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Saturday, September 9, 2023

Types of Cooperative Societies

Types of Cooperative Societies

Cooperative organisations are set up in different fields to promote the economic well-being of different sections of the society. So, according to the needs of the people, there are different types of cooperative societies in India.

  1. Consumers’ Cooperative Societies: These societies are formed to protect the interest of consumers by making available consumer goods of high quality at reasonable price.

  2. Producer’s Cooperative Societies: These societies are formed to protect the interest of small producers and artisans by making available items of their need for production, like raw materials, tools and equipment, etc.

  3. Marketing Cooperative Societies: To solve the problem of marketing the products, small producers join hands to form marketing cooperative societies.

  4. Housing Cooperative Societies: To provide residential houses to the members, housing cooperative societies are formed generally in urban areas.

  5. Farming Cooperative Societies: These societies are formed by the small farmers to get the benefits of large-scale farming.

  6. Credit Cooperative Societies: These societies are started by persons who are in need of credit. Credit Co-operative Societies accept deposits from the members and grant them loans at reasonable rate of interest

steps in formation of private company

  1. be properly registered and stamped.
  2. Article of Association: Article of Association (AoA) is also required to be signed and submitted. All members who previously signed MoA, should also be signing the AoA.
  3. The next step is preparing a list of directors which should be filed with the Registrar of Companies.
  4. Directors of the company should provide a written consent agreeing to be directors, should be filed with the Registrar of Companies (RoC).
  5. The notice of address of the office needs to be filed.
  6. A statutory declaration should be made by any advocate of either the High Court or Supreme Court, or a person of the capacity of Director, Secretary or Managing Director. This declaration shall be filed with the RoC.

Certificate of Incorporation: Certificate of incorporation is issued when the registrar is satisfied with the documents provided. This certificate validates the establishment of the company in the records.

Certificate of commencement of business: Certificate of commencement of business is required for a public company to start doing business, while a private company can start business once it has received the certificate of incorporation.

Public companies receiving the certificate of incorporation can issue prospectus in order to make the public subscribe to the share for raising capital. Once all the minimum number of required shares have been subscribed, a letter should be sent to the registrar along with a bank document stating the receiving of the money.

The registrar will issue a certificate upon finding the provided documents satisfactory. This certificate is known as certificate of commencement of business. The company can start business activities from the date of issue of the certificate and the business shall be done as per rules laid down in the MoA (Memorandum of Association).

This concludes the topic of Steps in Formation of a Company, which is an important concept for the students of Commerce. For more information, stay tuned to BYJU’S.


Friday, July 28, 2023

Forms of Business Organization

 Forms of Business Organization

One of the first decisions that you will have to make as a business owner is how the business should be structured.  All businesses must adopt some legal configuration that defines the rights and liabilities of participants in the business’s ownership, control, personal liability, life span, and financial structure.

In making a choice, following should be consider:

  • The size and nature of business.
  • The level of control.
  • The level of “structure”
  • Expected profit (or loss) of the business.
  • Whether or not need to re-invest earnings into the business.
  • Need for access to cash out of the business for yourself.

An overview of the four basic legal forms of organization: Sole Proprietorship; Partnerships; Corporations and Limited Liability Company follows. 

Sole Proprietorship

The vast majority of small businesses start out as sole proprietorship.  These firms are owned by one person, usually the individual who has day-to-day responsibility for running the business.  Sole proprietorship own all the assets of the business and the profits generated by it.  They also assume complete responsibility for any of its liabilities or debts.  In the eyes of the law and the public, you are one in the same with the business.

Advantages of a Sole Proprietorship

  • Easiest and least expensive form of ownership to organize.
  • Sole proprietors are in complete control, and within the parameters of the law, may make decisions as they see fit.
  • Profits from the business flow-through directly to the owner’s personal tax return.
  • The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship

  • Sole proprietors have unlimited liability and are legally responsible for all debts against the business.  Their business and personal assets are at risk.
  • May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans.
  • May have a hard time attracting high-caliber employees, or those that are motivated by the opportunity to own a part of the business.
  • Some employee benefits such as owner’s medical insurance premiums are not directly deductible from business income (only partially as an adjustment to income).


