Forms of Business Organisations

>> August 21, 2011

Every business needs an organisation to regulate its functioning. When two or more persons work together to achieve a common objective, the division of labor takes place between them. This is the beginning of an organisation. The organisation plays a vital role in achieving the main and ancillary objective of the business.

The business units have different forms of organisations. These can be classified as follow

1. Individual or sole proprietorship

Sole proprietorship is the first stage in the evaluation of various forms of business organisation and hence the oldest one. It is the simplest and most natural form of organisation. Though, the sole proprietorship is the oldest for of organisation and many changes have taken place thereafter in the form of business ownership, yet it remain the most popular form in the modern business.

" A sole proprietorship is that form of business as the head of which stands an individual as the one who is responsible, who directs its operations and who alone runs the risk of failure."

2. Partnership firm

Partnership has two or more members each of whom is responsible for the obligation of the partnership. Each of the partners may bind the other, and assets of the partners may be taken for the debts of the partnership.

3. Joint Hindu family

Joint Hindu family or Hindu undivided family firm is a peculiar form of organisation which comes into existence by operation of Hindu law. The functioning of this form of organisation is governed by Hindu law. The hindu law comes into operation on the basis of two schools of thoughts which are as follow.

School of mitakshara

The school of mitakshara is applicable to whole of India except the state of Assam and Bengal, where the school of dayabhaga is applicable.

The Joint Hindu family firm as a form of organisation has its origin in the principles of inheritance under the mitakshara school of Hindu law. Thus, legally speaking, joint Hindu family firm exists only under the mitakshara system. All the male members of the joint Hindu family firm are known as coparceners. Their interest in the family business is called as the coparcenery interest. Thus the sons, grand sons and great grand sons become joint owners in the family property. The moment a male child borns in joint Hindu family, he becomes a joint owner to the ancestral property. Initially, a female member was not having right to the joint family property, but the amended Hindu succession act, 1956, enable the female members of the deceased coparceners family to share out of the coparcenery interest of such coparceners. However, the female members or their relatives do not enjoy the status of coparceners even after the amendment in Hindu succession act 1956.

4. Joint stock company

Company is an artificial person created by law for some common purpose, where the capital is divisible into parts, known as shares and with a limited liability.

5. Co-operative organisation

Co-operative organisation is the form of business organisation where in persons voluntarily associate together as human beings on the basis of equality for promotion of economic interest of themselves.

6. State enterprises and public utilities

Public enterprises mean state ownership and operation of industrial, agricultural, financial and commercial undertakings. 


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