NIOS Class 12 Business Studies Chapter 4 Forms of Business Organisation

NIOS Class 12 Business Studies Chapter 4 Forms of Business Organisation Solutions to each chapter is provided in the list so that you can easily browse throughout different chapters NIOS Class 12 Business Studies Chapter 4 Forms of Business Organisation and select need one. NIOS Class 12 Business Studies Chapter 4 Forms of Business Organisation Question Answers Download PDF. NIOS Study Material of Class 12 Business Studies Notes Paper 319.

NIOS Class 12 Business Studies Chapter 4 Forms of Business Organisation

Also, you can read the NIOS book online in these sections Solutions by Expert Teachers as per National Institute of Open Schooling (NIOS) Book guidelines. These solutions are part of NIOS All Subject Solutions. Here we have given NIOS Class 12 Business Studies Chapter 4 Forms of Business Organisation, NIOS Senior Secondary Course Business Studies for All Chapter, You can practice these here.

Forms of Business Organisation

Chapter: 4

Module – 1 Introduction to Business

INTEXT QUESTION 4.1 

1. Define ‘Sole Proprietorship’ in your own words.

Ans: The term ‘sole’ means single and ‘proprietorship’ means ‘ownership’. So, only one person is the owner of the business organisation. This means, that a form of business organisation in which a single individual owns and manages the business, takes the profits and bears the losses, is known as sole proprietorship form of business organisation 

2. Below are given the merits and limitations of sole proprietorship form of business organisation. Write ‘M’ against Merits and ‘L’ against Limitations in the space provided against each. 

(a) A sole proprietorship business is easy to start. ( )

Ans: M. 

(b) A sole proprietor is personally liable for all the liabilities of the business. ( )

Ans: L. 

(c) A sole proprietor has a limited capacity to raise funds for his business. ( )

Ans: L. 

(d) A sole proprietor can maintain secrecy about the affairs of his business. ( ) 

Ans: M.

(e) A sole proprietor maintains good personal contact with the customers. ( )

Ans: M. 

3. Match the following with reference to sole proprietorship business.

Ans:

INTEXT QUESTIONS 4.2 

1. State the position of minors in relation to a partnership firm.

Ans: A minor can only share the profits of the business. 

2. Following are the statements related to partnership form of business organisation. Rewrite the statement in correct form if found wrong. 

(a) Maximum 20 partners can join in a partnership firm running banking business.

Ans: Maximum 10 members can join a banking business in partnership form. 

(b) Partnership Deed may be either oral or in writing.

Ans: Partnership deed is always in the writing form.   

(c) There is an employer-employee relationship among the partners.

Ans: There is a principal-agent relationship among the partners. 

(d) In a partnership firm Hari and Madhu contributed Rs. 10,000 each. Madhu’s liability would be limited to Rs. 10,000 in case of losses in firm’s business.

Ans: In a partnership Hari and Madhu contributed Rs. 10,000 each. Madhus’s liability would be unlimited in case of losses in firm’s business. 

(e) A person acquired interest in a partnership firm by virtue of his relationship with the existing partners.

Ans: A person can acquire interest in a partnership firm by entering into an agreement.  

3. Identify the type of partners in the following situation: 

(a) The liability of Sridhar, a 25 years old partner is limited to the extent of his capital contribution.

Ans: Limited partner.  

(b) Madan has neither contributed any capital nor shares the profits of the firm though he is treated as a partner.

Ans: Nominal Partner. 

(c) Sunita has been admitted to the benefits of the firm at the age of 15.

Ans: Partner in profit or Minor partner. 

(d) Sudhir had contributed to capital and shares the profit and loss of the firm. But he does not take part in the day-to-day activities.

Ans: Sleeping Partner/dormant partner. 

(e) A firm declares that Sachin is a partner of their firm. Knowing the declaration Sachin did not disclaim it.

Ans: Partner by holding out.   