In a Partnership, two or more people share ownership of a single business.  Like proprietorships, the law does not distinguish between the business and its owners.  The Partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed.

Yes, it’s hard to think about a “break-up” when the business is just getting started, but many partnerships split up at crisis times and unless there is a defined process, there will be even greater problems.  They also must decide up front how much time and capital each will contribute, etc.

Advantages of a Partnership

  • Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement.
  • With more than one owner, the ability to raise funds may be increased.
  • The profits from the business flow directly through to the partners’ personal tax return.
  • Prospective employees may be attracted to the business if given the incentive to become a partner.
  • The business usually will benefit from partners who have complementary skills.

Disadvantages of a Partnership

  • Partners are jointly and individually liable for the actions of the other partners.
  • Profits must be shared with others.
  • Since decisions are shared, disagreements can occur.
  • Some employee benefits are not deductible from business income on tax returns.
  • The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

Types of Partnerships that Should Be Considered:

1. General partnership
Partners divide responsibility for management and liability, as well as the shares of profit or loss according to their internal agreement.  Equal shares are assumed unless there is a written agreement that states differently.

2. Limited partnership and partnership with limited liability
“Limited” means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions, which generally encourages investors for short term projects, or for investing in capital assets.  This form of ownership is not often used for operating retail or service businesses.  Forming a limited partnership is more complex and formal than that of a general partnership.

3. Joint venture
Acts like a general partnership, but is clearly for a limited period of time or a single project.  If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such, and distribute accumulated partnership assets upon dissolution of the entity.


A Corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it.  A Corporation can be taxed; it can be sued; it can enter into contractual agreements.  The owners of a corporation are its shareholders.  The shareholders elect a board of directors to oversee the major policies and decisions.  The corporation has a life of its own and does not dissolve when ownership changes.

Advantages of a Corporation

  • Shareholders have limited liability for the corporation’s debts or judgments against the corporation.
  • Generally, shareholders can only be held accountable for their investment in stock of the company.  (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.
  • Corporations can raise additional funds through the sale of stock.
  • A Corporation may deduct the cost of benefits it provides to officers and employees.
  • Can elect S Corporation status if certain requirements are met.  This election enables company to be taxed similar to a partnership.

Disadvantages of a Corporation

  • The process of incorporation requires more time and money than other forms of organization.
  • Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
  • Incorporating may result in higher overall taxes.  Dividends paid to shareholders are not deductible from business income; thus this income can be taxed twice.

Limited Liability Company (LLC)

The LLC is a relatively new type of hybrid business structure that is now permissible in most states.  It is designed to provide limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.  Formation is more complex and formal than that of a general partnership.

The owners are members, and the duration of the LLC is usually determined when the organization papers are filed.  The time limit can be continued if desired by a vote of the members at the time of expiration.  LLC’s must not have more than two of the four characteristics that define corporations:  Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.

Characteristics of Business

Business is an economic activity that involves the exchange, purchase, sale or production of goods and services with a motive to earn profits and satisfy the needs of customers. Businesses can be both profit or non-profit organizations that function to gain profits or achieve a social cause respectively.

Characteristics of Business

Following are the characteristics or features of business

(1) An Economic Activity

A business is an economic activity which includes the purchase & sale of goods or rendering of services to earn money.

It is not concerned with the achievement of social and emotional objectives.

Example: Wholesaler sell goods to the retailers and retailers sell goods to the customers.

(2)Manufacturing or Procurement of Services and Goods

Before offering goods to the consumer for consumption it should be manufactured or procured by businesses.

Business enterprise converts the raw material into finished goods.

