OLD CONCEPT

An economic activity involving regular production or purchase and distribution of goods and
services with the object of earning profits.

The business of business is to do the business.

Business was regarded as an end in itself
Objective:
Profit maximization
Amassing wealth & economic power even at the cost of social justice

MODERN CONCEPT

Business is a socio-economic activity, which is related to continuous and regular production

and distribution of goods and services with satisfaction of human wants and needs as the
primary objective.
Modern business enterprise is a social & economic institution
It does not live in vacuum
It is not an end but a valuable means to achieve an end, viz human welfare & public good

Definition of Business

Stephenson defines business as, "The regular production or purchase and sale of goods
undertaken with an objective of earning profit and acquiring wealth through the satisfaction of
human wants."
According to Dicksee, "Business refers to a form of activity conducted with an objective of
earning profits for the benefit of those on whose behalf the activity is conducted."

In the words of Davis, Business may be defined as an activity in which different

persons exchange something of value whether goods or services for mutual gain or profit".
Lewis Henry defines business as, "Human activity directed towards producing or acquiring
wealth through buying and selling of goods."
Thus, the term business means continuous production and distribution of goods and services
with the aim of earning profits under uncertain market conditions.

According to Supreme court in west Bengal state warehousing corporation Vs.

Indrapuri studio Pvt. Ltd. (2010)
Profit motive is immaterial.
Even a single transaction may get covered under the ambit of ‘business’.
Ancillary and incidental activity also covered in the ambit of business.

Business – Sec 2(17) of CGST Act, 2017

“Business” includes –
(a) any trade, commerce, manufacture, profession, vocation, adventure or any other similar
activity, whether or not it is for a pecuniary benefit;
(b) Any activity or transaction in connection with or incidental or ancillary to (a) above;
(c) Any activity or transaction in the nature of(a) above, WHETHER OR NOT there is volume,
frequency, continuity or regularity of such transaction

d) Supply or acquisition of goods including capital assets and services in connection with
commencement or closure of business;
(e) Provision by a club, association, society, or any such body (for a subscription or any other
consideration) of the facilities or benefits to its members, as the case may be;
(f) Admission, for a consideration, of persons to any premises; and

(g) Services supplied by a person as the holder of an office which has been accepted by him in
the course or furtherance of his trade, profession or vocation;
(h) Services provided by a race club by way of totalizator or a license to book maker (accept
and pay off bets ) in such club;
(i)Any activity or transaction undertaken by the Central Government, a State Government or
any local authority in which they are engaged as public authorities

Taxation of NGOs under GST

The supreme court of India in the case of State of Tamil Nadu and Another Vs Board
of the port has held the following ratio
In order to be a supply which is taxable under GST, the transaction should be in the course
or furtherance of business. As there is no quid pro quo involved in supply for
charitable activities, it is not a supply under GST

FEATURES OF BUSINESS

1. Two Parties
Every business transaction must have at least two different parties as buyer & seller.
Business is nothing but a contract between buyer and seller.

2. Exchange of goods or services

All business transactions are directly or indirectly concerned with the exchange of goods or
services for money or money's worth.

3. Exchange of Tangible goods or services

Deals with tangible goods or services only
Exceptions may be in the form of intangible goods like good-will that can be evaluated in
monitory terms

4. Deals in numerous transactions in a regular manner

In business, the exchange of goods and services is a regular feature.
A businessman regularly deals in a number of transactions and not just one or two
transactions.
But we may have exceptional cases where in even one transaction will amount to business.

5. Profit is one of the Objectives and NOT the only objective

Business cannot thrive without profit.
Needs profits for its horizontal & vertical expansion and CSR initiatives.
Old business had profit as the sole objective but the modern business makes profits through
consumer satisfaction & social welfare.
6. Not certification but business skills mandatory
Anyone with business acumen can do business.
No certification or qualification is mandatory to become a businessman.

