case study of business studies class 11 chapter 2

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Class 11 Business Studies Case Study Questions

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CBSE Class 11 Business Studies Case Study Questions are available on myCBSEguide App . You can also download them from our student dashboard .

For students appearing for grade 11 CBSE exams from the Commerce stream, Business Studies is a fundamental subject. Business Studies is considered to be quite interesting as well as an occupying subject as compared to all other core subjects of the CBSE class 11 commerce stream. To ace this CBSE exam, students are not only required to work hard but they ought to learn to do smart work too.

Among all the other core subjects of the Commerce stream i.e accountancy, economics and business studies, Business Studies is the one that is purely theoretical. It is termed to be comparatively easier and more scoring than the other mandatory subjects of the commerce stream. Many students who opt for the commerce stream after their 10-grade exams desire to learn in-depth about the business organizations and their work, for them the subject is of utmost importance. Business Studies is an essential component of the class 11 commerce stream curriculum.

In order to ace the subject the student needs to have conceptual clarity. CBSE has designed the syllabus for class 11 Business Studies so as to provide students with a basic understanding of the various principles prevalent in the Business organizations as well as their interaction with their corresponding environment.   

Case Study Questions in class 11 (Business Studies)

Case-based questions have always been an integral part of the Business Studies question paper for many years in the past. The case studies have always been considered to be challenging for the students, for such questions demand the application of their knowledge of the fundamental business concepts and principles. Last year i.e-  2021 CBSE introduced a few changes in the Business Studies question paper pattern to enhance and develop analytical and reasoning skills among students.

It was decided that the questions would be based on real-life scenarios encountered by the students.CBSE not only changed the way case-based questions were formulated but also incremented their weightage in the Business Studies question paper. The sole purpose of increasing the weightage of case-based questions in the class 11 curriculum by CBSE was to drift from rote learning to competency and situation-based learning.

What is a case study question? (Business Studies)

In Business Studies, a case study is more like a real-world test of how the implementation works. It is majorly a report of an organization’s implementation of anything, such as a practice,a product, a system, or a service. The questions would be based on the NCERT textbook for class 11 Business Studies. Case-based questions will definitely carry a substantial weightage in the class 11 Business Studies question paper. questions.

A hypothetical text will be provided on the basis of which the student is expected to solve the given case-based question asked in the Business Studies class 11 exam. Initially, the newly introduced case-based questions appeared to be confusing for both the students and the teachers. Perhaps, they were reluctant to experiment with something new but now a lot more clarity is there that has made the question paper quite student-friendly.

Case study questions could be based on any chapter or concept present in the NCERT textbook. Thus, it is expected from the students to thoroughly revise and memorize the key business fundamentals. 

Business Studies syllabus of class 11 CBSE   

The entire Business Studies course is divided into 2 parts:

• Part A, Foundation of Business
• Part B, Finance and Trade

The class 11 Business Studies exam is for a total of 100 marks, 80 marks are for the theory and the remaining 20 for the project. Most of the questions are based on the exercises from the NCERT textbook. It is recommended to rigorously go through the contents of the book. A single textbook has been published by NCERT for Class 11 Business studies. There are a total of 10 chapters in this book divided into 2 parts. 

CBSE Class – 11

Business Studies (Code No. 054)

Theory: 80 Marks Time: 3 Hours Project: 20 Marks

Case Study Passage (Business Studies class)

As part of these questions, the students would be provided with a hypothetical situation or text, based on which analytical questions will have to be answered by them. It is a must for the students to read the passage in depth before attempting the questions. In the coming examination cycle (2022-23), case-based questions have a weightage of around 30%. These questions can be based on each chapter in the NCERT book for Business Studies, grade 11.

Students must prepare well for the case-based questions before appearing for their Business Studies exam as these questions demand complete knowledge of the various concepts in their syllabus. CBSE plans to increase the weightage of such questions in the upcoming years.

Sample case-based Questions in Business Studies

Business Studies as a subject provides a way of perceiving and interacting with the business ecosystem. It is a core subject of the commerce stream that is purely theoretical and relevantly easier than the other compulsory subjects of the stream. Class 11 Business Studies syllabus is closely related to trade and commerce. The subject cannot be ignored as it is the foundation of many concepts and theories which are studied at an advanced level in class 12.

The case-based questions asked in the CBSE Business Studies question paper for class 11 are of two types:

As per the latest circular issued by CBSE on Assessment and Evaluation practices of the board for the session 2022-23, CBSE has clearly mentioned that competency-based questions including case studies will be different from subjective questions.  

The questions can also be categorized on their difficulty level:

• Direct: such questions can be easily solved. Their answer is visible in the given passage itself.
• Indirect/ Analytical: such questions are confusing and tricky. These can be solved by the application of the theory or principle that is highlighted in the provided text. 

How To Prepare For Case-based Questions? (Business Studies grade 11)

Students need to prepare well for the case-based questions before appearing for their class 11 Business Studies exam. Here are some tips which will help the student to solve the case-based questions at ease:

• Read the provided text carefully
• Try to comprehend the situation and focus on the question asked
• Analyze and carefully answer the question asked
• In general, the passage given would be lengthy in Business Studies case-based questions but their solutions are comparatively short and simple
• One can significantly save time if they follow a reversal pattern, that is going through the questions before reading the comprehensive case study passage.
• Answer in a concise manner
• One should concentrate on solidifying key fundamental principles/theories
• Go through the NCERT textbook in depth. The language used is crisp and simple.
• While providing solutions to the case-based question, pick the keyword/keyline based on which you are driving insights.

 In order to excel in the Business Studies class 11 exam, one needs to ignore the shortcut techniques and get to read the NCERT textbook rigorously. Case studies can be easily solved if your key fundamentals are strong and clear. The best part of having these questions is that the asked question itself projects a hint of its answer. These simple points if kept in mind will definitely help the students to fetch good marks in case study questions, class 11 Business Studies. 

Case study question examples in Business Studies

Here a re some given case study questions for CBSE class 11 Business Studies. If you wish to get more case study questions and other study material, download the myCBSEguide app now. You can also access it through our student dashboard.

Business Studies Case Study 1

Read the hypothetical text given and answer the following questions:

Manish, Rahul and Madhav live in the same locality. They used to meet and discuss their ideas. After discussing the recent fire breakout in their area, they decided to take fire insurance for their house or work area. Manish gets his house insured against fire for ₹1 lakh and during the policy period, his house gets damaged due to fire and the actual loss amounts to ₹2.5 lakh. The insurance company acquired the burning material and approved his claim. Rahul gets his godown insured against fire for ₹1 lakh but does not take enough precautions to minimize the chances of fire like installing fire extinguishers in the factory. During the policy, a fire takes place in his godown and he does not take any preventive steps like throwing water and calling the employees from the fire fighting department to control the fire. He suffered a loss of ₹1,20,000. Madhav took a fire insurance policy of ₹20 lakh for his factory at an annual payment of ₹24,000. In order to reduce the annual premium, he did not disclose that highly explosive chemicals are being manufactured in his factory. Due to a fire, his factory gets severely damaged. The insurance company refused to make payment for the claim as it became aware of the highly explosive chemicals.

How much can Manish claim from the insurance company?

• None of the above

How much compensation can Rahul get from the insurance company?

Which principle is violated in the case of Rahul?

• Insurable Interest
• Utmost Good Faith

How much amount is the insurance company liable to pay to Madhav if he files a case against it?

• Insufficient information

Which principle of Insurance is violated by Madhav?

• Insurable interest
• Subrogation
• Proximate Cause

The insurance company acquired the burnt material and approved his claim. Which principle of Insurance is highlighted in the given statement.

• (a) Mitigation
• (a) Utmost Good Faith
• (d) Subrogation

Business Studies Case Study 2

 Sarthak Electronics Ltd. has a loss of Rs 15,00,000 to pay. They are short of funds so they are trying to find means to arrange funds. Their manager suggested a claim from the insurance company against stock lost due to fire in the warehouse. He actually meant that they can put their warehouse on fire and claim from insurance companies against stock insured. They will use the claim money to pay the loan.

• Will the company receive a claim if the surveyor from the insurance company comes to know the real cause of fire?
• Write any two Values which the company ignores while planning to arrange money from false claims.
• State any three elements of fire insurance

Business Studies Case Study 3

OLX and qickr are examples of well-known websites used to conduct business. Tarasha’s sofa set got spoiled in the rain. Her friend suggested that she should change the fabric so that it looks new and put it for sale on Olx. Tarasha followed her friend’s advice and got her sofa repaired so that it looked better and uploaded nicely clicked pictures on the website without disclosing the fact that it was damaged from the inside. She found a buyer and sold it for Rs 10,000. After five days the buyer found the real state of the sofa set and called Tarasha but she did not answer any of the calls.

• identify the type of business highlighted in the above case.
• Identify any two values which are overlooked by Tarasha.
• Explain any two benefits and limitations of e-business.

Advantages of case study questions in Business Studies

Class 11 Business Studies syllabus is not very vast but has to be focussed upon as it forms the base for your 12th grade Business Studies syllabus. Students are supposed to prepare themselves thoroughly from the NCERT textbook. The Case-based questions prominently focus on the real and current scenarios of the Business world. Approximately 30% of the question paper will comprise case study questions that demand high-order thinking and reasoning skills from the students. The students ought to practice class 11 Business Studies case-based questions from the various options available to them, so as to excel in the subject.

• Enhance the qualitative and quantitative analysis skills of students
• Provides an in-depth understanding of the key Business theories/concepts
• Inculcate intellectual capabilities in students
• Help students retain knowledge for a longer period of time
• The questions would help to discard the concept of rote learning
• Case studies promote and strengthen practical learning.

“Failure is success if you learn from it”

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Business Studies Class 11 Chapter 2 Important Questions and Answers

Home » CBSE » Business Studies Class 11 Chapter 2 Important Questions and Answers

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Business Studies is a subject taught in a Commerce student’s syllabus beginning in Class 11 and continuing through Class 12. Students will master an understanding of the area of management and other business disciplines if they study this subject. Forms of Business Organisation is the second chapter of the Class 11 syllabus, and it teaches about different forms of Business. This chapter covers concepts such as various forms of business organisation, features, merits, and demerits, and factors determining the appropriate form of business organisation. It carries significant weightage in the Business Studies syllabus. Students can easily access all this and more on the Extramarks website.

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Students must read through all the chapters to score well in Business Studies. Extramarks understands the importance of solving questions. As a result, we’ve gathered them from various sources, such as the NCERT Textbook, NCERT Exemplar, other reference books, past exam papers, and so on. Our Business Studies experts have curated step-by-step solutions to help students better comprehend the topics. Students can register with Extramarks and access Important Questions Class 11 Business Studies Chapter 2. 

Apart from Chapter 2 Class 11 Business Studies Important Questions, there is so much that the Extramarks website has to offer. Students can easily find materials like NCERT Solutions, CBSE revision notes , past year question papers, NCERT books, and more on the Extramarks website.

Get Access to CBSE Class 11 Business Studies Important Questions 2022-23 with Solutions

Sign Up and get complete access to CBSE Class 11 Business Studies Important Questions for other chapters too:

A team of Extramarks specialists have developed an entire list of Business Studies Class 11 Chapter 2 Important Questions taking cues from numerous sources. The questions comprise a wide variety of topics, including the different forms of business organisation, features, merits, and demerits of business organisation, factors determining the appropriate form of business organisation, and so on. These questions and their solutions help students better comprehend Forms of Business Organisations.

Mentioned below are a few Important Questions from Class 11 Business Studies Chapter 2 and their solutions:

Q1. What are the important privileges available to a private company?

Answer: When a business is formed as a private corporation, it has several advantages and exemptions that are not accessible to public companies. Some of the main benefits that a private corporation has are as follows:

• A private business can be formed with as few as two members, but a public corporation requires seven.
• In private business the public is not asked to subscribe to company’s shares and hence a prospectus is unnecessary.
• Shares can be distributed without a minimum subscription requirement.
• A private company can start operating as soon as it receives its establishment certificate. On the other hand, the public company must wait until it gets the starting certificate before it may begin operations.
• A private company only needs two directors, but a public company requires at least three.
• A member index is not necessary for a private organisation but is required for a public corporation.

Q2. With a notable example, explain mutual agency in partnership.

Answer: Mutual agency refers to the legal connection between participants in a partnership who have authorization powers and the authority to engage the collaboration in business contracts. In another way, each partnership member has the authority to make business choices that commit or bind the entire partnership to a commercial contract with a third party or entity. For example, even if the partnership agreement prohibits it, a grocery store partner who acquires a delivery truck in the partnership’s name enters a legally enforceable transaction. On the other hand, such behaviour would be unlawful if a law firm partner purchased a snowmobile for the firm.

Q3. What is meant by “partner by estoppel”? Explain.

Answer: A person who shows others that they are a company partner via their actions, behaviour, or statements, is referred to as Partner by estoppel. Such a person is not a partner, and they are not responsible for providing any cash to the company, nor are they accountable for any  portion of the company’s profit or loss. The same individual, however, may be held accountable for the firm’s debts. Hence, as a result, if the Business has adequate assets or finances, debt repayment can be obtained by selling off the partner’s private assets via estoppel.

Q4. What exactly is HUF?

Answer: Although the Income Tax Act does not define the Hindu Undivided Family (HUF), it is recognised under Hindu law. Unmarried daughters are included in the HUF, as are all those who are lineally settled from the same ancestor. A person does not create HUF but by a family’s standing, i.e., it is created automatically in any Hindu household.

Q5. Why do some consider partnership a relatively unpopular form of business ownership? Explain the merits and limitations of partnership.

Answer: A partnership is viewed as a relatively unattractive sort of company ownership due to the inherent limitations that come with it. These limits include infinite responsibility, limited resources, the possibility of conflict, and a lack of consistency.

• Ease of closure and creation: A partnership business can be established rapidly by agreement amongst potential partners. A company doesn’t need to be registered.
• Balance decision-making: The partners might manage various responsibilities depending on their expertise. As a result, the decision-making process in a partnership business is more balanced than in any other kind of corporate ownership.
• A large amount of funds: Each partner in a partnership provides a certain amount of money. Consequently, compared to a single owner, it is feasible to collect a more considerable sum of cash and carry out additional activities as needed.
• Confidentiality: There is no legal requirement for a partnership business to publish its financial accounts or submit reports. As a result, it may maintain secrecy regarding its operations.
• Sharing the risk: The risks that come with running a partnership business are shared by all partners. As a result, individual partners experience less worry, tension, and stress.