Organisations also procure finished goods& services from the producers to meet the needs of the customers in the market.

Goods can be a Consumer good like sugar, pen, ghee, etc. capital goods include machinery, furniture, services like transportation, banking, etc.

Example: Individual retailer buys the toffees from wholesalers in a specific quantity and sells it to the ultimate consumer.

(3)Exchange or Sale of Goods and Services for the Satisfaction of Human Needs

Every business activity includes an exchange or transfer of services and goods to earn value.

Producing goods for the goal of personal consumption is not included in business activity.

So, there should be the process of sale or exchange of goods or services exits among the seller and the buyer.

Example: A lady who bakes pastries and cakes at home and sells it to the pastry shop is a business activity.

(4) Dealings With Goods and Services on a Daily Basis

Every business, rendering either services or goods should deal on a daily basis.

A one-time sale is not considered a business activity.

Example: If a person sells his old car through OLX even at a profit will not be considered as a business activity. But if he is engaged in regularly trading of cars at his showroom will be considered as business activity.

(5) Profit Earning

No business can last for long, without making a profit.

The purpose to conduct the business is to earn profits and minimise the cost.

Example: A business house tries to reduce the cost of production and the cost of raw material to earn high profits.

(6) Uncertainty of Return

The possibility of earning profit or loss is very uncertain and can’t be anticipated by the entrepreneur.

Hence, no business can totally do away with risks.

source: https://byjus.com/commerce/concept-and-features-of-business/


The business objective is a goal, i.e. where the business wants to reach in the future. For example, a business wants to set up its franchise in another state in the next 3 years or it wants to increase its workforce in the coming months.

Business needs objectives, without objectives the business is like a car without headlights driving blind. Objectives of business are the purpose for which the business is established and performed. We can call objectives the cornerstone of every business.

Objectives are needed in every area where performance and results directly affect the survival and prosperity of a business. The right choice of objectives is critical for the success of the business. The objectives of a business can be classified into two main categories, which are

I  Economic objectives

1] Profit Earning

Business is a set of activities undertaken with the prospect of sale for the purpose of earning a profit. Profit is the extra income over the expenses. The main objective of any business is to earn a profit. Just as a plant cannot survive without water, similarly a business cannot sustain without profit.

Profit is necessary for growing and expanding business activities. Profit guarantee a consistent stream of capital for the modernization and augmentation of business activities in the future. Profits likewise show the scale of stability, efficiency, and advancement of the business organization.

2] Market Share / Creation of Customers

In the words of Drucker, “There is only one valid definition of business purpose; to create a customer. “ Profits are not generated out of thin air. They are the result of the hard work of the businessman to satisfy the needs of the customers.

In the long run, the survival of the business completely depends upon the market share captured by the business.  The creation of good and satisfaction of the needs of the customer is a crucial purpose of the business. So to generate profit and demand, the business must supply premium quality and give value for money products.

3] Innovation & Utilization of Resources

Innovation normally means to change processes or creating more effective processes, products and ideas. Nowadays, business is ever-changing and dynamic. To keep up with the growing competition a businessman has to introduce efficient design, latest trends, upgraded machinery, new techniques, etc.

Large corporations invest a humongous amount of capital in their Research & Development department to boost innovation. Whereas, on the parallel lines, utilization of resources is a proper use of workforce, raw material, capital and technology used in the business. A business has limited resources and that’s why its main objective is to put these resources to correct divisions.

4] Increasing Productivity

Productivity is a scale to measure the efficiency of the business activity. It is usually the last objective but just as important because productivity is measured by the output given by the activities. It is the end result of any business activity. Each business must go for more prominent productivity – to guarantee its survival and development. This goal can be accomplished by decreasing wastages and making proficient utilization of machines and supplies, HR, cash and so forth.