7. Risks and Uncertainties

Business is subject to risks and uncertainties.
Loss due to fire and theft can be insured.
Loss due to change in demand or fall in price cannot be insured

8. Connected with production, Purchase or their aid

Business activity MAY BE connected with production of goods or services (Industrial
activity). The industry may be primary, secondary or tertiary.
It MAY do purchase and sale or may be just serve as a connecting link
It MAY facilitate business

9. Marketing and Distribution of goods

Business activity MAY BE concerned with marketing or distribution of goods (Commercial
activity).

10. To Satisfy human wants

Modern business considers consumer as the master and business as servant
By producing and supplying various commodities, businessmen try to promote consumer
satisfaction so as attract them.
11. Social obligations
In the bid to thrive in the cut throat competition, the businessmen are now targeting triple
bottom line.
In addition to the consumers they are also extending their welfare activities towards non-
consumers including mother earth.

OBJECTIVES OF BUSINESS
Objective of Business means the purpose for which the business has been established.
One of the objectives of business is to make profit and avoid loss, but it is not the sole
objective of any business.
In the words of Urwick “Earning of profit cannot be the objective of a business any
more than eating is the objective of living”
However, any business unit cannot ignore the interests of its employees, customers, the
community and society as a whole
To sum up the objectives of business may be classified as -
1. Economic Objectives
2. Non- Economic Objectives
a. Social Objectives
b. Human Objectives
c. National Objectives
d. Global Objective

ECONOMIC OBJECTIVES

It refers to earning profit along with other activities that are necessary to be pursued
to achieve it such as :

i)Profit earning
ii)Creation of customers
iii)Regular innovations
iv)Best possible use of resources
I) PROFIT EARNING
Profit is the lifeblood of business, without which no business can survive in a competitive
market.
Profits must be earned to ensure the survival of business, its growth and expansion
over time by reinvesting a part of the profits.
II) Creation of customers
A business unit cannot survive unless there are customers to buy the products and
services.
Again a businessman can earn profits only when he/she provides quality goods and
services at a reasonable price.
For this it needs to attract more customers for its existing as well as new products.
This is achieved through various marketing activities
III) Regular Innovation
Innovation means changes, which bring about improvement in products, process of
production and distribution of goods.
Business units, through innovation, are able to reduce cost by adopting better methods of
production and also increase their sales by attracting more customers because of
improved products
IV) Optimum Utilisation of Resources
Basic requirement to run any business is to have sufficient capital or funds.
The amount of capital may be used to buy machinery, raw materials, employ men and
have cash to meet day-to-day expenses

V) Social Objectives
Since business operates in a society by utilizing its resources, the society expects
something in return for its welfare.
Social objectives are those objectives of business, which are desired to be achieved for the
benefit of the society
Social objective includes

1 Production and supply of quality goods and services

2 Adoption of fair trade practices
3 Contribution to the general welfare of society

General welfare of society includes :

Running of schools and colleges
Opening of vocational training centers
Opening hospitals for medical facilities
Providing recreational facilities for the general public like parks, sports complexes
 HUMAN OBJECTIVE

Human objectives refer to the objectives aimed at the well-being of employees & people
who are disabled, handicapped and deprived of proper education and training.

Human objectives include

Economic well being of the employees

Social and psychological satisfaction of employees
Development of human resources
Well being of socially and economically backward people

Economic well being of the employees

Provide performance based fair remuneration and incentives
Provide provident fund, pension , medical facilities, housing facilities etc.
It leads to job satisfaction , job involvement and hence the rise in productivity

SOCIAL AND PSYCHOLOGICAL SATISFACTION OF EMPLOYEES

Making job interesting and challenging

Putting the right person at the right job
Reducing monotony
Providing opportunities for promotion and advancement in career
Grievances of employees be given prompt attention
Their suggestions should be considered

Development of Human Resources

Employees as human beings always want to grow.