Limitations of business partnership:

• Restricted Resources: Capital investment contributions are frequently insufficient to sustain large-scale commercial activity due to the limited number of partners. As a result, partnership firms struggle to expand beyond a particular scale.
• Conflicts of Interest: The decision-making authority in a partnership business is distributed among the partners. This is also dependent on their level of competence, foresight, and ability.
• Unlimited liability: Partners are accountable for repaying debts from their assets if the Business’s assets are insufficient to fulfil its obligations.
• Lack of continuity: When one of the partners dies, retires, becomes bankrupt, or becomes mad, the partnership comes to an end. On the other side, the surviving partners might enter into a new agreement and continue to run the business.

Q6. In what form of Business do individuals associate freely for profit, with capital dividends into transferable shares, and ownership of which is a requirement of membership? Explain in terms of characteristics.

Answer. A joint-stock company is a non-profit organisation formed by a group of people to do profitable economic activities. It has a legal status distinct from its members and a capital structure separated into transferable shares. A corporation is an independent legal entity with its legal identity, perpetual succession, and a common seal. In a corporation, the shareholders are the company’s owners, and the Board of Directors, which the shareholders elect, is the company’s central management body.

The company’s capital is divided into smaller components known as “shares,” which can be freely transferred from one shareholder to the next (except in a private company). A joint-stock firm has the following characteristics:

• A corporation is a made-up entity. It is a legal entity that exists without the participation of its members.
•  The legal personality of a corporation is established. The law does not regard the Business and its owners as the same.
• Starting a business is a time-consuming, costly, and challenging endeavour. Therefore, incorporation is required for all enterprises.
• It will only be deactivated after completing a specialised operation known as winding up. Members may come and go, but the firm does not cease to exist.
• A company’s common seal may or may not exist.
• All shareholders share the risk of a company’s losses.

Q7. Even though there are limitations of size and resources, several people continue to prefer sole proprietorship compared to other forms of organisation? Why?

Answer: Due to the numerous sheer benefits, it provides despite the size and resource limits. The sole proprietorship is the company’s form of choice. The following are some of the advantages:

• A single proprietorship firm is simple to set up since there are few legal requirements. Similarly, closing a firm is a painless process.
• The sole owner controls the firm as the only decision-maker, allowing for swift choices.
• The sole proprietor enjoys all the Business’s gains while bearing all its misfortunes.
• Because the lone proprietor is the only person in charge of the business, it is highly flexible.

Q8. Which business model is best for the following businesses, and why?

• Coaching centre for the students of science subject
• A beauty salon
• A shopping centre
• Little repair shops

Answer. The suitable business model for the businesses as mentioned earlier would be:

• Coaching center for the students of science subject: Collaboration with a science coaching facility. It’s simple to set up and run, and it’s inexpensive. Partners report their share of profit or loss on their tax returns.
• A beauty salon: A salon can be run as a sole proprietorship. Created and ran straightforwardly and cost-effectively. The owner declares profit or loss on their tax return.
• A shopping center: shopping malls are JSCs (joint-stock corporations). Personal responsibility for commercial debts is restricted for business owners.
• Hotel: In the hotel industry, there are joint-stock companies. Small businesses are drawn to LLCs and corporations because they minimize their owners’ liability for corporate debts and court judgments against the company. Another factor to consider is income taxes: you may set up a limited liability company (LLC) or a corporation to benefit from reduced tax rates. Furthermore, an LLC or company may be able to deduct the cost of a range of fringe benefits passed on to its employees (including the owners) as a business expense.
• A little repair shop: A sole proprietorship is appropriate for a small repair shop. Created and ran straightforwardly and cost-effectively. The owner declares profit or loss on their tax return.
• Restaurant: Ownership of a restaurant as a sole proprietor. Created and ran straightforwardly and cost-effectively. The owner declares profit or loss on their tax return.

Q9. How does a cooperative society exemplify democracy and secularism? Explain.

Answer: A cooperative society is run by persons chosen by all members through a democratic process. Each member has an equal right to vote, regardless of the amount of money they have invested. As a result, it functions as a democracy in which all members are treated equally and have similar rights. Members are not discriminated against because of their caste, religion, or gender. People of the management committee can select the members they believe best represent them. As a result, it denotes secularism.

Q10. What does it mean to have unlimited liability?

Answer: General partners and sole proprietors with unlimited liability are jointly and severally liable for the company’s debts and obligations. However, this obligation is not limited and can be paid off by seizing the owners’ assets, distinguishing it from limited liability partnerships.

Q11. Compare the status of a minor in a Hindu joint family business with that in a partnership firm.

Answer: A person under 18 is considered a minor in Indian law. By being born into a Joint Hindu household, a minor becomes a member of the family company. Like other family members, the minor has equal ownership and rights to the property and company. However, his obligation is limited to his part of the property.

As per the Indian Partnership Act of 1932, a minor cannot become a partner in a partnership business. However, if all partners agree, a minor can be initiated and partake in a firm’s profits. Still, a minor does not need to contribute capital or carry any obligation if the Business supports the firm. Therefore, minors aren’t regarded as partners. However, once they reach the age of 18, they have the option of continuing the relationship or terminating it.

Q12. Who has equal ownership rights to an ancestor’s property? Emphasise its most important aspects

Answer: A Joint Hindu Family is a form of business owned and operated by members of the Hindu Undivided Family (HUF). The company’s membership is based on birth in a specific family, and three generations of the same family can be members. The family’s business is run by the eldest member of the family, known as Karta. Joint Hindu Family Business members with equal ownership rights over an ancestor’s property are known as coparceners.

A combined Hindu family company has the following characteristics:

• Because membership is by birth, there is no requirement for an agreement.
• Except for the Karta, all members are only responsible for their portion of the Business’s co-coparcenary property. The Karta’s responsibility is boundless.
• Karta oversees the family company, and his choices bind everyone.
• After Karta’s death, the business is carried on by the next eldest son, Karta.

Q13. Why is it important to choose an appropriate form of organisation? Discuss the factors that determine the choice of form of organisation.

Answer: Choosing an appropriate business organisation is necessary since it is one of the most important decisions to make when beginning a business or expanding an existing one. A business can be owned and run in several ways. It’s challenging to modify a company model after it’s been decided. As a result, the type of business company chosen should be done with care and consideration.

The following factors influence organisational structure selection:

• Control: With a sole proprietorship, you have complete control over your operations and decision-making authority. If the owners, on the other hand, want to share ownership to make better judgments, they can form a partnership or a corporation.
• Nature of Business: Businesses that involve direct personal connection with customers, such as beauty salons or grocery stores, are better suited to a single proprietorship. The corporate kind of structure benefits large manufacturing units. The partnership structure is significantly more served in the case of professional services.
• Management Skills: Being informed in all firm parts is difficult for a sole owner. Members split their labour in other organisations, such as partnerships and businesses, allowing management to specialise in specific areas and make better judgments.
• Capital Requirements: The corporation form is suitable for large-scale activity since it may generate a large amount of money by issuing shares. There are two options for medium and small firms: partnership or sole proprietorship. In the framework of a company, expansion capital requirements may be managed more easily.
• Continuity: The continuity of sole proprietorship and partnership enterprises can be disrupted by events such as the owners’ death, insolvency, or insanity. In organisations like joint Hindu family companies, cooperative societies, and corporations, such factors, on the other hand, have minimal influence on the business’s survival.
• Liability: The liability of the owners/partners of a sole proprietorship or partnership is unlimited. This might lead to the owners’ assets being used to repay the debt.
• Cost and Convenience of Starting a Company: A sole proprietorship is straightforward to start in terms of initial business costs and legal procedures, but because of its more minor activities, a partnership has the advantage of less legal formalities and lower prices. Registration is necessary in the case of cooperative societies and companies. The process of founding a company takes time and money.

Q14. What are the reasons for the formation of cooperative forms of organisation? Describe the different sorts of cooperative societies.

Answer. A cooperative society is a collection of individuals who get together voluntarily for the common welfare of its members. They are motivated by a desire to defend their economic interests from potential exploitation by intermediaries looking to increase their profits. The process of founding a cooperative organisation is simple, and all that is necessary is the agreement of at least ten adults. A society’s capital is raised by selling shares to its members. An organisation acquires a distinct legal character when it is registered.

One sort of cooperative society is the consumer cooperative society.

• It was designed to protect consumers’ interests.
• To improve operational savings, society strives to eliminate intermediaries. Instead, it purchases things in bulk from wholesalers and resells them to its members.
• Profits are dispersed depending on capital contributions to the organisation or purchases made by individual members.

Producer Cooperative Societies are a specific sort of producer cooperative society.

• It was established to protect the interests of small farmers.
• Members are producers looking for inputs to create commodities to fulfil customer demands.
• Profits are distributed according to their contributions to the society’s overall pool of products produced or sold.

Cooperative Societies Marketing-this organisation was established to help small manufacturers market their products.

• Producers that demand fair pricing for their commodities are among the group’s members.
• It combines individual members’ production and marketing activities such as shipping, storage, and packaging to sell the commodities for the best feasible price. Profits are dispersed according to the amount of money each member puts in.

Farmers’ Cooperative Societies were formed to protect farmers’ interests by providing high-quality inputs at a reasonable price.

• Members are farmers who want to collaborate on farming projects.
• The idea is to increase productivity while reaping the benefits of large-scale farming. Improving farmer output and returns while addressing challenges associated with farming on fragmented land holdings.

Cooperative Financing Societies were established to give members timely credit at reasonable rates.

• Members are individuals seeking financial assistance in the form of loans.
• The purpose of such groups is to protect members from being taken advantage of by lenders who demand high-interest rates on loans.

A cooperative housing organisation is a sort of Cooperative Housing Societies.

• It was established to assist low-income people in constructing homes at a reasonable cost.
• These societies are people looking for a cheaper location to reside in.
• The purpose is to alleviate members’ housing issues by constructing homes and allowing them to pay in instalments.

Q15. If registration is optional, why do partnership firms willingly go through this legal formality and register themselves? Explain.

Answer: Although partnership business registration is optional, many firms choose to do so. This is owing to the severe legal consequences of failing to register. Listed below are a few examples:

• The partners of a non-registered business cannot sue a third party, but the non-registration of a partnership firm does not prevent other firms from hiring it.
• The company is forbidden from filing a lawsuit against any of its partners. Similarly, a partner in a non-registered firm cannot sue their co-partners or the company.
• Claims against a third party by a non-registered partnership entity cannot be enforced in court. As a result, partnerships are established to overcome these disadvantages.

Forms of Business Organisation Class 11 Important Questions – Key Topics Covered 

Class 11 Business Studies Chapter 2 Important Questions covers the following key topics:

Forms of business organizations

There are several different types of business organizations from which to choose:

• Sole proprietorship 

Joint Hindu family business

• Partnership 
• Cooperative societies

Joint-stock company

Sole Proprietorship

It is a type of Business owned, managed, and controlled by a single person who carries all the risks and reaps all the rewards.

• It can be formed and disbanded without the need for any legal requirements.
• In this business organisation, the lone proprietor’s responsibility is unrestricted.
• As the single risk carrier and profit recipient, he bears all the risks and reaps all the rewards.
• There is no distinction between the owner and the Business in the eyes of the law.
• All choices must be made by the owner, which necessitates prompt decision-making.
• As a lone proprietor, it is simple to keep company secrets.
• Because there is no one to share gains with, the owner enjoys all the profits.
• There are no legal requirements for establishing and closing a business, making creating and completing one simple.

Limitations:

• The owner’s savings or money borrowed from friends and family might be used to support the Business.
• A business’s life expectancy is limited as it is dependent on the owner’s health and mental state.
• His assets are at stake if the firm fails to satisfy its debts.
• A single individual may not be able to oversee all of the functions.

It is a type of business that is owned and managed by members of an undivided Hindu family, with three generations of family members potentially participating.

• Hindu Undivided Families are created when at least two family members have ancestral property. The Hindu Succession Act of 1956 governs it.
• Except for the Karta, all family members have limited responsibility for their part of the company property.
• Karta oversees all actions inside the corporate organisation.
• It can be stopped if all members of the family agree to it.
• Organisation membership is based on birth.
• With ‘Karta,’ you have complete control over your firm and can make better decisions.
• If ‘Karta’ dies, the Business continues until all members desire to continue, and then control is given to the next eldest member.
• Family members are only liable for their share of the business party.
• Because family members feel connected and loyal, they work together to achieve a common goal of progress.
• Businesses might be supported primarily via inheritance, restricting financial resources.
• Karta’s personal property is at risk due to his unlimited liability.
• Differences of opinion among members and the ‘Karta’ might lead to conflict.
• Karta’s managerial abilities are limited, and he may not be familiar with all of the Business’s functions.

Partnership:

According to the Partnership Act of 1932, a partnership is a relationship between people who have agreed to share the earnings of a firm run by all or by one acting on behalf of all of them.

• The partnership Act of 1932 governs the establishment of the Business.
• The liability of all company partners is unlimited.
• All the partners share the risk in the Business.
• All decisions are made with the approval of all partners, and each partner bears responsibility for the company’s day-to-day operations.
• Because registration is optional, a business can be formed and ended with the approval of all partners.
• As partners take on tasks according to their competence, all choices are made by consensual partners.
• All partners contribute money, broadening the scope of large-scale company operations.
• There is no need to report financial results; therefore, maintaining corporate secrets is simple.
• Their complete responsibility covers each partner’s personal property.
• All parties may have differing viewpoints, which can lead to conflict.
• Any disagreement between partners or the death of a partner might put the company out of operation.
• Due to a lack of financial disclosures, an outsider can’t determine the actual economic situation.

Cooperative society

An organisation of volunteers working for a shared goal to protect members’ economic and social interests. The Cooperative Societies Act of 1912 requires it to be registered.