INTEXT QUESTIONS 4.3 

1. Why should the liability of Karta be unlimited? State the liability of the members of a Joint Hindu Family business.

Ans: Since Karta has absolute power to manage the business as per his own will, he may misuse the authority for his personal gain. The clause unlimited liability restricts the Karta to do harm to the business.  

2. State whether it is a merit or a limitation of Joint Hindu Family business. Write ‘M’ for merit and ‘L’ for limitation in the box given against each statement. 

(a) Young family member gains knowledge and experiences from other members.

Ans: M. 

(b) The death or insolvency of a member does not affect the continuity of the business.

Ans: M. 

(c) The coparceners are not motivated to put their best efforts. 

Ans: M.

(d) The members get equal share in the profits irrespective of their participation.

Ans: M. 

(e) The Karta takes quick decisions without any interference. 

Ans: M.

3. Distinguish between partnership and Joint Hindu Family business on the basis of membership.

Ans: (a) Minimum two members are required in both the cases. 

(b) Maximum 10 for banking and 20 for other business in case of partnership. Whereas there is no such limit fixed for Joint Hindu Family business. 

(c) Membership is acquired by entering into agreement in partnership business. In the Joint Hindu Family the membership is acquired by virtue of birth in the same family. 

INTEXT QUESTIONS 4.4 

1. Define ‘Cooperative Society’ in your own words.

Ans: The cooperative society is the only form of business organisation which gives utmost importance to its members rather than maximising its own profits. After studying its characteristics and different types, we may now study the merits of this form of business organisation. 

2. Answer the following in one or two words. 

(a) Who manages the cooperative society? 

Ans: Managing committee.

(b) How many members are required to start a multistate cooperative society?

Ans: 50 (Individual members). 

(c) Which type of cooperative society is formed to solve the credit need of the people?

Ans: Credit Cooperative society. 

(d) To whom the application should be made for seeking registration of a cooperative society?

Ans: Registrar of Cooperative societies. 

(e) What is the maximum limit of membership in a cooperative society?

Ans: Maximum limit is not fixed by the Act. It is the members who can decide about the maximum limit of membership in the society if they so want.   

3. Match the following: 

Ans:

Very Short Answer Questions: 

1. Define sole proprietorship. 

Ans: Sole Proprietorship’ form of business organisation refers to a business enterprise exclusively owned, managed and controlled by a single person with all authority, responsibility and risk.

2. List any two situations in which sole proprietorship form of business organisation is found to be most suitable.

Ans: (i) Small Scale Business.

(ii) Personalised Services. 

3. Who is a partner by estoppel? 

Ans: A person, who by his/her conduct or behaviour in the public gives an impression that he/she is a partner of the firm, is called ‘partner by estoppel’. Such partners are not entitled to share the profits of the firm, but are fully liable if somebody suffers because of their false representation.

4. Distinguish between partnership and sole proprietorship business on the basis of membership. 

Ans:

5. State the meaning of the term ‘Coparcener’.

Ans: In JHF business outsiders are not allowed to become the coparcener. Only the members of an undivided family acquire co-partnership rights by birth. 

1. State the suitability of sole proprietorship form of business organisation. 

Ans: To assist you in such exercise, it can be stated that the sole proprietorship is suitable where:  

(i) The market is limited, localised and the customers give importance to personal attention.  

(ii) The capital requirement is small and risk involved is limited.  

(iii) The production of goods involves manual skills e.g., handicrafts, filigree work, jewellery, tailoring, haircutting etc. 

2. Explain any two limitations of partnership form of business organisation. 

Ans: A partnership firm also suffers from certain limitations. These are as follows: 

(a) Unlimited Liability: The liability of the partners is unlimited i.e., the partners are personally liable for the debt and obligations of the firm. In other words, their personal property can also be utilised for payment of firm’s liabilities incase the firm’s assets are insufficient to pay debts. 

(b) Instability: Every partnership firm has an uncertain life. The death, insolvency, incapacity or the retirement of any partner brings the firm to an end. Not only that, any dissenting partner can give notice at any time for dissolution of partnership. 