Improve their skills and competencies by providing training and development

Well being of socially and economically backward people

Business should keep some provision for helping:
Backward class people
Physically and mentally challenged people
Vocational training programs may be arranged to improve their earning capacity
Scholarships for higher education to the meritorious students

National Objectives
Providing employment opportunities to its citizens
Earn revenue for its government
Becoming self-sufficient in production of goods and services
Promote social justice

I)CREATION OF EMPLOYMENT

Establishing new business units

Expanding markets
Widening distribution channels

II) Promotion of social justice

Provide equal opportunities of employment to all
Provide equal opportunities of growth and development to all employees
Towards this objective special attention must be paid to weaker and backward sections
of the society.
III)Production according to national priority
Business units should produce and supply goods in accordance with the priorities laid
down in the plans and policies of the Government.
One of the national objectives should be to increase the production and supply of essential
goods at reasonable prices
IV) Contribution to country revenue
The business owners should pay their taxes and dues honestly and regularly.
This will increase the revenue of government which can be used for the development of
nation

Self sufficient export promotion

Business units have the responsibility of :
Restricting import of goods
Increasing exports
And hence add to the foreign exchange reserves of the country

GLOBAL OBJECTIVES

I)Raise general standard of living

II)Reduce disparities among nations
III)Make available globally competitive goods and services

Raise general standard of living

(I)International trade makes available quality goods at reasonable prices all over the
world.
The people of one country get to use similar types of goods that people in other
countries are using.
This improves the standard of living of people.
(II)Reduse the disparity among countries
Business may help reduce disparities among the rich and poor nations of the world:
By way of capital investment in developing as well as underdeveloped countries
By sharing new technology, methods and ideas globally
(III)Make available globally competitive goods and services

Business should produce globally competitive goods and services according to the
demand of foreign markets.
By doing so it will :
i) improve the image of the exporting country
ii) earn more foreign exchange for its country.

FORMS OF BUSINESS

Business organization refers to all necessary arrangements required to conduct a business.  It involves many steps
for establishing relationship between men, material, and machinery to carry on business efficiently for earning
profits.  This may be called the process of organizing.  The arrangement which follows this process of organizing
is called a business undertaking or organization.  A business undertaking can be better understood by analyzing its
characteristics.

Characteristics

Distinct Ownership : • The term ownership refers to the right of an individual or a group of individuals to acquire legal
title to assets or properties for the purpose of running the business. • Nemo dat quod non habet • Exception : Sales of
goods Act 1930 Sec 27 • A business firm may be owned by one individual or a group of individuals jointly.

• Lawful Business : Every business enterprise must undertake such business which is lawful, that is, the business must
not involve in the activities which are illegal. • Section 23 of ICA 1872: The consideration or object of an agreement is
lawful, unless: • It is forbidden by law or • Is of such nature that, if permitted, would defeat the provisions of any law or
• Is fraudulent or • Involves or implies injury to the person or property of another or • The court regards it as immoral,
or opposed to public policy.
Characteristics

Separate Status and Management : • Every business undertaking is an independent entity. • It has its own assets and
liabilities. • It has its own way of functioning. • The profits earned or losses incurred by one firm cannot be accounted
for by any other firm. • TATA Group the most Ethical Business Conglomerate
https://www.livemint.com/industry/telecom/tata-settles-rs-50-000crore-of-dues-to-complete-sale-of-mobile-
business1562568497523.html
• Tata Sons, the holding company of $105-billion Tata group, will pump Rs 30,000 crore more into its moneylosing
telecom company, Tata Teleservices, by way of quasi-equity and/or inter-corporate loan in the current financial year. •
The additional funds will be used by Tata Teleservices to repay its Rs 31,000-crore debts and pay spectrum fees. Tata
Teleservices had on October 12 agreed to merge its consumer mobile business with Bharti Airtel on a cash-free and
debt-free basis. It was also considering merging its enterprise business with Tata Communications and the
broadband and fixed-line retail business with Tata Sky, apart from retaining its 32 per cent stake in Viom Networks, a
cellphone tower company.

