Forms of Organisation
1) The business assets of an organization 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 organization is a sole proprietorship firm.
b) The organization is a partnership firm with Antony and Akbar as partners. Which of the two partners can the creditors approach for repayment of debt? Explain giving reasons.
2) Kiran is a sole proprietor. Over the past decade, her business has grown from operating a neighborhood 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 Kiran’s decision to go nationwide play in her choice of form of the organization?
d) What legal formalities will she have to undergo to form a company?
3) A partnership with five partner is operating a shoe factory and retail outlets in five big cities. The demand of the firm’s products has increased considerably, but it does not have the capacity to meet the increasing demand. For expanding its operations, the firm needs more capital, manpower and machinery. After adequate deliberation, the partners have listed two alternatives. They can either admit new partners or convert the partnership into a public limited company.
a) Which alternative is most suitable for the partners and Why?
b) Why should the partners adopt the alternative suggested by you?
4) A partners firm has three partners- A, B and C. Last year, A proposed to B and C that the firm should donate 5 percent of the firms profit to a non-government organization(NGO) engaged in education and health programs meant for children in backward areas. A’s proposal was accepted and firm donated Rs 3 lakh to an NGO with the instruction that Rs 1 lakh can be used for buying books and stationery for children and Rs 2 lakh for providing health facilities to the children in backward areas.
a) Is the action of the firm justified? Why?
5) Tania and Suraj are qualified chartered accountant and lawyer respectively. They joined hands to form a consultancy firm. They entered into a written agreement which specifies terms and conditions that will govern their firm. They also got the firm registered. Both of them took part in carrying the business activities. Their professional attitude helped them in gaining success within a limited time.
a) Who governs lawyers in India?
b) Which form of business organization is referred to in the above case.
c) What is the written agreement between Tania and Suraj known as ? List any two terms of it.
d) Give two consequences of non-registration of a firm.