• Any individual with a shared interest, regardless of caste, gender, or religion, is free to join or leave a cooperative organisation at any time.
• A cooperative society has a different identity from its members, and the registration of such a group is required.
• The goal of forming a society is to provide mutual assistance to team members.
• Each member has the same right to vote and elect managing committee members.
• Cooperative societies maintain their existence in the face of death, bankruptcy, or insanity among their members.
• Members of society work willingly, which helps to save expenses.
• The only funding source is the member’s capital contribution, and the low dividend discourages members from contributing money to the organisation.
• Volunteer members may lack the requisite competence and skills, resulting in inefficient operations and management.
• It’s challenging to preserve secrets since members provide all information about the society’s operations at the meeting.

“A corporation is an artificial person with a separate legal existence, eternal succession, and a common seal,” according to the Companies Act of 2013.

• A corporation is a legal entity with legal standing but does not act as humans do. The board of directors conducts all corporate actions in the corporation’s name.
• Companies are founded following the legal requirements outlined in the Companies Act of 2013.
• A corporation is formed by law and may only be disbanded by legislation. Therefore, the company’s existence is unaffected by the status of its members.
• The responsibility of shareholders is limited to their investment in the firm. Therefore, there is no chance of personal assets being lost.
• The firm’s existence is unaffected by its stockholders’ status; it continues to exist.
• Companies can borrow vast sums of money from financial institutions or banks and solicit cash from the public.
• The formation of a corporation necessitates the completion of several documents and legal requirements, making the process lengthy and complicated.
• There is no confidentiality or secrecy because all financial information is given to the general public.
• Decision-making must adhere to a hierarchy, leading to delays in making judgments and implementing actions.

Choice of the Type of Business organisation

• Nature of Business
• Cost of setting up the organisation
• Capital consideration
• Degree of control
• Management ability

The briefly described topics in the above sections are covered in the Important Questions Class 11 Business Studies Chapter 2. 

Benefits of Solving Class 11 Business Studies Chapter 2 Important Questions

Business Studies is one subject that requires a lot of reading and revisions. This subject is introduced in Class 11, and it prepares the base for Class 12 board examinations. Therefore, students are advised to access Important Questions of Business Studies Class 11 Chapter 2 . Students will get a sense of confidence by solving essential questions from all the chapters and overlooking their solutions. 

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Q.1 The North Coast Cooperative that was Established in 1973 was the large consumer cooperative that offered a full service grocery store and deli. Director started to deal with bulk purchasing and packaging issues. Many people in the college-campus area wanted a supply of natural food products, which didnt exist. They wanted a cheaper, more reliable supply if they purchased togetherin bulk.

From the start, the co-op tried to provide a market for local produce. Initially, the farmers provided a fairly limited variety, mostly tomatoes, sweet corn, zucchini and other common garden vegetables. The co-op uses purchasing contracts, which act as a type of insurance to motivate farmers to produce new and different varieties

Explain the type of cooperative society that is refered to here. Also give three points to support the formation of such a form of business enterprise.

Marks: 1 Ans

This is a consumer cooperative society. These are formed to protect the interests of consumers. Members are consumers who want to get good quality products at reasonable prices. The society aims at eliminating middlemen for economy in operations.

Society purchases goods in bulk directly from the wholesalers and sells goods to the members directly.

Profits are distributed on the basis of either their capital contributions to the society or purchases made by individual members.

Merits of cooperative form of organisation are:

(i) Equal voting status: There is a principle of ‘one man one vote’ i.e., irrespective of the capital contribution by a member, each member is entitled to equal voting rights.

(ii) Limited liability: As the liability of members of a cooperative society is limited to the extent of their capital contribution, their personal assets of the members are safe from being used to repay business debts.

(iii) Stability: Death, bankruptcy or insanity of the members do not affect continuity of a cooperative Society i.e., it remains unaffected by any change in the membership.

(iv) Economy in operations: Focus of society is on elimination of middlemen which helps in reducing costs.

(v) Government support: Cooperative society exemplifies the idea of democracy and hence Government supports in the form of low taxes, subsidies, and low interest rates on loans.

(vi) Ease of formation: It can be started with a minimum of ten members and registration procedure is simple with few legal formalities.

Q.2 A friends group of a hotel management institute wants to start their own catering house that will serve parties, weddings, church functions and business events. All 4 of them are very good cooks and have managed the university parties very well. They want to start and see that how this business works with contributing small small savings initially.

What form of business organisation shall they form with limited funds

Looking at their conditions and case, the friends shall form a partnership initially. Partnership offers the advantage of less legal formalities and lower cost because of limited scale of operations.

After being successful, this partnership can take form of any other form of business organisation based on the decisions of partners.

Q.3 Karan is the sole owner of a shoe manufacturing factory. He took loan of `30 lakhs from a bank so as to expand his business further. However, he incurred losses in the business, due to which Karan was not able to pay the loan on time and his assets were also not sufficient enough repay back the loan. As a result, the bank asked him for repayment of loan, but he refused to pay on the ground that the loan was taken in the name of business and not for personal use. The bank file a case against Karan and the court gave the decision in favor of Bank on the on the basis that Karan is the sole proprietor and his business doesnt have separate identity from his own. The Court further stated that Karan is liable to repay the loan even by selling his personal property.

State the demerits of the business organisation being highlighted in the above case.

Marks: 6 Ans

The form of business organisation being highlighted above is Sole proprietorship.

Demerits of Sole proprietorship

• Limited life: Death, insolvency or illness of proprietor affects the business and may even lead to its closure as he/she is the sole owner of the business.
• Unlimited liability: Owner has unlimited liability. In case of business failure, creditors can recover their dues not only from the business assets, but also from the personal assets of proprietor. It makes the sole proprietor less inclined towards taking risks in the form of innovation or expansion
• Limited resources: Resources are limited to his/her personal savings or borrowing from other parties. Banks and other financial institutions might hesitate in lending long term loan to the sole proprietor. Size of the business rarely grows much and generally remains small due to lack of resources.
• Limited Managerial Ability: The proprietor has to assume responsibility of varied managerial tasks. Since a business owner may not be a specialist in every field, there is a possibility of unbalanced decision making. Moreover, proprietor may not be able to employ and retain talented and ambitious employees, due to limited resources.

Q.4 A private company is superior to a public company. Discuss this statement in the light of privileges of a private company.

Privileges of a private limited company as against a public limited company:i. A private company can be formed only by two members, whereas seven persons 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 shares of a private company. iii. Allotment of shares can be done without receiving the minimum subscription. iv. A private company can start business as soon as it obtains the certificate of incorporation, whereas a public company can start its business only after receiving the certificate of commencement of the business. v. A private company needs to have only two directors as against the minimum of three directors in case of a public company. vi. A private company is not required to keep an index of members, while it is necessary in case of a public company.

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Cbse class 11 business studies important questions, chapter 1 - business, trade and commerce.

Chapter 3 - Private, Public and Global Enterprises

Chapter 4 - business services, chapter 5 - emerging modes of business, chapter 6 - social responsibilities of business and business ethics, chapter 7 - formation of a company, chapter 8 - sources of business finance, chapter 9 - small business, chapter 10 - internal trade, chapter 11 - international business, faqs (frequently asked questions), 1. how many business studies books are there for class 11.

For Class 11 Business Studies, the Central Board of Secondary Education (CBSE) only recommends one book. Therefore, the National Council of Educational Research and Training (NCERT) has released this book, which is available in both English and Hindi. This book is broken into two sections and has ten chapters. Part A comprises six units that address business foundation information, while part B contains the remaining four units that discuss financial and trade knowledge.

2. What are the essential chapters in Business Studies in Class 11?

There are ten chapters in the Business Studies syllabus for Class 11. Chapter 7 – Sources of Business Finance, Chapter 8 – Small Business, Chapter 9 – Internal Trade, and Chapter 10 – International Business are the most significant. It is so because they have a greater weight than the rest of the syllabus. Students can refer to Important Questions Class 11 Business Studies Chapter 2 for easier comprehension of these chapters.

3. What is so special about Important Questions Class 11 Business Studies Chapter 2 that it makes Extramarks stand out from the rest?

 These Important Questions Class 11 Business Studies Chapter 2 are developed exclusively by the Extramarks subject experts. These solutions are 100 percent authentic and have been made after much research. They cover the concepts of the entire chapter and are written in simple and easy language.

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Question 1:

The structure in which there is separation of ownership and management is called

(a) Sole proprietorship

(b) Partnership

(c) Company

(d) All business organisations

The organisational structure in which there is separation of ownership and management is called a company. In a company, management and ownership lie in the hands of different individuals. A company is owned by its shareholders, while its management is handled by a group of elected persons known as the board of directors. The board of directors in turn appoints the top officials for managing the day-to-day operations of the business.

Hence, the correct answer is option (c).

Page No 51:

Question 2:.

The karta in Joint Hindu family business has

(a) Limited liability

(b) Unlimited liability

(c) No liability for debts

(d) Joint liability

The karta is the eldest male member of a Joint Hindu family who is responsible for decision making in the family business. He needs no permission from the coparceners (joint heirs) before taking any action. Since the karta has complete control over the business, his liability is unlimited. On the other hand, the liability of all coparceners is limited to their share in the family business.

Hence, the correct answer is option (b).

Question 3:

In a cooperative society the principle followed is

(a) One share one vote

(b) One man one vote

(c) No vote

(d) Multiple votes

When individuals voluntarily join together to protect and promote their common interests, they form a cooperative society. A cooperative society is managed by an elected body known as the managing committee. The elections in cooperative societies are based on the principle of ‘one man, one vote’. This principle guarantees equal voting rights to the members of a society, thereby preventing any discrimination in the body.

Question 4:

The board of directors of a joint stock company is elected by

(a) General public

(b) Government bodies

(c) Shareholders

(d) Employees

A joint stock company is owned by individuals known as shareholders. The shareholders elect the board of directors as the chief managing body of the company and grant it indirect control over the business. The board of directors in turn appoints the top officials for managing the business operations.

Question 5:

The maximum number of partners allowed in the banking business are

(c) No limit

In the case of the banking business, the maximum number of partners allowed is 10. In other businesses, the maximum number of partners allowed is 20.

Question 6:

Profits do not have to be shared. This statement refers to

(a) Partnership

(b) Joint Hindu family business

(c) Sole proprietorship

(d) Company

Profits do not have to be shared in a sole proprietorship form of business. This is because, in a sole proprietorship, the business is owned, managed and controlled by a single individual known as the sole proprietor. Thus, being the sole owner of the business, he or she becomes the single recipient of all the profits of the business.

Page No 52:

Question 7:.

The capital of a company is divided into number of parts each one of which are called

(a) Dividend

(c) Interest

The capital of a company is divided into a number of parts, each one of which is called a share . These parts (or shares) are freely transferable except in the case of a private company.

Hence, the correct answer is option (d).

Question 8:

The Head of the joint Hindu family business is called

(a) Proprietor

(b) Director

(d) Manager

The head of a joint Hindu family business is called the karta . The karta is the eldest male member of a joint Hindu family who is responsible for the control and management of the joint Hindu family business and has unlimited liability.

Question 9:

Provision of residential accommodation to the members at reasonable rate is the objective of

(a) Producer's cooperative

(b) Consumer's cooperative

(c) Housing cooperative

(d) Credit cooperative

A housing cooperative has the responsibility of ensuring the provision of residential accommodation to the members at a reasonable rate. A housing cooperative aims at providing accommodation to its members by constructing houses and giving them the option of paying the cost in installments.

Question 10:

A partner whose association with the firm is unknown to the general public is called

(a) Active partner

(b) Sleeping partner

(c) Nominal partner

(d) Secret partner

A secret partner in a firm is a partner whose association with the firm is unknown to the general public. Secret partners do not contribute any capital to the business but have participation rights in the management of the partnership firm. They are also entitled to a share in the profits and losses of the business and have unlimited liabilities.

For which of the following types of business do you think a sole proprietorship form of organisation would be more suitable, and why?

(a) Grocery store

(b) Medical store

(c) Legal consultancy

(d) Craft centre

(e) Internet cafe

(f) Chartered accountancy firm

A sole proprietorship refers to a form of business organisation in which an individual is the sole owner of the business. All operations, management and activities of the business are handled by this individual. Thus, it is a favourable form of organisation for small businesses. Among the given alternatives, the sole proprietorship form of organisation is more suitable for the following businesses.

(c) Craft centre

(d) Internet cafe

This is because these businesses require a lower capital and lesser managerial ability to handle the day-to-day operations. The sole proprietor has all the rights to make decisions and carry out plans as per his or her own will. Hence, the sole proprietorship form of business is more suitable for the four business types mentioned above.

For which of the following types of business do you think a partnership form of organisation would be more suitable, and why?

We know that in a partnership form of organisation, there are two or more persons who work together, pool their respective funds and finally share the profits earned (or bear the losses incurred). Among the given alternatives, a partnership is highly suitable for the following types of businesses.

(a) Legal consultancy

(b) Chartered accountancy firm

The reason is that a legal consultancy and a chartered accountancy firm require high managerial ability to handle the diverse activities and the comparatively wide range of operations. Besides, these businesses require balanced decision making and risk-taking in order to earn the maximum possible gains. Hence, a partnership is the most suitable form of business for the two businesses mentioned above.

Explain the following terms in brief

(a) Perpetual succession

(b) Common seal

(d) Artificial person

(a) Perpetual succession : It implies that a company will continue to exist until and unless it is forced by the law to wind up. This implies that a company, as a separate legal entity, cannot come to an end by itself and will continue to operate forever. It will not cease to exist even in situations such as death, retirement or insolvency of any of its members—that is, a company will continue to operate even if all its members die.

(b) Common seal : A company is an artificial entity that is created under the law. Unlike human beings, it cannot sign official documents. This is where the role of a common seal becomes important. A common seal is the official signature of a company that is used by its board of directors in almost all the important official documents. The presence of this seal authenticates the documents, and documents with a common seal can be provided as evidence in a court of law.

(c) Karta : The term karta is used for the head of a joint Hindu family who runs a family business. The karta of a Joint Hindu family is responsible for carrying out the business operations of the family business and exercising full control over the business. He is the eldest member of the family and has unlimited liabilities along with absolute decision-making powers.