Tata settles ₹50,000 crores of dues to complete sale of mobile business (Updated: 08 Jul 2019, 12:33 PM IST) • Tata
Group paid lenders and the government about₹50,000 crore ($7.3 billion) to help complete the sale of its mobile-
phone services business to Bharti Airtel Ltd., a deal that was announced almost two years ago. • Tata Sons Pvt., the
group holding company, paid the Department of Telecommunications ₹10,000 crore late last month, days after
settling all pending loans worth ₹40,000 crore owed by unit Tata Teleservices (Maharashtra) Ltd., the Mumbai-based
group said. • “All debt obligations of the consumer mobile business of Tata Teleservices have been repaid as per
schedule," a Tata Group spokeswoman said in an emailed statement.

Characteristics

Deals with goods and/or services : Every business undertaking is engaged in the production and/or distribution of
goods or services in exchange of money.

Continuity of business operations : • All business enterprise engage in operation on a continuous basis. • Any unit
having just one single operation or transaction is not a business unit.

Risk involvement : Business undertakings are always exposed to risk and uncertainty.

• Business is influenced by future conditions which are unpredictable and uncertain. • This makes business
decisions risky, thereby increasing the chances of loss arising out of business.

MDH CASE STUDY

Mahashay Dharampal Gulati is an Indian businessman. He is the owner and CEO of MDH
(Mahashian Di Hatti Private Limited) an Indian spice company.

• Gulati was born in March 27, 1923 in Sialkot in present-day Pakistan. His father was
Mahashay Chunni Lal Gulati, the founder of MDH.

Gulati and his family migrated to India during the partition of India. The family spent some
time in a refugee camp in Amritsar, and then they moved to Delhi in search of work. •

Gulati opened spice shop in Karol Bagh (1948). • 1953, he rented a second shop in Chandni
Chowk. •

In 1959, Gulati purchased land in Kirti Nagar, New Delhi to set up the manufacturing unit of
Mahashian Di Hatti.

In 2017, Gulati was the highest paid fast-moving consumer goods CEO in India.

In 2019, the Government of India honored Gulati with Padma Bhusan, India's third highest
civilian award.

Gulati donates nearly 90% of his salary to charity under the banner of the Mahashay Chunni
Lal Charitable Trust.
• The Trust operates a 250-bed hospital in Delhi, along with a mobile hospital for slum dwellers
and 20 schools of which four are in Delhi.
 Meaning  When the ownership and management of business are under the control of one
individual, it is known as sole proprietorship or sole trader ship.  It is seen everywhere, in
every country, every state, every locality.  The shops or stores which you see in your
locality — the grocery store, the vegetable store, the sweets shop, the chemist shop, the
paanwala, the stationery store etc. come under sole proprietorship.

• It is not that a sole trader ship business must be a small one. • The volume of activities of
such a business unit may be quite large. • However, since it is owned and managed by one
single individual, often the size of business generally remains small.

Example
• X runs a cosmetics store in the town where she resides. Business has picked up for X so she
decides to order several months’ worth of supplies in advance, at a cost of about
Rs.10,00,000, which is to be paid in monthly installments.

• Couple of months after X purchased the large order, the mill in her town closed down, laying
off more than 200 employees. Suddenly the town experiences an economic recession, and X
can’t sell her products quickly enough to make her payments.

• In this example of a sole proprietorship of the business, X is personally liable for the debt. •
This means that the Supplier and any other creditor:
1. Can file a civil lawsuit against X
2. Go after her business assets, as well as her personal property 3. Including her home.

Characteristics:

1. Ownership : The business enterprise is owned by one single individual, that is the individual
has got legal title to the assets and properties of the business.  The entire profit arising out
of business goes to the sole proprietor.  Similarly, he also bears the entire risk or loss of the
firm.

2. Management : The owner of enterprise is generally the manager of business.  He has got
absolute right to plan for the business and execute them without any interference from
anywhere.  He is the sole decision maker.

3. Source of Capital : The entire capital of business is provided by the owner.  In addition to
his own capital he may raise more funds from outside through borrowings from close relatives
or friends, and through loans from banks or other financial institutions.

