BBA Business Organisation Causes of business combinations Various

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Forms of Business Organisation

The Business Activities are carried on by different forms of business organization or ownerships. Ownership of business organization signifies acquisition of legal control for earning profits from such acquisition.

Forms of organization can be classified into following heads:

1.      Private Ownership

1. 1. Sole-proprietorship.
   2. Partnership
   3. Joint Hindu Family business.
   4. Joint Stock Company.
      1. Public Company.
      2. Co-Operative undertaking.
   5. Co-operative undertaking.
      1. Join Ownership
      2. Joint stock company or company ownership.
      3. Co-operative society or co-operative ownership.

2.      Public Ownership

1. 1. Departmental enterprise.
   2. Public corporations.
   3. Government companies.

Points for a Good Forms of business Organisation

Easy formation.

1. Extent of liability
2. Ease in raising capital.
3. Stabiiity continuity.
4. Efficient and effective management.
5. Business secrecy.
6. Freedom from state regulations.
7. Tax liability.
8. The degree of closeness of relationship between the employers and the employees.
9. Transferability of shares.

Factors which you would kept in mind while selecting a form of business organization are:

1. Nature of business.
2. Area of operation.
3. Volume of business.
4. Liabilities.
5. Financial requirement.
6. Degree of entrepreneurial control required.
7. Tax liability.
8. State regulations.
9. continuity.
10. Flixibility.
11. Relationship between ownership and management.

Merits of Partnership

1. Ease of Formation : A partnership is easy to form as no cumbersome legal formalities are involved. An agreement is necessary and the procedure for registration is very simple. Similarly a partnership can be dissolved easily at any time without undergoing legal formalities. Registration of the firm is not essential and the partnership agreement need not essentially by in writing.
2. Larger financial resources : As a number of persons or partners contribute to be capital of the firm, it is possible to collect larger financial resources than is possible in sole proprietorship. Credit worthiness of the firm is also higher because every partner is personally and jointly liable for the debts of the business. There is greater scope for expansion or growth of business.
3. Specialisation and balanced approach: The partnership form enables the pooling of abilities and judgement of several persons. Combined abilities and judgement result in more efficient management of business. Partners with complementary skills may be chosen to avail of the benefits of specialization. Judicious choice of partners with diversified skills balanced decisions. Partners meet and discuss the problems of business frequently so that decisions can be taken quickly.
4. Flexibility of operations : Though not as versatile as proprietorship, a partnership firm enjoys sufficient flexibility in its day-to-day operations. The nature and place of business can be changed whenever the partners desire. The agreement can be altered and new partners can be admitted whenever necessary. Partnership is free from statutory control by the government except the general law of the land.
5. Protection of minority interest : No basic changes in the rights and obligations of partners can be made without the unanimous consent of all the partners. In case a partner feels dissatisfied, he can easily, retire from or he may apply for the dissolution of partnership.
6. Personal incentive and supervision : There is no divorce between ownership and management. Partners share in the profits and losses of the firm and there is motivation to improve the efficiency of the business. Personal control by the partners increases the possibility of success. Unlimited liability encourages caution and care on the part of partners. Fear of unlimited liability discourages reckless and hasty action and motivates the partners to pt in their best efforts.
7. Capacity for survival : The survival capacity of the partnership firm is higher than that of sole proprietorship. The partnership firm can continue after the death or insolvency of a partner if the remaining partners so desire. Risk of loss is diffused among two or more persons. In case one line of business is not successful, the firm may undertake another line of business to compensate its losses.
8. Better human and public relations : Due to a number of representative (partners) of the firm, it is possible to develop personal touch with employees, customers, government and the general public. Healthy relations with the public help to enhance the goodwill of the firm and pave the way for steady progress of the business.
9. Business secrecy : it is not compulsory for a partnership firm to publish and file its accounts and reports. Important secrets of business remain confined to the partners and are unknown to the outside world.