(d) Artificial person : By the term artificial person, we mean that a company is created as a separate legal entity under the law and is a juristic person. However, unlike human beings, a company, as an artificial person, cannot breathe or talk, cannot sign its documents and cannot negotiate with its customers. In contrast, like human beings, a company does have its own life that is truly independent of the life of its members. Hence, because of these dissimilarities and similarities, a company is regarded as an artificial person.

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

As per the Indian law, any person below the age of 18 years is considered a ‘minor’. The status of a minor in a Joint Hindu Family differs from that in a partnership firm. In case of a Joint Hindu Family, membership in the family business is by birth. This means that as soon as a boy child is born in a Joint Hindu Family, he is automatically entitled to a share in his family business. In this case, the minor enjoys an equal ownership right over the inherited property as the other members of the family. However, his liability is limited only to the extent of his share in the joint property.

As per the Partnership Act, 1923, no minor can be a partner in a partnership firm. But a partnership firm, with the consent of all the partners, can admit a minor to share the profits of the firm; but he cannot be asked to either contribute capital or bear the losses incurred by the business. A minor is not legally competent to enter into any legal contracts, and therefore, he or she cannot be considered a partner. However, a minor, after attaining the age of 18 years, has the option of either continuing with the partnership firm or withdrawing his interest from it.

If registration is optional, why do partnership firms willingly go through this legal formality and get themselves registered? Explain.

Although registration in case of a partnership firm is optional yet many firms voluntarily opt for it. This is because of the various legal disadvantages associated with non-registration. A few of these disadvantages are listed below.

(a) The partners of a non-registered firm cannot file a suit against a third party; however, non-registration of a partnership firm does not prevent other firms from suing it .

(b) The firm cannot file a case against any of its partners. Similarly, a partner of a non-registered firm cannot file a case against his or her co-partners or the firm.

(c) A non-registered partnership firm cannot enforce its claims against a third party in a court.

State the important privileges available to a private company.

A private company enjoys certain exemptions or privileges which are often not available to a public company. Some of the privileges enjoyed by a private company are given below.

(a) Lesser number of members required : A private company requires only two members for formation, while a public company requires at least seven members.

(b) Commencement of business : A private company can start its business operations right from the day of receiving the certificate of incorporation. On the other hand, it is mandatory for a public company to obtain a certificate of commencement along with a certificate of incorporation before starting business.

(c) No restriction on advancing loans to the directors : In the case of a private company, there is no restriction on the amount of loans that can be granted to the directors. No prior permissions are required to be sought for advancing such loans. In contrast, a public company has to seek permission from the government before advancing loans to its directors.

(d) Lesser number of directors required for operations : A private company can continue operations with just two directors, whereas a public company must have at least three directors to continue its operations.

How does a cooperative society exemplify democracy and secularism? Explain.

In a cooperative society, management is in the hands of a managing committee elected by the members of the society. The elections in such societies are governed by the principle of ‘one member, one vote’. This implies that all members have equal voting rights irrespective of the amount of capital they have contributed to the society. This principle prevents the dominance of the richer members (who may own a higher number of shares) in the decision-making process. Thus, as in a democracy, a cooperative society treats all its members equally and provides equal rights to its members. Moreover, there is no discrimination among the members on the basis of their religion, caste or sex. In addition, the members are free to elect the members of the managing committee of their choice. Therefore, a cooperative society exemplifies a secularist system.

What is meant by 'partner by estoppel'? Explain.

A person can be regarded as a 'partner by estoppel', if he or she through his/her actions or behaviour, leaves an impression on third parties that he or she is a partner in a particular firm. This means that if a person behaves in a manner that makes third parties consider this individual as one of the actual partners, then he or she is regarded as a ‘partner by estoppel’. Such a partner (by estoppel) is actually not a partner, as he or she neither contributes any capital to the firm nor actively participates in the operations of the firm and is not entitled to any share in the firm’s profits or losses. Nevertheless, he or she can be held liable for the debts that the firm owes to third parties. Accordingly, if the funds available to the firm fall short of requirement for the repayment of debts, then the private assets of a partner by estoppel can be used to repay the debts.

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What do you understand by a sole proprietorship firm? Explain its merits and limitation?

In a sole proprietorship form of business, the business is owned, managed and controlled by a single individual who is known as the sole proprietor. As the sole owner of the business, the proprietor becomes the single recipient of all the profits earned by the business and, in the same way, has to bear all losses.

Merits of Sole Proprietorship

A sole proprietor enjoys the following benefits.

(a) Ease in formation and closure of business : There are hardly any legal formalities to be fulfilled for setting up a sole proprietorship firm. However, if a proprietor is dealing in drugs and liquor products, then a licence has to be acquired. The procedure for closing down a sole proprietorship firm is also hassle-free and easy.

(b) Quick decision making : A sole proprietor enjoys complete control over the business. This makes decision making quick and easy.

(c) Direct incentive : A sole proprietor is the sole bearer of all types of risks associated with the business and, at the same time, is the single recipient of all the profits and gains earned in the business. Thus, this direct link between efforts and rewards motivates the sole proprietor to operate the business efficiency and effectively.

Limitations of Sole Proprietorship :

The following are a few limitations of a sole proprietor firm.

(a ) Limited capital : The financial resources that are available to a sole proprietor are limited merely to this person’s personal savings and borrowings that can be raised from relatives and friends. Thus, the amount of capital available to a sole proprietor is limited, which often prevents him or her from expanding the business.

(b) Limited managerial abilities : A sole proprietor manages all the core functions such as purchasing, selling and planning. As a result, the benefits of specialisation are not available to a sole proprietor. Also, because of limited resources, a sole proprietor may not be able to employ specialised employees to handle specific business operations.

(c) Uncertain life : In the eyes of the law, a sole proprietor and his or her business are regarded as the same entity. In the event of death, insanity, bankruptcy or physical ailment of a sole proprietor, the life of the business is adversely affected.

Why is partnership considered by some to be a relatively unpopular form of business ownership? Explain the merits and limitations of partnership.

Partnership is considered to be a relatively unpopular form of business ownership because of the various limitations associated with it. These limitations include unlimited liability, limited resources, possibility of conflicts and lack of continuity.

Limitations of Partnership

(a) Unlimited liability : In a partnership, all the partners have unlimited liability. This means that if the firm’s assets fall short of the requirement for the repayment of the firm’s debts, then the personal assets of the partners can be used.

(b) Limited resources : A partnership firm faces limited availability of finance, because of the restrictions imposed on the following fronts:

(i) maximum number of partners allowed in a partnership firm by definition

(ii) maximum number of new partners who can be admitted in the firm

Hence, as a result, a partnership firm faces financial constraints, which in turn impedes its growth prospects.

(c) Possibility of conflicts : In a partnership firm, the power of decision making is shared among the partners. This further depends on their respective levels of skills, capabilities and foresightedness. The differences in these qualities may possibly lead to conflicts among the partners.

Merits of Partnership

(a) Easy formation and closure : A partnership firm involves an agreement (either oral or written) between two or more partners. The registration of a partnership firm is not compulsory, which eases its formation. Similarly, a partnership firm can be shut down at any time with the mutual consent of all the partners.

(b) Balanced decision making : In a partnership firm, all the decisions related to the business are taken collectively by all the partners. This makes the decision-making process in a partnership firm comparatively more balanced than in any other form of business ownership.

(c) Sharing of risks : The risks in a partnership firm are shared jointly by all the partners. As a result, anxiety, burden and stress of the individual partners are shared among all the partners, which reduces the burden on a single partner.

Why is it important to choose an appropriate form of organisation? Discuss the factors that determine the choice of form of organisation.

The choice of an appropriate form of business organisation is important for the following reasons.

(a) Options to choose among various business forms : As there exist numerous forms of business organisations such as sole proprietorship, partnership, cooperative society and company, the choice of an appropriate business organisation is important, because each business form has its own merits and demerits.

(b) Business factors : Every type of business form is influenced by its respective business-related factors, namely, need of funds, risk involved, amount of profits and legal obligations. Therefore, the choice of the appropriate business form is made only after the evaluation of all these business factors.

(c) Long-term growth prospects : The growth prospects of each type of business form are different. If a businessperson opts for a particular business form without correctly evaluating the growth prospects, then the business may fail or the long-term growth prospects of the business will suffer.

Factors determining Choice of a Business Form

The following are the factors that determine the choice of a business organisation.

(a) Nature of business activity : Any individual first needs to decide upon the nature or kind of business activity that he or she desires to undertake. In case the business type requires direct personal contact with customers, then the sole proprietorship form of business proves beneficial. On the other hand, if direct personal contact is not required, then a partnership or a company form of business is more suitable.

(b) Degree of control : The choice of a business form also depends on the degree of control that a businessperson wants to exercise over its management. If a businessperson aims to have direct control over all the business operations, then sole proprietorship may be considered appropriate. However, if he or she does not mind sharing the decision-making powers with others, then a partnership or company form of business would be more suitable.

(c) Degree and specialisation of managerial abilities : If the business operations are large and require specialised and skilled professionals for managing them, then a company form of business may be selected. However, if the business operations are not very complex and the scale of operations is also not very large, then sole proprietorship proves to be a better alternative.

Discuss the characteristics, merits and limitations of cooperative form of organisation. Also describe briefly different types of cooperative societies.

The word ‘cooperative’ means an organisation in which the stakeholders work with one another. Thus, a cooperative society is a voluntary association of individuals who join together to protect or promote their common interests.

Features of Cooperative Societies

(a) Separate legal entity : The registration of a cooperative society is compulsory under the Cooperative Societies Act, 1912. Once the registration is complete, the cooperative society is granted the status of a separate legal entity. This implies that the cooperative society can hold properties in its own name and enter into contracts. Moreover, it can sue others and can be sued by others.

(b) Management and control : A cooperative society is a democratic form of organisation as it is managed and controlled by a managing committee which is elected by the members of the society on the principle of ‘one member, one vote’.

Merits of Cooperative Societies

(a) Ease of formation : The formation of a cooperative society is quite easy as it requires the induction of only 10 adult members. The registration procedure of a society under the Cooperative Societies Act, 1912, is quite simple.

(b) Continued existence : A cooperative society is a stable form of organisation as it enjoys the status of a separate legal entity that is considered distinct from its members. As a result, the life of a cooperative society remains unaffected by the death, insolvency or insanity of its members.

Limitations of Cooperative Societies

(a) Excessive government control : Cooperative societies have to follow certain rules and regulations as imposed on them by the cooperative departments of the state government concerned. These rules include submission and auditing of accounts.

(b) Inefficiency in management : The management of a cooperative society generally comprises part-time or inexperienced people. They may not be well equipped with the skills required to handle the managerial functions effectively. Consequently, cooperative societies often lack efficiency.

Types of Cooperative Societies

Cooperative societies are classified into the following six types.

(a) Consumer cooperative societies: These are formed to provide consumer goods at reasonable prices to its members.

(b) Producer cooperative societies : The objective of producer cooperative societies is to procure raw materials and other inputs at low costs and supply them to small producers.

(c) Marketing cooperative societies : These societies pool the outputs of the member and perform certain marketing functions for them such as transportation, labelling, packaging and warehousing.

(d) Farmers’ cooperative societies: Such societies are formed by small farmers who pool their resources to reap the benefits associated with large-scale operations. These societies ensure the availability of better and advanced inputs at low rates to farmers.

(e) Credit cooperative societies - These societies ensure the availability of funds to its members at comparatively low interest rates on reasonable terms.

(f) Cooperative housing societies : The aim of housing cooperative societies is to solve the problem of finding residential accommodation of its members by constructing houses for them. These societies provide its members with easy repayment schemes through which the cost of the houses can be repaid in form of installments.

Distinguish between a Joint Hindu family business and partnership.

Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organisation? Why?

Despite the limitations in terms of size and resources, many people prefer sole proprietorship over any other forms of business primarily because of the numerous benefits associated with the sole proprietorship business form.

The following are a few important benefits that a businessperson enjoys by being a sole proprietor.

(a) Ease in formation and closure : There are hardly any legal formalities that are required to be fulfilled for setting up a sole proprietorship firm. However, if a proprietor wants to deal in drugs and liquor, then he or she must to acquire a licence. Just as setting up a sole proprietorship firm is easy, its closure is also hassle-free.

(b) Quick decision making : A sole proprietor enjoys complete control over the business, facilitating quick and easy decision making.

(c) Direct incentive : A sole proprietor is the sole bearer of all types of risks associated with the business and at the same time is the single recipient of all the profits and gains earned from the business. Thus, it is due to this direct link between the businessperson’s efforts and the rewards which keeps this individual motivated to operate the business efficiency and effectively.

(d) Flexibility in operations : A sole proprietorship firm is highly flexible in operations. It can adapt itself to various situations, and vital changes can be incorporated, as per the dynamism of the business environment. The reason for the high degree of flexibility can be attributed to the fact that a sole proprietor is the only person who is involved in every aspect of the business.

In which form of organisation is a trade agreement made by one owner binding on the others? Give reasons to support your answer.

It is under partnership that the trade agreement made by one owner becomes binding for others. This is because every partner acts for each other. In other words, every partner is both a principle as well as an agent. As an agent he binds others through his actions and as a principle he is bind by the action of others.

The business assets of an organisation amount to Rs. 50,000 but the debts that remain unpaid are Rs. 80,000. What course of action can the creditors take if (a) The organisation is a sole proprietorship firm (b) The organisation is a partnership firm with Anthony and Akbar as partners. Which of the two partners can the creditors approach for repayment of debt? Explain giving reasons

(a) In case of a sole proprietorship the creditors can claim the personal property of the proprietor. This is because the proprietor has unlimited liability. (b) The creditors can approach either Akbar or Anthony. Both of them would have the liability to pay according to their profit sharing ratio. Moreover, in case one of them becomes insolvent the creditors can approach the other partner.

Kiran is a sole proprietor. Over the past decade, her business has grown from operating a neighbourhood corner shop selling accessories such as artificial jewellery, bags, hair clips and nail art to a retail chain with three branches in the city. Although she looks after the varied functions in all the branches, she is wondering whether she should form a company to better manage the business. She also has plans to open branches countrywide. (a) Explain two benefits of remaining a sole proprietor (b) Explain two benefits of converting to a joint stock company (c) What role will her decision to go nationwide play in her choice of form of the organisation? (d) What legal formalities will she have to undergo to operate business as a company?