3. What is meant by ‘partnership deed’? Is it essential for partnership?

Ans: A partnership deed, also known as partnership agreement, is a written document that outlines in detail the rights and responsibilities of all partners in a business operation. For lasting relationship among partners, there must be a written agreement among the partners to carry out the business and share the profits and losses.

Yes, it is essential For lasting relationship among partners, there must be a written agreement among the partners to carry out the business and share the profits and losses. 

4. Compare the status of a minor in partnership firm with that in a Joint Hindu Family business.

Ans: Partnership is created by an agreement among the persons who have agreed to join hands. Such persons must be competent to contract. Thus, minors, lunatics and insolvent persons are not eligible to become partners. However, a minor can be admitted to the benefits of partnership firm i.e., he can have a share in the profits without any obligation for losses. 

The JHF business is a jointly owned business. It is governed by the Hindu Succession Act 1956.

5. Mention any four characteristics a cooperative society attains after getting the registration certificate. 

Ans: The four characteristics a cooperative society attains after getting the registration certificate:

(a) Voluntary Association: Members join the cooperative society voluntarily i.e.by their own choice. Persons having common economic objective can join the society as and when they like, continue as long as they like and leave the society as and when they want. 

(b) Open Membership: The membership is open to all those having a common economic interest. Any person can become a member irrespective of his/her caste, creed, religion, colour, sex etc. 

(c) Number of Members: A minimum of 10 members are required to form a cooperative society. In case of multi-state cooperative societies the minimum number of members should be 50 from each state in case the members are individuals. The Cooperative Society Act does not specify the maximum number of members for any cooperative society. However, after the formation of the society, the members may specify the maximum member of members. 

(d) Registration of the Society: In India, cooperative societies are registered under the Co-operative Societies Act 1912 or under the State Cooperative Societies Act. The Multi-state Cooperative Societies are registered under the Multi-state Cooperative Societies Act 2002. Once registered, the society becomes a separate legal entity and attains certain characteristics.

1. Describe any four different types of partners.

Ans: partners can be classified into various categories. These are summarised as under. 

(i) Based on the extent of participation in the day-to-day management of the firm, partners can be classified as: 

(a) ‘Active Partners’: The partners who actively participate in the day-today operations of the business are known as active partners or working partners. 

(b) ‘Sleeping Partners’: Those partners who do not participate in the dayto-day activities of the business are known as sleeping or dormant partners. Such partners simply contribute capital and share the profits and losses. 

(ii) Based on sharing of profits, the partners may be classified as: 

(a) ‘Nominal Partners’: Nominal partners allow the firm to use their name as partner. They neither invest any capital nor participate in the day-today operations. They are not entitled to share the profits of the firm. However, they are liable to third parties for all the acts of the firm. 

(b) ‘Partners in Profits’: A person who shares the profits of the business without being liable for the losses is known as ‘partner in profits’. This is applicable only to the minors who are admitted to the benefits of the firm and their liability is limited to their capital contribution. 

(iii) Based on Liability, the partners can be classified as: 

(a) ‘Limited Partners’: The liability of limited partners is limited to the extent of their capital contribution. This type of partners are found in Limited Partnership firms in some European countries and the USA. 

(b) ‘General Partners’: The partners having unlimited liability are called ‘general partners’ or Partners with unlimited liability. It may be noted that every partner who is not a limited partner is treated as a general partner. 

(iv) Based on the behaviour and conduct exhibited, there are two more types of partners besides the ones discussed above:

(a) Partner by Estoppel: A person, who by his/her conduct or behaviour in the public gives an impression that he/she is a partner of the firm, is called ‘partner by estoppel’. Such partners are not entitled to share the profits of the firm, but are fully liable if somebody suffers because of their false representation. 

(b) Partner by Holding out: Similarly, if a partner or partnership firm declares that a particular person is a partner of their firm, and such a person does not disclaim it, then he/she is known as ‘Partner by Holding out’. Such partners are not entitled to profits but are fully liable as regards the firm’s debts.  

2. What is a Joint Hindu Family business? Describe its main characteristics. 

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