Joint Stock Company

1. Unlimited liability : Every partner is jointly and severally liable for the entire debts of the firm. He has to suffer not only for his own mistakes but also for the lapses and dishonesty of other partners. This may curb entrepreneurial spirit as partners may hesitate to venture into new lines of business for fear of losses. Private property of partners is not safe against the risks of business.
2. Limited resources : The amount of financial resources in partnership is limited to the contributions made by the partners. The number of partners cannot exceed 10 in banking and 20 in other types of business. Therefore, partnership form of ownership is not suited to undertake business involving huge investment of capital.
3. Risk of implied agency : The acts of a partner are binding on the firm as well as on other partners. An incompetent or dishonest partner may bring disaster for all due to his acts of commission or omission. That is why the saying is that choosing a business partner is as important as choosing a partner in life.
4. Lack of harmony : The success of partnership depends upon mutual understanding and co-operation among the partners. Continued disagreement and bickering among the partners may paralyse the business or may result in its untimely death. Lack of a central authority may affect the efficiency of the firm. Decisions may get delayed.
5. Lack of continuity : A partnership cones to an end with the retirement incapacity, insolvency and death of a partner. The firm may be carried on by the remaining partners by admitting new partners. But it is not always possible to replace a partner enjoying trust and confidence of all. Therefore, the life of a partnership firm is uncertain, though it has longer life than sole proprietorship.
6. Non-transferability of interest : No partner can transfer his share in the firm to an outside without the unanimous consent of all the partners. This makes investment in a partnership firm non-liquid and fixed. An individual’s capital is blocked.
7. Public distrust : A partnership firm lacks the confidence of public because it is not subject to detailed rules and reguluations. Lack of publicity of its affairs undermines public confidence in the firm.

The foregoing description reveals that partnership form of organization is appropriate for medium-sized business that required limited capital, pooling of skills and judgment and moderate risks like small scale industries, wholesale and retail trade, and small service concerns like transport agencies, real estate brokers professional firms like chartered accountants, doctor’s clinics or nursing homes, attorneys, etc.

Joint Stock Company

With the growing needs of modern business collection of vast financial and managerial resources became necessary. Proprietorship and partnership forms of ownership failed to meet these needs due to their limitations, e.g., unlimited liability, lack of continuity and limited resources. The company form of business organization was evolved to overcome these limitations. Joint stock company has become the dominant form of ownership for large scale enterprises because it enables collection of vast financial and managerial resources with provision for limited liability and continuity of operations.

A joint stock company is an incorporated and voluntary association of individuals with a distinctive name perpetual succession, limited liability and common seal, and usually having a joint capital divided into transferable shares of a fixed value. Chief justice john Marshall of U.S.A defined a company in the famous Dartmouth College case as an artificial being, invisible, only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence and the most important of which are immortality and individuality”. Thus a company is an artificial legal person having an independent legal entity.

Salient Features of a Company

1. Separate legal entity : A company has an existence entirely distinct from and independent of its members. It can own property and enter into contracts in its own name. it can sue and be sued in its own name. there can be contracts and suits between a company and the individual members who compose it. The assets and liabilities of the company are not the assets and liabilities of the individual members and vice versa. No member can directly claim any ownership right in the assets of the company.
2. Artificial legal person : A company is an artificial person created by law and existing only in contemplation of law. It is intangible and invisible having no body and no soul. It is an artificial person because it does not come into existence through natural birth and it does not possess the physical attributes of natural person. Like a natural person, it has rights and obligations in terms of law. But it cannot do those acts which only a natural person can do, e.g., taking an oath in person, enjoying married life, going to jail, practicing profession, etc. A company is not a citizen and it enjoys no franchise or other fundamental rights.
3. Perpetual succession : A company enjoys continuous or uninterrupted existence and its life is not affected by the death, insolvency, lunacy, etc. of its members or directors. Members may come and go but the company survives so longs as it is not would up being a creature of law, a company can be dissolved only through the legal process of winding up. It is like a river which retains its identity though the legal process of winding up. It is like a river which retains its identity though the parts composing it continuously change.
4. Limited Liability : Liability of the members of a limited company is limited to the value of the shares subscribed to or to the amount of guarantee given by them. Unlimited companies are an exception rather than the general rule. In a limited company, members cannot be asked to pay anything more than what is due or unpaid on the shares held by them even if the assets of the company are insufficient to satisfy in full the claims of its creditiors.
5. Common seal : A company being an artificial person cannot sign for itself. Therefore, the law provides for the use of common seal as a substitute for its signature. The common seal with the name of the company engraved on its serves as a token of the company’s approval of documents. Any document bearing the common seal of the company and duly withnessed (signed) by at least two directors is legally binding on the company.
6. Transferability of shares : The shares of a public limited company freely transferable. They can be purchased and sold through the stock hange. Every member is free to transfer his shares to anyone without the consent other members.
7. Separation of ownership and management : The number of members in a public company is generally very large so that all of them or most of them cannot take active part in the day-to-day management of the company. Therefore, they elect their representatives, known as directors, to manage the company on their behalf. Representative control is thus an important features of a company.
8. Incorporated association of persons: A company is an incorporated or registered association of persons. One person cannot constitute a company under the law. In a public company, at least seven persons and in a private company at least two persons are required. Causes of business combinations Various