(a) The following are two of the benefits of sole proprietorship. i. A sole proprietor is the single recipient of all the profits of the business. ii. A sole proprietor takes all business decisions independently and enjoys complete control over the business. (b) The following are two benefits of converting to a joint stock company. i. In a joint stock company capital can be easily expanded by issuing fresh, new shares. ii. The liability of the owners is limited to the amount of capital invested by them. (c) If she plans to go nationwide then converting to a joint stock company would be more appropriate as it will lead to large scale business operations.     (d) Some of the legal formalities to be completed for operating a joint stock company are as follows. i. Promotion of the company ii. Submitting documents such as Memorandum of Association, Articles of Association, statutory declaration and agreement iii. Getting the certificate of incorporation iv. Getting the certificate of commencement of business

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NCERT Notes for Class 11 business studies Chapter 2 Forms of Business Organisation

Class 11 business studies chapter 2 forms of business organisation.

NCERT Notes for Class 11 business studies Chapter 2 FORMS OF BUSINESS ORGANISATION , (business studies) exam are Students are taught thru NCERT books in some of state board and CBSE Schools.  As the chapter involves an end, there is an exercise provided to assist students prepare for evaluation.  Students need to clear up those exercises very well because the questions with inside the very last asked from those.

Sometimes, students get stuck with inside the exercises and are not able to clear up all of the questions.  To assist students, solve all of the questions and maintain their studies without a doubt, we have provided step by step NCERT Notes for the students for all classes.  These answers will similarly help students in scoring better marks with the assist of properly illustrated Notes as a way to similarly assist the students and answering the questions right.

Class 11 business studies Chapter 2 Forms of Business Organisation

Meaning of Business Organisation

A business organisation or business concern is an enterprise created to achieve business objectives. It achieves its objectives by engaging in some activities like production or purchase and sale of goods or services. Business undertakings can be distinguished from one another on the basis of ownership, management and control. In India we have the following types of business enterprises.

• Sole Proprietorship
• Joint Hindu Family Business

• Partnership
• Co-operative Society
• Joint Stock Company.

SOLE PROPRIETORSHIP

• Sole proprietorship is the form of business, which is owned, managed and controlled by an individual.
• He is solely responsible for providing the capital, for bearing the risk and for the overall management and control of the business.
• If the business earns profit, the sole proprietor enjoys all the profit alone and if the business suffers loss, it has to be borne by the sole trader himself.
• He conducts the business with the help of his family members or employees.
• Sole proprietorship is also called single ownership or single proprietorship.

Suitability

Sole trading concerns require lesser amount of capital. It is best suitable for the following types of business:

• Business which are carried out on small scale with modest capital and limited managerial talent, e.g., local grocery store, stationery shops, medical store, bakeries, small factories etc.
• Business where customers demand personalized services such as small beauty parlors, hair cutting saloons tailoring units, internet café etc.

Features of Sole trading Concern

1- Single ownership

A sole proprietorship is wholly owned by a single person . He supplies the entire capital from his own wealth or from borrowed funds.

2- No legal formalities

There is no legal formality to start as well as to close sole trading concern. Only a license is necessary in certain types of business.

A sole proprietor has full control over his business. He can carry out his plans without consulting with others.

4- No legal entity

• A sole proprietorship has no separate legal entity from its owner.
• In the eyes of law, there is no distinction between the sole trader and his business.
• The assets and liabilities of the business and its owner can’t be separated.

5- Unlimited liability

The sole proprietor’s liability is unlimited. If the asset of the business is insufficient to meet its debts, the proprietor is liable to pay off the debts out of his personal property.

6- No profit sharing

The sole proprietor alone is entitled to all the profit and losses of the business.

7- Lack of business continuity

Since the owner and the business are same, death, insanity or bankruptcy of the sole trader will cause closure of the business.

Merits or Advantages of sole proprietorship

A sole proprietorship has the following advantages.

1- Easy formation:

An important merit of sole proprietorship is the possibility of entering into business with minimal legal formalities.

2- Quick decisions

The sole proprietor is completely free to take decisions without consulting with others. Quick decision and prompt actions help to improve the efficiency of the business.

3- Motivation to work

The proprietor alone is entitled to receive all the profit of business and he alone has to bear all the losses, there is direct relation between effort and reward. Therefore, there is an incentive to work hard.

• Business secrecy is an important factor in every business.
• A sole trader can keep his all business information and maintain secrecy.
• He is not bound by law to publish his accounts of business.

5- Flexibility of operations:

The small size and simple management structure helps a sole proprietor to adapt easily to changing conditions. He can reduce his business or increase it according to the changing conditions.

Sole proprietorship can be formed with small capital and the least administration expenses.

7- Self Employment: It is a means for earning livelihood independently.

8- Diffusion of ownership: Under sole trading, business ownership is diffused. The concept of sole proprietorship business creates large number of units in the economy. There is no danger of concentration of economic power in a few hands.

9- Development of Personality: Qualities of self-reliance, self-confidence, responsibility and initiate have full scope for development under sole proprietorship.

Demerits or disadvantages of Sole Proprietorship

The sole proprietorship has the following disadvantages

1- Limited Capital

Resources of a sole trader are limited to his personal savings and borrowings from others. Banks generally hesitate to give long term loans to a sole trader. It is difficult for him to expand his business.

2- Unlimited Liability

A major disadvantage of a sole trader is that the owner has unlimited liability. In the case of business losses, if the business assets are not sufficient to meet all business liabilities, the proprietor may have to sell his personal property to pay off the liabilities.

3- Limited Managerial Skill

• A sole trader business is a one man show.
• He wants to perform various functions like purchase, sales marketing, financing etc.
• It is rare to find an individual who excels in all these areas.
• Due to limited financial resources, sole trader is not in a position employ talented employees.

4- Uneconomic Size

Due to small size, sole proprietorship can’t enjoy the economics of large scale operations like bulk purchase, division of labour etc.

5- Uncertain life

The existence of sole proprietorship centers on an individual. Death, insolvency or illness of a proprietor affects the business and can lead to its closure.

Special Notes:-

• “Too many chefs spoil the soup”. There are several advantages in doing business alone. For eg. Mr. Salim runs a tea shop in a market place. He is working as the owner, manager and the labourer of his business. He knew the tastes of his customers and hence he can easily manage his business successfully.
• “One man control is the best in the world, provided that one man is big enough to manage everything”. The sole proprietorship offers the best promise of motivation, control, self-reliance and self-confidence. It is the most popular form of business in the world.

Fringe Benefit : Fringe benefits are forms of compensation paid by an employer to his employees outside of a stated wage or salary. Common examples of fringe benefits include medical and dental insurance, use of a company car, housing allowance, educational assistance, vacation pay, sick pay, free meals and employee discounts.

JOINT HINDU FAMILY BUSINESS

• It is a special form of business found only in India.
• This business is owned and managed by members of the Hindu Undivided Family (HUF).
• This form of business organization is not formed by an agreement or contract, but comes into existence by the operation Hindu Law.
• Joint Hindu Family or Hindu Undivided Family consists of grandparents, parents and sons.
• HUF business is managed by the eldest male member known as ‘Karta’ whose liability is unlimited.
• All members have equal ownership right over the property of an ancestor.

They are known as co-parceners.Examples: Haldirams,Tata Sons

There are two conditions for existence of HUF Business:

• Minimum two members must be there in the family
• Existence of some ancestral property.
• There are two systems which govern the membership in the Hindu undivided family business, viz., Dayabhaga system and Mitakasharaystem.
• Dayabhaga system prevails in West Bengal and allows both the male and female members of the family to be co-parceners.
• Mitakasharasystem, on the other hand, prevails all over India except West Bengal and allows only the male members to be co-parceners in the business.

Features of Joint Hindu Family Business

1- Membership by birth

Membership of the Hindu Undivided Family business is automatic by birth. All the members have equal ownership right over the ancestral property and they are known as Co-Parceners.

2- Formation

For a joint Hindu family business, there should be at least two members in the family and ancestral property to be inherited by them. There is no need for any agreement as membership is by birth.

HUF business is controlled by the eldest male member in the family called Karta. He takes all the decision alone to manage the business.

4- Minor Members

Since membership is by birth, minors can also be members of the business.

5- Liability

The liability of ‘ karta’ is unlimited. But the liability of co-parceners is limited to the extent of their share in the family property.

6- Continuity

The life of HUF business is not affected by the death of the karta . If Karta died next senior most male member will be the next karta.

7- No maximum limit on membership

There is no restriction about the number of members in HUF business. It depends upon the birth or death of members in that family.

Advantages or merits of HUF business

The main advantages of HUF business are the following.

1- Easy Formation

It can be started easily without any legal formalities.

2- Continuity of the business

The death of the Karta never affects the existence of HUF business as the next eldest male member will be the next karta.

Complete secrecy regarding business decisions can be maintained by Karta.

4- Assured share to all members

Every member of a HUF is assured a minimum share of profit, irrespective of their talents, capacity to work and efficiency.

5- Quick decision

Karta is free to take any decision without consulting others, so quick decision is possible in HUF business.

6- Division of labour

The principle of division of labour can effectively be applied in HUF business by allotting work among members according to their abilities and skills.

7- Limited liability of members

Karta’s liability is unlimited in HUF business.But all other co-parceners liability is limited to their share in the business.

Disadvantages or Demerits of HUF Business

HUF business suffers from the following limitations:

Joint Hindu Family business can’t be carried on very large scale, because the capital contributed by the members of the family is generally insufficient for large scale business.

2- Limited managerial ability

The whole affair of the business is managed by the Karta. He may not be an expert in all areas of management.

3- No link between responsibility and reward

Karta is responsible for manage the business alone. He bears the entire liability for the debts of the family business alone. For all these responsibilities he is not paid with any extra amount as remuneration. He gets his share of profit only as other co-parceners get.

4- Scope for misuse of power

As t karta enjoys full authority over the business; he may misuse the powers for his own benefits.

PARTNERSHIP

• Partnership is an association of two or more persons who agreed to pool together their financial and managerial resources in some business and to share the profit thereof between them.
• It is formed when there is a need for greater capital investment, varied skills and sharing of risk.
• Section 4 of The Indian Partnership Act, 1932 defines partnership as “the relation between two or more persons who have agreed to share the profit of a business carried on by all or any one of them acting for all”.
• The persons who enter into partnership are individually called ‘partners’ and collectively a ‘firm’. In India partnerships are regulated by partnership Act 1932.

Features of Partnership

1- formation.

• The partnership form of business organization is governed by the Indian Partnership Act, 1932.
• The partnership comes into existence with an agreement among partners.

2- Agreement

• In a partnership there must be an agreement.
• The agreement may be oral or written.
• The written agreement is known as Partnership Deed.

3- Number of partners

• There must be at least two persons to form a partnership.
• The maximum number limit is 100

4- Profit motive

• The business carried on by partnership firm must have profit motive.
• In this way, orphanage, charitable trust etc. can’t become partnership.
• The partners share the profits in the ratio mentioned in the partnership deed.

5- No separate legal existence

• The partnership firm has no separate legal existence apart from the partners.
• Firm can’t own property or enter into a contract in its own name.
• The firm’s name is only a symbol representing all partners.

6- Restriction on transfer of Interest

• No partner can transfer his share in the partnership without the prior consent of all other partners.

7- Unlimited Liability

• The partners of a firm have unlimited liability.
• Partners are individually and collectively responsible for the entire debts of the firm.
• Personal assets may be used for repaying debts in case the business assets are insufficient.

8- Registration

Registration of partnership is not compulsory. It is optional.

9- Decision making and control

The activities of a partnership firm are managed through the joint efforts of all the partners.

10- Lack of continuity

The retirement, death, insolvency etc. of any partner brings the firm to an end. However, the remaining partners may if they so desire continue the business on the basis of new agreement.

11- Mutual agency

• A partner can act simultaneously as a principal as well as an agent of the firm.
• Each partner is an agent because he can bind other partners by his acts.
• Similarly he can also be bound by the action of other partners. So he is called a principal.

Partnership Deed

• Partnership is the result of mutual agreement between partners.
• Thus, the document containing terms of agreement in writing among partners is called partnership deed .
• It contains the terms and conditions relating to partnership and regulations governing the internal management.
• It should be signed by all partners and stamped properly.

Contents of Partnership Deed

A partnership deed usually contains the following particulars:-

• Name of the firm
• Names and addresses of partners
• Nature of business
• Duration of partnership, if any
• Amount of capital contributed by each partner.
• Profit sharing ratio.
• Amount of salary, if any, payable to partners.
• Rate of interest, if any, on capital and drawings.
• Amount of withdrawals to be allowed to each partner.
• Rights, duties, powers and obligations of partners.
• Procedure for admission and retirement etc. of partners.
• Procedure for dissolution of the firm and settlement of accounts.
• Methods of valuation of good will and revaluation of assets and liabilities on admission, retirement and death of a partner.

Any other clauses, on which there is mutual agreement among partners, can be included in the partnership deed. If partnership deed is silent on some point, the provisions of the Partnership Act 1932, will apply.

Rules applicable in the absence of Partnership Deed

In the absence of partnership deed or if the deed is silent on any matter, provisions of the partnership act will automatically apply in the following way:

• The partners are entitled to share profit and losses equally i rrespective of their capital contribution.
• The partners are not entitled to get interest on their capitals .
• No interest will be charged on drawings of the partners.
• No partner is entitled to get salary or any other remuneration for any extra work done for the firm.
• Partners are entitled to get Interest @ 6%p.a on loans granted by partners to the firm.
• Partner’s capital shall be fluctuating (Fluctuating Capital Method).

Types of Partnership

Partnerships can be classified on the basis of duration and liability. On the basis of duration, there are two types of partnerships i.e. particular partnership and partnership at will. On the basis of liability, there are two types of partnership, i.e. general partnership and limited partnership.

• Classification on the basis of duration

a) Particular partnership

b) Partnership at will

a. Particular Partnership

• A particular partnership is one which is formed for a specific time period or for a particular purpose.
• It is automatically dissolved on the expiry of the specified period or on the completion of the specific purpose for which it was formed.