4. Legal Status : The proprietor and the business enterprise are one and the same in the eyes
of law.  There is no difference between the business assets and the private assets of the
sole proprietor.  The business ceases to exist in the absence of the owner.

5. Stability : The stability and continuity of the firm depend upon the capacity, competence
and the life span of the proprietor

6. Liability : The liability of sole proprietor is unlimited. • This means that, in case the sole
proprietor fails to pay for the business obligations and debts arising out of business activities,
his personal property can be used to meet those liabilities.

7. Legal Formalities : • In the setting up, functioning and dissolution of a sole proprietorship
business no legal formalities are necessary. • However, a few legal restrictions may be there in
setting up a particular type of business. • For example, to open a restaurant, the sole
proprietor needs a license from the local municipality ; to open a chemist shop, the individual
must have a license from the government.
• However, there are different sections in law that can be applied to a sole proprietor business
and registering under them can give valid proof of existence. Such provisions exist under the
ambit of:

1. Obtaining Shop & Establishment Certificate

2. Goods and Services Tax Identification Number
3. Small Scale Industries Registration
4. Opening a Current Bank Account
5. Self Declaration before a Notary Public through an Affidavit if your banker is convinced by
the same.

Advantages of Sole Proprietorship:

1. Easy Formation: The biggest advantage of a sole trader ship business is its easy formation.
• Anybody wishing to start such a business can do so in many cases without any legal
formalities.

2. Better Control : The owner has full control over his business. He plans, organizes, co-
ordinates the various activities.
• Since he has all authority, there is always effective control.

3.Prompt Decision Making : As the sole trader takes all the decisions himself the decision
making becomes quick, which enables the owner to take care of available opportunities
immediately and provide immediate solutions to problems.
4. Flexibility in Operations : One man ownership and control makes it possible for change in
operations to be brought about as and when necessary.

5.Retention of Business Secrets : Another important advantage of a sole proprietorship

business is that the owner is in a position to maintain absolute secrecy regarding his business
activities.

6. Direct Motivation : The owner is directly motivated to put his best efforts as he alone is the
beneficiary of the profits earned.

7. Personal Attention to Consumer Needs : In a sole trader ship business, one generally finds
the proprietor taking personal care of consumer needs as he normally functions within a small
geographical area.

8. Creation of Employment : A sole trader ship business facilitates self employment and also
employment for many others. It promotes entrepreneurial skill among the individuals.

9. Social Benefits : A sole proprietor is the master of his own business.  He has absolute
freedom in taking decisions, using his skill and capability.  This gives him high self-esteem
and dignity in the society and gradually he acquires self- reliance, self-determination,
independent thought and action, initiative, hard work etc,.  Thus, he sets an example for
others to follow.

10. Equitable Distribution of Wealth : A sole proprietorship business is generally a small scale
business.
• Hence there is opportunity for many individuals to own and manage small business units.
• This enables widespread dispersion of economic wealth and diffuses concentration of
business in the hands of a few.

• Disadvantages of Sole Proprietorship :

1. Unlimited Liability : In sole proprietorship, the liability of business is recovered from the
personal assets of the owner.
• It restricts the sole trader to take more risk and increases the volume of his business.
2. Limited Financial Resources : The ability to raise and borrow money by one individual is
always limited.
• The inadequacy of finance is a major handicap for the growth of sole proprietorship.

3. Limited Capacity of Individual : An individual has limited knowledge and skill.

• Thus his capacity to undertake responsibilities, his capacity to manage, to take decisions and
to bear the risks of business are also limited.

4. Uncertainty of duration : The existence of a sole tradership business is linked with the life of
the proprietor. Illness, death or insolvency of the owner brings an end to the business.
• The continuity of business operation is, therefore, uncertain.

Partnership

• Meaning

• A partnership form of organisation is one where two or more persons are associated to run a
business with a view to earn profit.

• Persons from similar background or persons of different ability and skills, may join together
to carry on a business.