Role of FICCI Trade Association

Causes of business combinations Various

1. Cut Throat Competition: Wasteful competition has been the most common cause of combinations is industry. Large scale production in anticipation of demand led to intense competition. In these conditions, factors are misused. The equilibrium between demand and supply is ruined. Unhealthy competition leads to wasteful expenditure. Combinations come into existence to check various competition.
2. Benefits of Large Scale Production: Large scale production and distribution beings a number of internal and external benefits, small and uneconomical business firms, therefore, join hands to secure these benefits combinations to reduce costs of doing business and staying in business. The amalgamation of a bank is an example of a combination on account of this factor in India.
3. To Face the Business Cycle: In almost every business, booms and depressions occur one after another. During the depression, inefficient and weak firms finding it difficult to survive, often sell themselves to large firms.
4. To Desire to Control Market: Sometimes, a few businessmen desire to establish their control in the market of any product. Their main objective is to earn huge profits by doing so. By motivating with this thought they gather all businessmen dealing in that product, i,e., form a business combination. Such combinations are very common in industries comprising of few companies start working under one management then the business combination is established.
5. Formation of Joint Stock Companies: Free transferability of shares in a public company enables acquisition of control in several enterprises. When one company purchases the majority of shares of other companies that it can easily control those companies. In this manner, when a few companies start working under one management then the business combination is established.
6. Rationalization: Measures for modernization, replacement, etc., require large finances and organized efforts. The complexity of modern production and distribution has also led to the integration of firms in an industry. Rationalization involves a combination of inefficient units to reduce wastage, to eliminate overproduction and to adopt new techniques.
7. Need of More Quantity of Capita : To run the business on large scale, large quantity of money is required. The capacity of a small business unit to collect the capital is limited. In this condition, many small units form the combination to gather large amount of capital. This way, they can collect the large amount of capital as well as they get the load from banks at simple terms and conditions. Causes of business combinations Various
8. The craze to be a Big Businessmen: To craze of being a bid businessman also give birth to business combination. The individual who develops this craze, he gather many business units and try to make it popular in one name (in his own name) only. If one person works hard and with great zeal, for him, it is not a tough task. In this manner, that person can gather many persons under one banner and can form business combination.
9. To Take Advantage of Individual Managerial Ability: Nowadays, the demand for efficient manager is higher than their supply. In this condition. When certain units observe that an individual has excellent managerial capabilities, then all forms a combination collectively and enjoy the services of that person. Hence, the manager, who was not able to manage the units having separate identity, now can manage these units efficiently because now they have become one unit.
10. To get Benefit from foreign Intelligence : To get benefit from the knowledge of foreign businessmen, business combination is established with foreign units. Whit these combinations, not only benefits of foreign intelligence are enjoyed but foreign units. With these combinations, not only benefits of foreign intelligence are enjoyed because also enters in india industry,

Rade Assciations

BBA Business Organisation Causes of business combinations Various :-

Trade Associations : It is a non-profit and voluntary organization formed by business enterprises operating in the same trade or industry for the promotion of mutual business interest. The general purpose of trade association is to improve the conditions in trade or industry, it meets raw materials. Labour of power, taxation etc. and tries to arrive at satisfactory solutions. It may be organized on local, regional or national levels. Almost every trade and industry today has its own association.

Example of Trade Associations : All India Manufacturer’s Organisation (AIMO), Confederation of Indian Industry (CII), All India Organisation of Employers (AIOE), Indian Jute Mills Association, Indian Sugar Mills Association, etc. are some examples of trade associations in India.