Eg: Partnership formed to construct a bridge or building will automatically get dissolved after the construction of that bridge or building.

b.Partnership at will

• If a partnership is formed without mentioning its duration, it is called partnership at will.
• It can continue as long as partners want.
• It can be dissolved by any partner at any time by giving a notice of dissolution to other partners.

2. Classification on the basis of liability

• General Partnership
• Limited or Special Partnership

a) General Partnership

• In general partnership, the liability of partners is unlimited and joint.
• The partners enjoy the right to participate in the management of the firm.
• Registration of the firm is optional.
• The existence of the firm is affected by the retirement, death or insolvency of the partners.

b) Limited Partnership

• Limited partnership is one in which the liability of at least one partner is unlimited whereas the other partners may have limited liability.
• The limited partners do not enjoy the right to participate in the management of the firm.
• The registration of limited partnership is compulsory.
• Such a partnership does not get terminated with the death of any partner with limited liability.

Types of partners

A partnership firm can have different types of partners with different roles and liabilities. They are:

1- Active or working partner

• A partner who contributes capital and takes active interest in the day to day affairs of the firm is called active partner.
• He manages and controls the business and his liability is unlimited.

2- Sleeping or dormant partner

• A partner who does not take part in the working of the concern is called a sleeping or dormant partner.
• He contributes to the capital of the firm.
• He is entitled to share the profits of the firm.
• His liability is unlimited.
• He is not known to the public as a partner.

3- Secret Partner

• A secret partner is one whose association with the firm is unknown to the general public.
• He contribute capital to the firm, takes part in the management, shares its profit and losses and his liability is unlimited.

4- Nominal or Ostensible Partner

• A nominal partner neither contributes capital nor takes any active part , in the management of the business.
• He only knowingly allows himself to be represented as a-partner.
• His reputation may be benefited to the firm.
• He is liable to third partners for all debts of the firm.
• He is also called a quasi-partner.

5- Partner in profits only

• When a partner is admitted in a partnership by a special agreement so that he is entitled to share in the profits of the firm but not in the losses, he is known as ‘partner by profit only’.
• But he has no right to take part in the activities of the business.

6- Partner by estoppels

• If a partner by his talk or action gives an impression to third parties that he is a partner, then he is known as partner by estoppels.
• He is not entitled to share the profit of the firm and does not participate in the management.
• Such a partner is liable as a true partner to third parties

Partner by Estoppels-In this case he himself gives an impression to others that he is a partner

7- Partner by holding out

• When a person is declared as a partner and he does not deny even after becoming aware of it, he is called a partner by holding out.
• He becomes liable to those who lent money to the firm on the basis of such declaration.
• He does not bring any capital nor does participate in the management and profits.

Partner by holding out-In this case others give the impression that he is a partner. His mistake is that he never denies it.

Types of Partners

We are minors

MINOR AS A PARTNER

• Partnership is based on legal contract between two persons.
• A minor is a person who has not attained the age of maturity i.e. not completed 18 years old.
• As such a minor is incompetent to enter into a valid contract with others; so minors can’t start a partnership firm.
• However, a minor can be admitted to the benefits of an existing partnership firm with the mutual consent of all other partners.
• In such a case his liability is limited to the capital contributed by him .
• He will not be eligible to take an active part in the management of the firm.
• He can inspect the books of accounts of the firm .
• The status of a minor will change when he attains maturity.

Rights of a minor partner

• A minor has the right to share profit and property of the business.
• He can inspect the accounts of the firm
• A minor can file a suit against the partners for nonpayment of his share in the property.

Liability of Minor Partner

1) His liability is limited to his share in the business.

Registration of Partnership

• Registration of partnership firm means the entering of the firm’s name in the Register of Firms kept with Registrar.
• It provides conclusive proof of existence of partnership firm.
• The registration of partnership firms is not compulsory, it is optional.
• However, an unregistered firm suffers from several draw backs.

Procedure for registration

In order to register a partnership, it must submit an application in the prescribed form along with prescribed fee to the Registrar of Firms of the state in which the firm is situated.

The application should contain the following particulars:-

• The principal place of business.
• Name of other places where the firm carries on business.
• The date when each partner joined the firm.
• Names and permanent address of the partners.
• Duration of partnership, if any.

The application must be signed by all the partners. If the Registrar of Firms satisfied with the statement he shall make entry the name of the firm in the Register of Firms . After registration the firm must communicate any change in the above mentioned information to the Registrar.

Consequences of Non Registration

An unregistered firm suffers from the following limitations:-

• An unregistered firm can’t sue third parties for the recovery of debts exceeding Rs. 100.
• An unregistered firm can’t sue its own partners.
• A partner of an unregistered firm can’t sue the third parties or his copartners for the recovery of his claims.

However a third party is at full liberty to file a suit against any unregistered firm or against any partner for recovery of bad debts.

Advantage of partnership

A partnership firms enjoys the following advantages:

• A partnership firm can be formed easily by putting an agreement between partners.
• Registration is not compulsory.
• Closure of the firm is also simple.

2- More Funds

• In a partnership, the capital is contributed by a number of partners.
• This makes it possible to raise larger amount of capital as compared to sole trading concern.

3- Division of labour

• Division of labour is possible in partnership.
• The work and responsibility can be distributed among partners according to their ability.
• For example Anil, Binil and Ciril started a Bakery as partnership.
• In a bakery there are various types of activities like purchase, production, sales, finance etc.
• In that firm there is three partners, so division of labour is possible.
• Responsibility of purchase can be assigned to Mr Anil, production charge can be assigned to Mr. Binil and sales and finance can be assigned to Mr,Ciril. Division of labour leads to specialization.

4- Balanced decision making

Collective decision making is possible in partnership. So they can take better decisions regarding their business.

5- Efficient management

In partnership the skill and experience of all partners are brought together. It can secure greater managerial ability as compared to sole trading concern.

6- Sharing of risk

The risks are shared by all the partners. This reduces the anxiety, burden and stress on individual partners.

A partnership firm is not legally required to publish its accounts and reports. Hence it can maintain confidentiality of information relating to its operations.

Disadvantages of partnership

1- unlimited liability.

The partners of a firm have unlimited liability. This may restrict them to take risky decisions. It may badly affect the growth of the business.

2- Non transferability of interest

In partnership there is restriction in case of transfer of ownership. A partner can transfer his share to a third party only with the consent of all other partners.

3- Limited Resources

There is a restriction on the number of partners in a firm. Therefore it is not possible to collect huge financial resources.

4- Lack of public confidence

A partnership firm is not legally required to publish its financial reports. As a result the confidence of the public in partnership is generally low.

5- Possibility of conflicts

Partnership is run by group of persons wherein decision making authority is shared. Difference in opinion on some issues may lead to disputes between partners.

6- Lack of continuity

Partnership comes to an end with the death, retirement, insolvency of any partner. However, the remaining partners may continue the business on the basis of a new agreement.

JOINT STOCK COMPANY

• The Industrial Revolution and introduction modern factory system etc made large scale production possible.
• Large scale production required huge capital investment and management skill.
• It also involved high degree of risk.
• The sole proprietorship and partnership form of business have limitations such as limited managerial skill, shortage of capital and unlimited liability.
• These limitations of sole trading concern and partnership paved the way to a new form of organization called Joint Stock Company.
• A joint stock company is the largest form of business organization.
• It is an artificial person having separate legal existence, perpetual succession and a common seal.
• Companies are compulsorily to be registered under the Indian Companies Act, 2013.
• A company is a voluntary association of persons formed for some common purpose.
• It may be formed with the purpose of carrying on some business for profit or carrying on some charitable activity without profit motive.
• Its capital is divided into small parts called shares.
• The persons who subscribed shares are known as shareholders.
• The company is owned by share holders. It is managed by Board of Directors, the elected representatives of share holders. In this way, management and ownership is practically different.
• The liability of a shareholder is limited to the face value of shares held by him, so every public limited co add the word “Ltd” at the end of its name.
• For example Reliance Industries Ltd, South Indian Bank Ltd, Kitex Ltd etc.

Features of a Joint Stock Company

Important feature of a joint stock company are the following:

1- Large members

• Minimum number of members to form a Private Ltd.
• Company is 2 and 7 in case of Public Ltd.
• The maximum number of members in a private Ltd company is limited to 200 and in Public Limited Company it is unlimited.

2- Created by Law

• A company is formed by registered under Indian Companies Act 2013.
• Formation of a company involves lengthy and complicated procedures.

3- Separate Legal Existence

• A company has separate legal existence apart from its members.
• It can carry on business in its own name, own property, lend and borrow money etc in its own name.
• It can open bank accounts, sue and be sued in its own name.
• A company can legally behave like a human being but it is actually not a natural person, so it is called an artificial person.
• It has to depend upon directors, managers, etc. for getting its works done.

4- Perpetual succession (Permanent life)

• Its existence not affected by the death, insolvency or change of ownership through sale of shares by shareholders.
• Members may come and go, but the company can go forever.
• All the members of a private Ltd company sitting in a general meeting were killed by a bomb.
• But it was held that the company survived. Not even a hydrogen bomb could have destroyed it.

5- Limited liability

• The liability of a shareholder is limited to the extent of the face value of shares held by him.
• So the creditors of a company have no right to realize the amount due to them out of the personal property of the members.
• (For example, suppose Kannan, a share holder, holding 1,000 shares of Rs.10 each on which he has already paid Rs.8 per share. In the event of loss or company failure to pay debts, his liability can be only up to Rs.2, 000 (i.e.1000 X 2))

6- Transferability of shares

• Shares of a public company are freely transferable.
• Members can transfer their shares without the consent of other members.
• Therefore, a person can become a member at any time by purchasing shares and cease to be a member by selling his shares.

7- Common seal

• Common seal is the official signature of a company.
• Every company has common seal.
• Every document of the company must bear this seal, otherwise it is valueless.

8- Separation of ownership and management

• The company is owned by share holders.
• But it is managed by Board of Directors, the elected representatives of share holders.
• As an artificial person it has to depend upon directors, managers etc for getting its works done.
• In this way there is separation of ownership and management.

9- Compulsory Registration

All companies are compulsorily to be registered under the Indian Companies Act, 2013.

Advantages of a Joint Stock Company

A company form of organization enjoys the following advantages:

Huge Capital

• A company can raise huge capital through issue of shares and debentures because there is no limit to the maximum number of members in a public company.
• Thus, there is greater scope for growth and expansion.

Limited Liability

• The liability of a shareholder of a company is limited to the face value of shares held by him.
• His personal property can’t be attached even if the company is unable to meet its creditors claim.
• This reduces the degree of risk

Transferability of Shares

• Shares of a public company are generally listed in stock exchanges so that a member can sell his share at any time.
• There is no need to get permission from other members for this.
• It provides liquidity to their investment.
• However, it is restricted in the case of private company.

4- Economies of Large Scale

• Huge capital and professional management facilitate large scale operations.
• Therefore, a company can fully secure the advantages of large scale production, purchase, marketing etc.

Efficient Management

• A company can afford to pay higher salaries to professional managers.
• It will increase the efficiency of management.

6- Public Confidence

• A company enjoys public confidence and good reputation in the business world.
• It has to disclose its results and follow all legal regulations.
• Its activities are subject to scrutiny by auditors and the government.
• Therefore, people have trust in a public company.

7- Long term projects

• A company is the only form organization with continuous stability.
• The funds invested in the company by shareholders are not withdrawal until it is wound up.
• So company can undertake long term projects and attract further investments in business.

8- Perpetual Existence

Being a separate legal entity, existence of a company is not affected by death, resignation or insolvency of a member.

9- Greater Scope for Expansion

Retained earnings and vast financial resources and managerial ability help a company to expand its business.

Disadvantages of a Joint Stock Company

A company form of organization faces the following disadvantages:

1- Difficulty of formation

• Formation of a company is time consuming and expensive process.
• It involves preparation of several documents fulfilling several legal formalities.
• Registration of a company is compulsory under the Indian Companies Act, 2013.

2- Delay indecision making

• Control and management of the company is subject to provisions of Companies Act 2013.
• There are certain matters which can be decided only in Board meetings.
• More important matters require approval of shareholders in their meeting.
• This results in unavoidable delay in decision making.

3- Lack of Secrecy

• Everything about a company is required to discuss in board meeting.
• A company is required to publish its annual accounts and other reports.
• It is available to the general public also.
• So trade secret can’t be maintained.

4- Excessive regulation of law

• A company is required to file a number of returns and reports with various authorities.
• It involves considerable time and money.

5- Lack of flexibility

• A company should undertake its business only within the objective already stated in the objective clause of Memorandum of Association.
• So it can’t divert its business activities according to the changing conditions without altering its memorandum.

6- Development of monopoly

• The joint stock form of organization creates large scale business with a huge capital base.
• This might lead to concentration of economic power and monopoly in the economy.

7- Unhealthy Speculation

• The directors have all information about the functioning of the company; they can use it for their personal advantage.
• For example, the director can easily speculate the price of a share by knowing the ups and downs in the profit of the company.

Types of Companies

Companies are classified as:

• Private Company
• Public Company
• One Person Company

1- Private Company

A private company means a company by its Articles of Association.

• Restricts the right to transfer its shares.
• Limits the number of its members to 200(As per Companies Act, 2013).
• Prohibits an invitation to the public to subscribe its shares or debentures.
• Puts the minimum paid up capital to be rupees one lakh.

A private company can be formed with a minimum number of two persons. A private company must add the ward ‘private limited’ or (P) Ltd or (Pvt.) Ltd. in its name.

Bg:- Lunar Private Limited or Lunar (P) Ltd.

2- Public Company

A public company is one which is not a private company. In other words, it is a company which by its Articles of Association.

• Put no restrictions on the right of its members to transfer their shares.
• Does not limit the number of members to 200.
• It is free to make an invitation to the general public to subscribe its shares or debentures.
• Puts the minimum paid up capital to be rupees five lakh.

Minimum number of share holders to start a public company is 7. A public company must add the word limited or Ltd to its name. Eg:- Reliance Industries Ltd ., Bajaj Auto Ltd ., Federal Bank Ltd .

Difference between Public and Private Companies

Special privileges of private limited company.

A company can be registered as a private company or a public company. When a company is incorporated as a private company it enjoys certain privileges and exemptions when compared to a public company. The special privileges enjoyed by a private company are the following.