• Each member of such a group is individually known as ‘partner’ and collectively the members
are known as a ‘partnership firm’.

• These firms are governed by the Indian Partnership Act, 1932.

Section4 IPA 1932

• "Partnership" is the relation between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all. • Persons who have entered into
partnership with one another are individually called "partners" and collectively "a firm", and
the name under which their business is carried on is called the "firm-name".
Characteristics:

1. Number of Partners : A minimum of two persons are required to start a partnership

business.  The maximum membership limit is 100 according to ICA 2013. According to ICA
1956, it was 10 in case of banking business and 20 in case of all other types of business.

2. Contractual Relationship : The relation between the partners of a partnership firm is created
by contract.  The partners enter into partnership through an agreement which may be
verbal, written or implied. If the agreement is in writing it is known as a ‘Partnership Deed’.

3. Competence of Partners : Since individuals have to enter into a contract to become

partners, they must be competent enough to do so.
• Thus, minors, lunatics and insolvent persons are not eligible to become partners.
• However, a minor can be admitted to the benefits of partnership i.e. he can have a share in
the profits.

4. Sharing of Profit and Loss : The partners can share profit in any ratio as agreed.
• In the absence of an agreement, they share it equally.

Competency to contract Sec 11 ICA 1872

Major (Indian Majority Act, 1875 ):

• Otherwise -18 Years

• Guardian is appointed of his person or property by any Court of Justice, or he is under the
jurisdiction of any Court of Wards- 21 Years Sound Mind: A person is said to be of sound mind
for the purposes of making a contract, if , at the time when he makes it, he is capable of
understanding it and of forming a rational judgment as to its effect upon his interests. Not
debarred by Law: • Convicts
• Insolvent Person
• Alien enemy
• Foreign Sovereigns & Ambassadors
• Company going Ultra Vires it's memorandum
5. Unlimited Liability : The partners have unlimited liability.  They are liable jointly and
severally for the debts and obligations of the firm.  Creditors can lay claim on the personal
properties of any individual partner or all the partners jointly.  Even a single partner may be
called upon to pay the debts of the firm.  Of course, he can get back the money due from
other partners.

6. Principal-Agent Relationship : The business in a partnership firm may be carried on by all

the partners or any one of them acting for all.
• This means that every partner is an agent when he is acting on behalf of others and he is a
principal when others act on his behalf.
• It is, therefore, essential that there should be mutual trust and faith among the partners in
the interest of the firm.

7. Transfer of Interest : No partner can sell or transfer his interest in the firm to anyone
without the consent of other partners.

8. Legal Status : A partnership firm is just a name for the business as a whole. • The firm
means partners and the partners mean the firm. • Law does not recognize the firm as a
separate entity distinct from the partners. 9. Voluntary Registration : Registration of
partnership is not compulsory. • But since registration entitles the firm to several benefits, it is
considered desirable.

• For example, if it is registered, any partner can file a case against other partners, or a firm
can file a suit against outsiders in case of disputes, claims, disagreements, etc. 10. Dissolution
of Partnership : Dissolution of partnership implies not only a complete closure or termination of
partnership business, but it also includes any change in the existing agreement among the
partners due to a change in the number of partners.

Advantages of Partnership Firm :

1. Easy Formation : A partnership can be formed without many legal formality and expenses.
Every partnership firm need not be registered.

2. Larger Resources : As compared to sole proprietorship, a partnership firm can pool larger
financial resources.
• Thus it can enter into bigger operations and can have more credit facilities. • It can also
have better managerial talent.

3. Flexibility in operation : There is flexibility of operation in partnership business due to a

limited number of partners.
• These partners can change their operations and amend objectives if necessary by mutual
consent.
4. Better Management : Partners take more interest in the affairs of business as there is a
direct relationship between ownership, control and profit.
• They often meet to discuss the affairs of business and can take prompt decision.

