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| 1. |
Explain briefly factors to be considered for standing business? |
| Answer» It is evident that each form has certain advantages as well as disadvantages. Therefore, it is important to choose an appropriate form of organisation.Factors that determine the choice of form oforganisation:\tCost and ease in setting up the organisation: From the’point of view of initial cost, sole proprietorship is the preferred form as it involves least expenditure.\tA company form of organisation, on the other hand, is more complex and involves greater costs.\tLiability : In case of sole proprietorship and\tpartnership firms, the liability of the owners/ partners is unlimited. In Joint Hindu Family Business, only the Karta has unlimited liability. In cooperative societies and companies, however, liability is limited.\tContinuity: In case the business needs a permanent\tstructure, company form is more suitable. For short term ventures, proprietorship or partnership may be preferred.\tManagement ability : A sole proprietor\tmay find it difficult to have expertise in all functional areas of management. In other forms of organisations like partnership and company, there is no such problem.\tCapital consideration : Companies are in a better\tposition to collect large amount of capital by issuing shares to a large number of investors. Partnership firms also have the advantage of combined\tresources of all partners. But the resources of a sole proprietor are limited.\tDegree of control: If direct control over operations\tand absolute decision making power is required, sole proprietorship may be preferred. | |