• The minimum number of members required to form a private company is only 2 whereas it is 7 in case of public company.
• A private company can start business immediately after its incorporation.
• A private company need not issue a prospectus or not required to file with the Register a statement in lieu of prospectus. It can raise capital privately.
• It need not hold a statutory meeting or file a statutory report.
• It can be managed with two directors and they are given the privilege of continuing the office even after the age of 65.
• There is no restriction with regard to the remuneration payable to directors.
• It need not keep the index of its members
• Only two members can make the quorum for a meeting.
• It is not required to offer new shares to existing shareholders in proportion to their share holdings.

3- One Person Company

According to Indian Companies Act 2013 it is possible to form One Person Company (OPC).An OPC means a company with only one person as its member.

According to section 3(1) of the Indian Companies Act 2013:-

• Only a natural person who is an Indian citizen and resident in India shall be eligible to incorporate OPC.
• No person shall be eligible to incorporate more than one OPC.
• OPC to compulsory convert itself into public or private company when its capital exceeds 50 lakh or its average annual turnover during year exceeds 2 crore.

Co-operative organization / Co-operative Societies

• A Cooperative society is a voluntary association of persons for the promotion of their common economic interest.
• The word co-operation implies joint effort.
• Through joint efforts, we can attain greater success than individual effort.
• For example in Consumers Cooperative Society consumers may join together to provide goods at cheaper rates by establishing direct contacts with producers and thereby eliminating the profits of middlemen.
• The motto of co- operative society is “each for all and all for each”.
• Co-operative form of business organization fundamentally differs from other business organizations.
• Their basic objective is service rather than profit.

Features of Co-operative Societies

1- voluntary association.

• A co-operative society is a voluntary association of persons.
• Any person having a common interest can join a cooperative society and can leave any time by giving a prior notice.

2- Compulsory registration

A cooperative society is compulsorily registered under the Cooperative Societies Act, 1912.

3- Number of members

• Minimum number of members required to form a cooperative society is 10.
• Maximum number of members is unlimited.

4- Limited liability

• The liability of the members of a cooperative society is limited to the extent of the amount contributed by them as capital.

5- Open membership

• The membership of a co-operative society is open to all irrespective of cast, creed, religion or sex.
• Democratic Control There is equality of status between members of a cooperative society.
• Business is managed by a managing committee which is elected by members on the principle one member one vote .

6- Service motive

It is formed with the motive of service to its members, not to earn profits.

• The capital of cooperative society is raised from its members through issue of shares.
• It can also raise loans from the banks.

8- Distribution of surplus

In cooperative society, surplus is distributed among members not on the basis of shares held by them but on the basis of their transactions with the society.

According to the Co-operative Societies Act the following provisions are to be followed for the disposal of surplus:-

• Only 9% of the profit distributed as dividends.
• 25% of profits transferred to reserve fund.
• 10% of profit to be used for general social welfare activities
• The rest used to give bonus to members on the basis of share effected by them.

Advantages of cooperative societies

1- easy formation.

• Any ten adult persons can form a cooperative society.
• The registration procedure is simple involving a few legal formalities.

2- Limited liability

• Their personal properties are safe from being used to repay business debts.

3- Democratic Management

• The principle one man one vote guarantees democratic management.

4- Government assistance

Government gives all kind of support to cooperative societies in the form of relief in taxation, subsidies and low interest rates on loans.

5- Social importance

A co-operative movement eliminates concentration of wealth in a few and provides employment to many people.

6- Stable existence

• A co-operative society has a separate legal existence from its members.
• So, its life is not affected by death, insolvency, bankruptcy etc of a member.

7- Economic upliftment of weaker sections

• The Co-operative Societies give financial assistance at lower rates of interest to poor farmers, artisans etc.
• They also give marketing facilities by enabling to sell the produce at reasonable prices.
• Hence they save the members from being exploited by local money lenders and merchants.

Disadvantages of a cooperative society

1- unsuitable for large business.

• A co-operative society is formed with limited capital contribution from its members.
• It is not able to mobilize adequate capital for large scale operations.

2- Inefficient Management

• Cooperative society is managed by elected members who may not be competent and experienced.
• A Co-operative Society is not in a position to employ expert professional managers at high salary.

3- Excessive State Regulation

The excessive state regulation and control restrict flexibility and initiative.

4- Lack of Secrecy

• The affairs of a co-operative society are openly discussed in meetings of members.
• Therefore, it becomes difficult to keep the secrets of business.

5- Absence of Motivation

• There is no direct link between effort and reward.
• Hence members are not willing to put their maximum efforts.

6- Non transferability of Shares

The shares of a co-operative society are not transferable. A member who wants to quit the society has to surrender his share to the society in order to get his money back.

Types of Co-operative Societies

On the basis of function they perform, Co-operative Societies are classified as follows:-

• Consumers Co-operative Society.
• Producers Co-operative Society
• Marketing Co-operative Society
• Co-operative Credit Society.
• Co-operative Farming Society
• Co-operative Housing Society.

1- Consumers Co-operative Society.

• Consumer’s cooperative societies are established to remove middlemen from the field of trade.
• It is formed to ensure steady supply of essential commodities of standard quality at fair prices.
• It purchases goods on wholesale basis and sell these goods to members at cheaper rates than the market price.
• However, the goods are sold to non- members at the market price.
• These societies protect lower and middle class people from the exploitation of profit hungry businessmen.
• The profits of the society are distributed among members in the ratio of purchases made by them during the year. Eg Triveni super market

2- Producers Co-operative Society.

• It is formed to protect the interest of small scale producers.
• A producers Co-operative Society is organized by small scale producers to face competition and to increase production.
• The members of the society produce goods in their house or at common place.
• The raw materials, tools, equipments, money etc. are provided to them by the society.
• The output is collected by the society and sold in the market at the wholesale rate.
• The profit is distributed among the members in proportion to the goods supplied by each member.
• Producer’s co-operative societies help members in obtaining raw materials, in improving quality of products, and in securing the economics of large scale production. Eg. Haryana Handloom

3- Marketing Co-operative Society

• These societies are formed by small producers and manufacturers who find it difficult to sell their products individually.
• The society collects the products from the individual members and takes the responsibility of selling those products in the market.
• It pools the output of individual members and performs marketing functions like grading, transportation, warehousing, packaging, marketing research etc.to sell the output at the best possible price.
• Profits are distributed according to ratio of goods supplied by them.
• Gujarat Co-operative Milk Marketing Federation that sells AMUL milk products is an example of marketing co-operative society.

4- Co-operative Credit Societies

• These societies are formed by poor people to provide financial help and to develop the habit of savings among members.
• They help to protect members from exploitation of money lenders who charge very high interest from borrowers.
• Credit cooperatives are found in both urban and rural areas.
• In rural areas, agricultural credit societies provide loans to members mainly for agricultural activities.
• In urban areas, non-agricultural societies or urban banks offer credit facilities to the members for purchase of row material, tools and household needs.
• They raise funds by accepting deposits from the members as well as from the public and grant loans to its members.
• Kumaramangalam Service Co-operative Society and Thodupuzha Urban Cooperative Banks etc are examples of co-operative credit society.

5- Co-operative Farming Society

• These are voluntary associations of small farmers who join together to obtain the economies of large scale farming.
• In India farmers are economically weak and their land-holdings are small.
• In their individual capacity, they are unable to use modern tools, seeds, fertilizers, etc.
• They pool together their land and undertake cultivation collectively.
• It provides better quality seeds, fertilizers, large scale farming tools like tractors, harvesters etc.

6- Co-operative housing societies

• These societies are formed by low and middle income group people in urban areas to have a house of their own.
• Housing cooperatives are of different types.
• Some societies acquire land and give the plots to the members for constructing their own houses.
• They also arrange loans from financial institutions and Government agencies.
• Other societies themselves construct houses and allot them to the members who make payment in installments.

Choice of form of business organization

• A business firm can be owned and managed in several forms.
• Choice of form of business is a very crucial decision because it determines the risks, responsibility, liability and control of the enterprise and the division of profit or loss.
• Once a form of business is chosen it is difficult to change it.
• Therefore, the form of business enterprise should be selected with due care and thought.
• Several factors influence the choice of the form of business enterprise.
• These factors are given below: –

1- Nature of business

• Business providing direct services eg. small retailers, hair dressing saloons, tailors etc. professional service, eg. Doctors, lawyer etc.
• depend for their success upon personal attention.
• They are therefore organized as sole trading concern.
• Business activities requiring pooling of skills and funds, eg. Wholesale trade, stock broking firms etc are better organized as partnerships.
• Manufacturing organizations of large size are more commonly setup as private and public companies.

2- Degree of Control Desired

• A person who desires direct control prefers proprietorship or partnership form of organization.
• In case the owner is not interested in direct personal control but in large scale operation, it would be desirable to adopt the company form of ownership.

3- Degree of risk and liability

• An individual not afraid of unlimited liability may go in for sole proprietorship or partnership firm.
• But people who prefer safety than return can select company form of organization, where liability is limited to the face value of shares held by him.

4- Duration of Business

• Temporary and ad hoc ventures can be organized as sole proprietorship or partnership as they are easy to form and dissolve.
• Enterprises of permanent nature can be better organized as joint stock companies and co-operative societies because they enjoy perpetual succession.

5- Amount of Capital required

• Enterprises requiring heavy investments should be organized as joint stock company.
• Where the funds required initially are small and scope for expansion is not desired, sole trading or partnership is better choice.

6- Government Regulation and Control

• Sole trading concerns and partnership are subject to little regulation and control by the government.
• Companies and co-operative societies have to undergo several legal formalities.

7- Managerial Requirements

• Small business using simple process of production and distribution can be managed effectively as proprietorships or partnerships.
• On the other hand an enterprise involving the use of complex techniques and procedures requires professional management.
• Such enterprises can be managed efficiently as joint stock companies.

8- Size and area of operations

• Large scale enterprises catering to national and international markets can be organized more successfully as joint stock companies.
• The reason is that large sized enterprises require large financial and managerial resources which are beyond the capacity of a single person or a few partners.
• On the other hand, small and medium scale firms are generally set up as partnership or proprietorship.

9- Division of Surplus

• If a person is ready to bear unlimited personal liability and desires maximum share of profit, the best choice is sole proprietorship   

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• Important Questions for CBSE Class 11 Business Studies (2024-25)

CBSE Class 11 Business Studies Important Questions - Free PDF Download

Class 11 is the introduction of higher secondary education for the students. For commerce students, business study is an essential subject. They should read this subject sincerely for better higher education. Class 11 business studies syllabus contains vital topics. The students should read the syllabus including important questions for class 11 business studies. The chapter wise important questions are essential exam preparation tools, which will help in scoring good marks. In Class 11 , students are introduced to the commerce subjects, which they will have to study in their higher academic life.

Class 11 Business Studies comprises eleven chapters that cover important topics. These topics need the highest attention from the students to prepare. To assess their preparation level, they can download and solve the Class 11 Business Studies term 2 Important Questions with Solutions developed by the subject experts of Vedantu. Find the solutions to these questions and take a step ahead in your preparation.

CBSE Class 11 Business Studies Chapter-wise Important Questions 2024-25

Chapterwise Important Questions for CBSE Class 11 Business Studies

Class 11 Business Studies Syllabus

Central Board of Secondary Education (CBSE) has included business studies as a vital subject in the class 11 commerce curriculum. The syllabus of business studies includes introductory chapters of some vital topics. The students will get primary knowledge about some vital topics of business studies. The entire syllabus of business studies is divided into part A and part B. Part A is about business foundation knowledge, which contains 6 different units. Part B is about trading and financial knowledge contains 4 units. Each part of the syllabus carries equal division for the exam. The students should read both parts with equal sincerity. They should learn all the topics thoroughly for future convenience and good marks in the final exam. To score well in the exam, they should practice class 11 business studies important questions after completing the entire syllabus.

Class 11 Business Studies Part A

The first part of class 11 business studies includes 6 units about the foundation of the business. The units of part A are Business Evolution and Fundamentals, Different forms of Business Organizations, private, public and multinational business companies, service of business, Business emerging Modes, Business Ethics and Social Responsibility in Business. Here, we have discussed the units briefly.

1. Unit 1: Business Evolution And Fundamentals

The first unit has 8 chapters, which are commerce and trading history of India, definition, and characteristic of business, Profession and Employment concept of Business, Business Objective, Business Activity classification (commerce and industry), Industry Types in Business, the meaning of commerce-trade, Risk concept of Business. All these chapters are important for knowing the subject primarily.

2. Unit 2: Different Forms of Business Organizations

This unit contains 6 chapters about business organization. The chapters are the concept of a sole proprietorship, the concept of partnership, the concept of partnership, the concept of Hindu Undivided Family Business, concept of cooperative society, concept, and classification of company, stages of company Formation.

3. Unit 3: Private, Public, and Multinational Business Companies

The third unit of part business studies class 11 has two chapters. The chapters are the concept and difference of private and public sector, different forms of the public sector. This unit gives an idea of business sector types to the students.

4. Unit 4: Service of Business

This unit includes 3 different chapters about business services. The chapters of this unit are concepts of banking and account types, different forms of banking services and payments, concept and classification of Insurance. All these chapters include primary knowledge of different business services.

5. Unit 5: Business Emerging Modes

This unit has only one chapter about business emerging modes, which is E-business. In this chapter, the concept, features, benefits, and scopes of E-business are described in detail. The students should read this chapter as a vital topic for better knowledge of business studies.

6. Unit 6: Business Ethics And Social Responsibility In Business

The last unit of part A class 11 business studies includes 4 chapters. The chapters are the concept of social responsibility, case of social responsibility, different forms of business responsibility, the role of business in environment protection. The chapters of this unit inform about the ethics and responsibilities of business.

Class 11 Business Studies Part B

The second part of the class 11 business studies syllabus is about trading and financial knowledge business. This part contains four units about trading and financial knowledge. The units are Financial Source of Business, Enterprise, and small business, Internal trading, International Trading. All the units have many chapters. Here, we have discussed the units in a brief.

1. Unit 7: Financial Source of Business

The first unit of class 11 business studies part B has three chapters. The chapters are the concept of Finance in business, the concept of different business materials: owners’ funds, shares, receipts, the concept of borrowed funds. All three chapters give a rough idea of the financial sources and factors of the business.