II. Social Objectives of Business

According to Dayton Hudson “The business of business is serving society, not just making money.” Business is one of the pillars on which the society stands.  Therefore, it is a part of the society. In fact, it cannot thrive without the resources from the society.  The business earns its income from the sale of products and services to the society. It is mandatory on the part of the business to take care of the social factors. The necessary social objectives of a business are as follows:

1] Providing Goods & Services at Reasonable Prices

Business exists in the first place to satisfy the needs of the society. It’s the first and major social objective of the business. Products and services ought to be of better quality and these ought to be provided at sensible costs. It is additionally the social commitment of business to keep away from misbehaviors like boarding, Black promoting and manipulative advertising.

2] Employment Generation

One of the major problem today’s generation facing is unemployment. Business generates employment. Therefore, it is the social objective of a business to give chances to beneficial employment to individuals of the society. In a nation like India, unemployment has turned into a critical issue.

3] Fair Remuneration to Employees

The business does not run on its own but the people are responsible for the success and failure of the business. The people on the inside of the business are more valuable i.e. employees. They are an asset of the business and make a ground-breaking contribution to the business. They must be given reasonable pay for their work.

Notwithstanding wages and salary, a significant piece of profits ought to be distrib­uted among them in acknowledgment of their commitments. Such sharing of benefits will expand the inspiration and proficiency of employees.

4] Community Service

Business must give back something to the society. As a result, the Library, dispensary, educational foundations and so on which a business can make and help in the advancement of society are created. Business enterprises can build schools, colleges, libraries, hospitals, sports bodies and research institutions. They can help non-government organizations (NGOs) like CRY, Help Age, and others which render services to weaker sections of society.

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Difference between Business, Profession, and Employment

Economic activities are divided into three major categories, namely business, professions and employment.


Business refers to those economic activities, which are connected with the production or purchase & sale of goods or supply of services with the main object of earning a profit. To earn income in the form of profit people engage themselves in business. Examples: fishing, mining, farming, manufacturing, wholesales etc.

Professions includes those activities, which require special knowledge & skill to be applied by individuals in their occupation. Those engaged in professions are known as professionals. Professionals are generally subjected to guidelines or codes of conduct laid down by professional bodies.

Examples: lawyers are engaged in the legal profession, governed by the bar council of India & chartered accountants belonging to the accounting profession are subject to the regulations of the Institute of chartered accountants of India.

Getting remunerated in return for the work done for others refers to an employee. Employees are the people who are employed by others. Thus, people who work in factories, offices of banks, insurance companies or government department, etc at various posts are the employees of these organizations. They receive wages & salaries. Examples: working in offices, banks, insurance companies, shops, as a manager, clerk, peon, salesman etc.

Difference between Business, Profession, and Employment

    Basis         Business       Profession     Employment
CommencementBusiness may commence with the decision of entrepreneur.The profession may commence on completion of a degree course & by getting a certificate of practice.Employment commences on joining duty by entering into a service agreement.


QualificationNo minimum qualification required before starting a business.Prescribed & professional qualification & training required.Qualification depends on the nature of the job.


InvestmentCapital requirement depends on the scale of business.Limited capital investment is required.No capital investment is required.
RiskIn business, there is always risk & uncertainty.In the profession, there is little risk present.In employment, there is no risk involved.
Transfer of interestTransfer of interest is possible with some formalities.Transfer of interest is not possible.Not possible to transfer the service contract.
Main objectiveThe main objective of business is to earn a profit.The main objective of a profession is to provide service.The main objective of employment is to earn income in the form of salary by satisfying the employer.
Code of conductThere is no prescribed code of conduct for business.Code of conduct is prescribed by the professional associations.The terms & conditions of service contract are applicable to an employee.
Nature of work involvedIt involves production, purchase & sale or exchange of goods & services.It involves the rendering of personalized services of specialized nature.It involves performing the work as assigned by the employer.
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Types of Cooperative Societies

Types of Cooperative Societies Cooperative organisations are set up in different fields to promote the economic well-being of different sect...