5. Sharing of Risk: In partnership, risk of loss is easier to bear by individual partners as it is

shared by all the partners. 6. Protection of minority interest : Every partner has an equal say
in decision making. A partner can prevent a decision being taken if it adversely affects his
interests.
• In extreme cases a dissenting partner may withdraw from partnership and can dissolve it.

• 7. Better Public Relations : • In a partnership firm the group managing the affairs of the firm
is generally small.
• It facilitates cordial relationship with the public.

Disadvantages of partnership Firm

1. Instability : A partnership firm does not continue to exist indefinitely.  The death,
insolvency or lunacy of a partner may bring about an unexpected end to partnership.

2. Unlimited Liability : As the liability of partners is joint and several to an unlimited extent,
any one of the partners can be called upon to pay all the debts even from his personal
properties.  Further, as every partner has a right to take part in the management of the
firm, any wrong decision by a single partner may lead to heavy liabilities for others.

3. Lack of Harmony : • Since every partner has equal right, there are greater possibilities of
friction and quarrel among the partners. Differences of opinion may lead to mistrust and
disharmony which may ultimately result in disruption and closure of the firm.

4. Limited Capital : • As there is a restriction on the maximum number of partners, the capital
which can be raised is limited.

Section69: EFFECT OF NONREGISTRATION

• Section 58 Application For Registration: •

(1) Subject to the provisions of sub-section of sub-section (1A), the registration of a firm
effected by sending by post or delivering to the Registrar of the area in which any place of
business of the firm is situated or proposed to be situated, a statement in the prescribed form
and accompanied by the prescribed fee and a true copy of the deed of partnership stating
following details :
• (a) the firm-name,

• (aa) the nature of business of the firm;

• (b) the place or principal place of business of the firm,
• (c) the names of any other places where the firm carries on business,
• (d) the date when each partner joined the firm,
• (e) the names in full and permanent addresses of the partners, and
• (f) the duration of the firm.
• The statement shall be signed by all the partners, or by their agents specially authorised in
this behalf.
• (1A) The statement under sub-section
(1) shall be sent or delivered to the Registrar within a period of one year from the date of
constitution of the firm :
• Provided that in the case of any firm carrying on business on or before the date of
commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984, such
statement shall be sent or delivered to the Registrar within a period of one year firm such
date.
• (2) Each person signing the statement shall also verify it in the manner prescribed.
• (3) A firm shall not have any of the names or emblems specified in the Schedule to the
Emblems and Names (Prevention of Improper Use) Act, 1950, or any colourable imitation
thereof, unless permitted so to do under that Act, or any name which is likely to be associated
by the public with the name of any other firm on account of similarity, or any name which, in
the opinion of the Registrar, for reasons to be recorded in writing, is undesirable :
• Provided that nothing in this sub-section shall apply to any firm registered under any such
name before the date of the commencement of the Indian Partnership (Maharashtra
Amendment) Act, 1984.
• (4) Any person aggrieved by an order of the Registrar under sub-section (3), may, within 30
days from the date of communication of such order, appeal to the officer not below the rank of
Deputy Secretary to Government authorised by the State Government in this behalf, in such
manner, and on payment of such fee, as may be prescribed. On receipt of any such appeal,
the authorised officer shall, after giving an opportunity of being heard to the appellant, decide
the appeal, and his decision shall be final.

• Section59

• REGISTRATION.

• (1) When the Registrar is satisfied that the provisions of section 58 have been duly complied
with, he shall record an entry of the statement in a register called the Register of Firms, and
shall file the statement. [19 On the date such entry is recorded and such statement is filed, the
firm shall be deemed to be registered.
• (2) The firm, which is registered, shall use the brackets and word (Registered) immediately
after its name.
Section69: EFFECT OF NONREGISTRATION

• (1) No suit to enforce a right arising from a contract or conferred by this Act shall be
instituted in any Court by or on behalf of any persons suing as a partner in a firm against the
firm or any person alleged to be or to have been a partner in the firm unless the firm is
registered and the person suing is or has been shown in the Register of Firms as a partner in
the firm

• Provided that the requirement of registration of firm under this sub-section shall NOT APPLY
to the suits or proceedings instituted by the heirs or legal representatives of the deceased
partner of a firm for accounts of the firm or to realize the property of the firm.