2. Unit 8: Enterprise and Small Business

This unit has four different chapters about enterprise and small business. The chapters are concept and features of enterprise, classification of enterprise, the role of small business in India, Government schemes for enterprise and small business. The students should read these chapters for deep knowledge in business studies.

3. Unit 9: Internal Trading

This unit includes two chapters, which are the concept of internal trade and the concept of large-scale retailers. The first chapter defines the meaning and features of internal trading. In the second chapter, the students will learn about different stores on a large scale.

4. Unit 10: International Trading

The last unit of class 11 business studies part B has two chapters. In the first chapter, the students will learn the concept, features, and benefits of International Trading. The second chapter is the Definition and Objectives of the World Trade Organization (WTO). Both chapters are important for advancing knowledge in business studies.

Business Studies Class 11 Important Questions Chapter Wise

Class 11 business studies syllabus includes a huge number of chapters separated into different units. The students have to read all the chapters thoroughly to learn the topics correctly. They have to complete the entire syllabus and revise them within an academic year. That is why chapter wise important questions for class 11 business studies during revision. From the chapter wise important questions for class 11 business studies during revision. From the chapter wise important questions, the students will get a chapter insight as well as the question pattern. The chapter wise important questions will make the revision and exam preparation easier. Important questions for class 11 business studies are vital exam preparation tools.

Benefits of Important Questions for Class 11 Business Studies

The benefits of practicing chapter wise important questions are–

The students will get to know the question pattern.

The revision and exam preparation will be easier.

The students will achieve efficiency by practicing the questions repeatedly.

The students can practice the questions considering the time to increase time management capability.

Significance of CBSE Class 11 Business Studies term 2 Important Questions with Solutions

There are a total of 11 chapters in the Class 12 Business Studies syllabus . These chapters are based on important topics such as business, trade, commerce, modes of business, business services, company formation, international business, internal trade, etc.

The syllabus has been divided into two parts for the convenience of the students. To make the preparation of all the chapters on these two parts easier, students complete solving the exercises and then proceed to solve the important questions. These Important Questions for Class 11 Business Studies Board Exam have been framed by the top subject experts of Vedantu to cover the entire syllabus properly.

These questions come with proper solutions framed by the same experts to offer convenience in solving them. These solutions will aid the students to focus on the answering formats and how to use the concepts of this subject in a better way.

Hence, these important questions will enable students to test their preparation level and to find out how to solve fundamental questions to score more in the exams.

Advantages of CBSE Class 11 Business Studies Important Questions with Answers PDF

All 11 chapters have been approached individually to form separate files. These files can be found on the list here to download. Hence, you can add more convenience to your study sessions by accessing these files easily.

Resolve doubts on your own when you have the solutions for all these chapters here. These solutions will come in very handy when any query arises. You can answer those queries instantly and proceed with your preparation.

Focus on how the experts have used the simplest explanation of all the answers in the solutions. Learn from the formats and practice to answer all exam questions within the given time and score more.

Recall all the concepts and principles you have studied in these solutions easily and answer the questions accurately in an exam.

Solved Examples

1. Why is Insurance Known as the Tertiary Industry?

Solution: Insurance is a support service to the primary and secondary services. Tertiary industries are concerned with providing support services. The services are to primary and secondary industries as well as activities relating to trade, which provide service facilities. Therefore, insurance is known as the tertiary industry.

2. Categories the Following into Profession, Business, and Employment: Farmer, Clerk, Advocate, Hawker, Person Working in Repairing Shop, Doctor.

Farmer – Business

Clerk – Employment

Advocate – Profession

Hawker – Business

A person working in repairing shop – Employment

Doctor – Profession

3. Explain the Meaning of Unlimited Liability.

Solution: Unlimited liability refers to the indefinite extent of liability to pay a firm’s obligations, extending beyond the investments of the firm’s owners, partners, or shareholders to their assets. This extent of liability is supposed to be an unlimited liability company, which can be a sole proprietorship or general partnership.

4. A Special Act of Parliament Bought Which Public Sector Form Into Existence?

Solution: Statutory corporations are the special act of the parliament. The act defines its functions and powers, rules and regulations, and its relationship with departments of the government. They have the power of the government and a considerable amount of operating flexibility of private enterprises.

5. Define the Meaning of Banking.

Solution: A banking company is the one transacting the business of banking. It means accepting for investment and lending of deposits of money. The acceptance is from the repayable on demand, or the public, or otherwise and withdrawal by drafts, cheques, order, or otherwise. Basically, a bank accepts money repayable on demand, public, and also earns a profit by lending money.

6. Define Outsourcing.

Solution: Outsourcing is a long-term contracting out of the non-core and of late even some of the core activities. The captive or third-party specialists benefit from their experience, expertise, efficiency, and even investment.

7. Define the One Need for Social Responsibility.

Solution: A socially responsible company can create a company’s image and build its brand. By projecting a positive image, a company can make a name for not only being financially profitable but socially conscious as well.

8. What is the IEC Number?

Solution: ICE number refers to import export code number, which is obtained from the Directorate General Foreign Trade (DGFT) or Regional Import Export Licensing Authority. It is a prerequisite to obtaining an export license.

Download Class 11 Business Studies Important Questions with Answers PDF 2024-25

Get the free PDF versions of these questions for all the chapters. Focus on how you can make your preparation better by practising these questions. Learn to use the solutions and methods provided by the experts to grow your answering skills. Develop your concepts for Class 11 Business Studies and ace all the exams by becoming more confident.

Other CBSE Class 11 Important Questions Links

Important related links for cbse class 11.

FAQs on Important Questions for CBSE Class 11 Business Studies (2024-25)

1. Explain 6 important factors that are to be considered for starting a business.

The 6 important factors that are to be considered for starting any business are as follows.

The Selection of Business Line: Select your business line wisely, that is, ensure the possibility of business growth and profitability when you select the nature and type of business.

The Size of the Business: Depending on the market demand and supply of your business products, select the size of your business. For high demands and fewer risk factors, select a large-scale business, and for high-risk factors select a small-scale business.

Choice of the Ownership Form: The type of ownership of your business depends on the line of business, capital requirements, legal formalities, the liability of owners, etc.

Location of the Business Firm: The location of the business firm depends upon the availability of labourers and raw materials.

Financing the Proposition: Financing the business proposition includes arranging the necessary capital for the business.

Physical Facilities: To start a business, it is important to check for the availability of machines, equipment, and other services.

Plant Layout: The layout of the business details has to be chalked out well in advance.

Competent Workforce: Arranging for a competent workforce is one of the basic necessities for starting a business. The growth of the business depends greatly on the workforce.

Tax Planning: Proper tax planning is necessary for every business, be it large-scale or small-scale.

Launching a Business Firm: With all the above factors taken care of, the business or the enterprise can be launched successfully.

2. What are the types of a service business?

There are three types of service businesses or enterprises, and they are as follows.

Micro Enterprises: The investment in the business equipment is within 10 lac rupees. 

Small Enterprises: The investment in the business equipment is between 10 lacs and 2 crores rupees.

Medium Enterprises: The investment in the business equipment is between 2 and 5 crore rupees.

3. Give two advantages of supermarkets.

The two advantages of supermarkets are as follows.

Sales are all carried out in cash or cards, leaving no chances of debts.

A wider variety of goods are available in the supermarkets, making it more likely for the buyers to end up making a purchase.

4. Are the important questions for CBSE Class 11 Business Studies beneficial for exam preparation?

Yes, the important questions for CBSE Class 11 Business Studies available on Vedantu are highly beneficial for exam preparation. Our in-house team of subject matter experts has curated and prepared these questions and solutions after making a detailed study of the entire syllabus of Class 11 Business Studies. The important questions from each chapter are arranged in a separate PDF file, for the convenience of students. You can download these files for free from Vedantu and refer to them for effective learning. These important questions also make an excellent study material for the Class 11 Business Studies examination. Therefore, download the PDF files and revise all the topics of Class 11 Business Studies by referring to these important questions and answers.

5. Where can I get the list of Important Questions of Class 11 Business Studies?

When looking for important questions for Class 11 Business Studies, the best place to be at is Vedantu’s e-platform. Students can find accurately chosen and explained questions that are important to prepare before their Class 11 Business Studies exams. The solutions for these questions have been carefully crafted by subject experts at Vedantu. The important questions and their solutions can be downloaded free of cost by students for offline access. You can also easily access them from Vedantu’s website. These solutions are available at free of cost on Vedantu(vedantu.com) and mobile app.

6. What are the chapters covered in Important Questions for Class 11 Business Studies?

Important Questions for CBSE Class 11 Business Studies provided by Vedantu cover the following chapters:

Chapter 1 - Business, Trade and Commerce

Chapter 2 - Forms of Business Organisation

Chapter 3 - Private, Public and Global Enterprises

Chapter 4 - Business Services

Chapter 5 - Emerging Modes of Business

Chapter 6 - Social Responsibilities of Business and Business Ethics

Chapter 7 - Formation of a Company

Chapter 8 - Sources of Business Finance

Chapter 9 - Small Business

Chapter 10 - Internal Trade

Chapter 11 - International Business

7. How many books are there for Class 11 Business Studies?

The Central Board of Secondary Education (CBSE) prescribed only one book for Class 11 Business Studies. This book has been published by NCERT and it is available in both English and Hindi mediums. There are a total of 10 chapters in this book divided into two parts. Part A contains six units that discuss knowledge about the business foundation and part B consists of the remaining four units that talk about financial and trading knowledge.

8. What are the most important chapters in Class 11 Business Studies?

The syllabus for Class 11 Business Studies contains a total of 10 chapters. Out of these, the most important chapters are Chapter 7 - Sources of Business Finance, Chapter 8 - Small Business, Chapter 9 - Internal Trade, and Chapter 10 - International Business. These are considered important since they contain higher weightage than all other chapters in the syllabus. Students can refer to Important Questions for CBSE Class 11 Business Studies for better preparation of these chapters.

9. What is meant by Banking?

As discussed in Class 11 Business Studies, banking is the term given to all activities related to business that involve accepting and safekeeping money owned by other entities for the purpose of lending or investment. The money that is deposited is also repayable on demand or otherwise, and withdrawable by cheque, order, draft, etc. It is an important service facilitating the economy by offering people an opportunity to save.

Important Questions for CBSE Class 11

Cbse class 11 study materials, home tuitions in india.

Monday 12 September 2016

Business studies case studies class 11; chapters 3,4 and 5, 14 comments:.

Sir inke solutions kha milenge

Sir where are the answers of all these questions

Yes sir we want answers

anssererdsd

sir answers pls

answer de na

Ans. Dasso yrr

Give answer of these case studies

answers bhej do yrr

Sir answer kaha h

Amul is a big brand now. Read how supply chain of amul work.

Thank you for sharing amazing case studies related to business. Case Studies For Small Businesses

BUSINESS STUDIES FOR CLASS 11 CHAPTER 2 FORMS OF BUSINESS ORGANISATIONS MCQS ALONG WITH ANSWERS

Free CBSE Business Studies Multiple Choice Questions for Class 11 along with answers, Chapter 2: Forms of Business Organisations. Business Studies MCQs for Class 11 chapter-wise with answers are prepared based on the current exam pattern. Students can tackle MCQs with answers to realise their spadework level.

1. The simplest form of business ownership is a _____.

(a) Proprietorship

(b) Partnership

(c) Corporation

(d) Cooperative

Answer: (a) Proprietorship

2. At least 10 adults, no maximum limit in case of ________.

(a) Cooperative Society

(b) Joint Hindu Family

(c) Partnership

(d) Company

Answer: (a) Cooperative Society

3. The main disadvantage of a general partnership is _____.

(a) The unlimited liability of the partners

(b) Disagreement amongst partners

(c) Shared management

(d) Difficulty of termination

Answer: (a) The unlimited liability of the partners

4. The major advantage of a franchise is _____.

(a) Training and management assistance

(b) Personal ownership

(c) Nationally recognised name

(d) All of the above

Answer: (d) All of the above

5. Profits do not have to be shared. This statement refers to _____.

(a) Company

(b) Sole proprietorship

(c) Joint Hindu family business

(d) Partnership

Answer: (b) Sole proprietorship

6. The form of business organisation that has the largest sales volume is the _____.

(a) Partnership

(b) Corporation

(c) Cooperative

(d) Multinational

Answer: (b) Corporation

7. Which of the following is probably the most important reason for incorporating?

(a) Limited liability of shareholders

(b) More money for investment

(c) Increased flexibility

(d) Shared management

Answer: (a) Limited liability of shareholders

8. The structure in which there is a separation of ownership and management as per law is called _____.

(b) All business organisations

(d) Sole proprietorship

Answer: (a) Company

9. Provision of residential accommodation to the members at reasonable rates is the objective of _____.

(a) Consumers cooperative

(b) Credit cooperative

(c) Housing cooperative

(d) Producers cooperative

Answer: (c) Housing cooperative

10. In a cooperative society, the principle followed is ______.

(a) One share, one vote

(b) One man, one vote

(c) No vote

(d) Multiple votes

Answer: (b) One man, one vote

11. Which of the following is an advantage of a sole proprietorship?

(a) Ease of starting a business

(b) Being your own boss

(c) Pride of ownership

12. In case of ___________, registration is compulsory.

(a) Sole Proprietorship

(c) Company

(d) None of these

Answer: (c) Company

13. A partner whose association with the firm is unknown to the general public is called _____.

(a) Active partner

(b) Sleeping partner

(c) Nominal partner

(d) Secret partner

Answer: (d) Secret partner

14. The Karta in the Joint Hindu family business has _____.

(a) No liability for debts

(b) Unlimited liability

(c) Joint liability

(d) Limited liability

Answer: (b) Unlimited liability

15. A partner who is not actually involved in the partnership but lends his name for public relations purposes is a _____.

(a) Silent partner

(b) General partner

(d) Dominant partner

Answer: (c) Nominal partner

We trust that the offered Business Studies MCQs for Class 11 with respect to Chapter 2: Forms of Business Organisations will help you. Assuming you have any questions with respect to CBSE Class 11 Business Studies, Forms of Business Organisations MCQs, drop a remark underneath, and we will hit you up at the most punctual.

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