Functions of Trade Association

1. To Stop the Unhealthy competition : Trade association try to check the unhealthy competition going on among its members.
2. To Arrange the Industrial Research : These associations arrange for their members the industrial research and market survey. They make all attempts for the development of their members.
3. To Solve the Mutual Problems : There are certain problems with which all the members of association suffer. These problems can be related with getting raw material, lack of means of transport, lack of power etc. trade association try to solve these problems.
4. To Safeguard the Interest of the Members : Trade association represent their members and present their view on government policies. They also suggest for making new laws in business interest. They also help in solving business conflicts among their members.

Introduction of FICCI

BBA Business Organisation Causes of business combinations Various :-

Federation of Indian Chambers of Commerce and Industry (FICCI) came into existence in 1927 in New Delhi. It has its headquarter in New Delhi. It is a voluntary organization registered under the Indian Companies Act, 1913 as a non-profit body. It membership consists of over 50 chambers and trade association, 200 overseas member and 1,500 associate members which include individuals, firm and companies. Causes of business combinations Various

Objectives of FICCI

BBA Business Organisation Causes of business combinations Various :-

1. To promote healthy interface between the business community and the government.
2. To create conditions for the globalization of the Indian economy.
3. To promote scientific research, import substitution and fullest possible utilisation of national resources.
4. To work for deregulation of the economy by persuading the government to life administrative and other controls.
5. To assist members in export promotion, modernization, quality control, pollution control, etc.
6. To assist government in achieving socio-economic goals of removing poverty and increasing employment opportunities.

Role of FICCI

BBA Business Organisation Causes of business combinations Various :-

FICCI has led Indian business from the front and it has becomes the apex central body to protect and promote and promote the interests of business community. Some of its involvement in promoting business interests are given below:

1. Set up of Committee : FICCI is represented on various advisory boards, communities and councils set up by the government and leading institutions. The Board of Trade, Central Advisory Council of Industries, Direct Taxes Advisory Commuittee, customs and bodies, FICCI has influenced the government policies concerning industrial licensing , foreign collaborations, plant location, capital issues, etc.
2. Set up of Associate Bodies : FICCI has set up specialized bodies to cater sectorial interest of business. All India Organisation of Employers (ALOE), Indian National Committee of International Chamber of commerce (INCICC), Indian Council of Arbitration (ICA), All India shipper’s council (AISC),Confederation of India food trade and industry (CIFTI), FICCI ladies organization (FLO), Economic and Scientific Research Foundation (ESRF) are associate organization of FICCI engaged in solving specific problems of Indian Business.

1. Set up of Expert Committees: FICCI has set up several expert committees and task forces to keep track of the latest developments in the market environment and to study their impact on business. The subject-areas include informatics, industry, banking and finance, environment, taxation, and legal affairs, international trade, telecommunications, electronics technology, housing and construction, agriculture, management and HRD, international trade.
2. Set up of joint Business Council: FICCI has set up a joint Business Council (JBC) with ASSOCHAM to promote exports and to develop sound business relations with other countries. JBC has entered into trade agreements with more than 50 countries and is a rallying point for Indian and overseas businessman.
3. Library and Publications: FICCI has a well-established library having a large number of books and periodicals on business and industry. The journals published by FICCI are designed to update.

What do you Mean Amalgamation

BBA Business Organisation Causes of business combinations Various :-

Amalgamation : In order to reap the economies of scale and reduce or eliminate competition, two or more than two joint stock companies may combine their undertakings and become one joint stock company. It may be done either by one of the existing joint stock companies taking over the other combining company or companies, the latter being dissolved or by starting a new joint stock company takes over all the combining joint stock companies. Suppose, there are two joint stock companies A Ltd. And B Ltd. Now A Ltd. May take over the business of B Ltd. Which is dissolved or B Let. May absorb A Ltd. There is another choice.

But A Ltd. And B Ltd. May be dissolved and the business of both the companies may be taken over by a newly formed joint stock company, say C Ltd. In all the three cases, we shall say that there is an amalgamation of A Ltd. According to Halsbury’s laws of England, “Amalgamation is a blending company becoming substantially the shareholders in the company which is carried on the blending company becoming substantially the shareholders in the company which is carried on the blended undertakings. There may be amalgamation either by transfer of two or more undertakings to a new company or by the transfer of one or more undertakings to an existing company.” Causes of business combinations Various

BBA Business Organisation Causes of business combinations Various :-

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BBA Business Low Question Paper 2018-2020

 

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