:  A duly stamped, signed, and witnessed Memorandum of Association. In the case of a public business, it must be signed by at least seven members. However, two members' signatures are sufficient for a private company.  As with the Memorandum, the Articles of Association must be legallystamped and witnessed.  The prospective directors' written approval to serve as directors, as well as an agreement to purchase qualification shares.  The prospective Managing Director, Manager, or full-time director has reached an agreement if one exists.  A copy of the letter from the Registrar authorizing the company's name.  A legislative declaration attesting to the fact that all registration requirements have been met. This document must be properly signed.  Along with these documents, a notification containing the exact address of the registered office may be submitted. Effect of the Certificate of Incorporation: The date inscribed on the Certificate of Incorporation marks the beginning of a company's legal existence. On that date, it becomes a legal entity with eternal succession. It gains the ability to enter legally binding contracts. The Certificate of Incorporation is indisputable documentation of a company's regular incorporation. 40 C. Capital Subscription: SEBI clearance is required to raise funds from the public. The Registrar of Companies will receive a copy of the prospectus or a statement in lieu of the prospectus. Bankers, brokers, underwriters & other professionals are hired. A request for approval to trade in shares or debentures must be made to the stock exchange. Process of Capital Subscription: 1. SEBI Approval: SEBI (Securities and Exchange Board of India), ou