• (2) No suit to enforce a right arising from a contract shall be instituted in any court by or on
behalf of a firm against any third party unless the firm is registered and the persons suing are
or have been shown in the Register of Firms as partners in the firm.

• (2A) No suit to enforce any right for the dissolution of a firm or for accounts of a dissolved
firm or any right or power to realize the property of a dissolved firm shall be instituted in any
Court by or on behalf of any person suing as a partner in a firm against the firm or any person
alleged to be or have been a partner in the firm, unless the firm is registered and the person
suing is or has been shown in the Register of Firms as a partner in the firm

• Provided that the requirement of registration of firm under this sub-section shall not apply to
the suits or proceedings instituted by the heirs or legal representatives of the deceased partner
of a firm for accounts of a dissolved firm or to realize the property of a dissolved firm.
Company

 Meaning: Company form of business organization is a voluntary association of persons to

carry on business. It is given a legal status and is subject to certain legal regulations.

 It is an association of persons who generally contribute money for some common purpose.

 The money so contributed is the capital of the company.  The persons who contribute
capital are its members.

 The proportion of capital to which each member is entitled is called his share, therefore
members of a company are known as shareholders and the capital of the company is known as
share capital.

• The total share capital is divided into a number of units known as ‘shares’.
• Examples of companies are Tata Steel Limited, Hindustan Unilever Limited, Reliance
Industries Limited, Steel Authority of India Limited,

• The companies are governed by the Indian Companies Act, 2013 (earlier ICA1956).

• The Act defines a company as an artificial person created by law, having separate entity,
with perpetual succession and a common seal.

• According to Sec (20) of Indian Companies Act, 2013, company means a company
incorporated under this Act or under any previous company law

Sec 3 ICA 2013: Formation of company

• (1) A company may be formed for any lawful purpose by:

• (a) Seven or more persons, where the company to be formed is to be a public company

• (b) Two or more persons, where the company to be formed is to be a private company or

• (c) One person, where the company to be formed is to be One Person Company that is to
say, a private company,

• by subscribing their names or his name to a memorandum and complying with the
requirements of this Act in respect of registration:

• Memorandum of One Person Company shall indicate the name of the other person, with his
prior written consent in the prescribed form, who shall, in the event of the subscriber‘s death
or his incapacity to contract become the member of the company

• Written consent of such person shall also be filed with the Registrar at the time of
incorporation of the One Person Company along with its memorandum and articles
• Such other person may withdraw his consent in such manner as may be prescribed

• Member of One Person Company may at any time change the name of such other person by
giving notice in such manner as may be prescribed
• It shall be the duty of the member of One Person Company to intimate the company the
change, if any, in the name of the other person nominated by him by indicating in the
memorandum or otherwise within such time and in such manner as may be prescribed,

• Company shall intimate the Registrar any such change within such time and in such manner
as may be prescribed • Any such change in the name of the person shall not be deemed to be
an alteration of the memorandum.

Characteristics:

1. Artificial Person : A Company is an artificial person in the sense that it is created by law
and does not possess physical attributes of a natural person.  However, it has a legal status.

2. Separate Legal Entity : Being an artificial person, a company has an existence

independent of its members.  It can own property, enter into contract and conduct any
lawful business in its own name.  It can sue and can be sued in the court of law.  A
shareholder cannot be held responsible for the acts of the company.

• 3. Common Seal : Every company has a common seal by which it is represented while
dealing with outsiders. • Any document with the common seal and duly signed by an officer of
the company is binding on the company. • 4. Perpetual Existence : A company once formed
continues to exist as long as it fulfills the requirements of law. • It is not affected by the
death, lunacy, insolvency or retirement of any of its members.
5. Limited Liability : • The liability of a member of a Company is limited. In other words, in
case of payment of debts by the company, a shareholder is held liable only to the extent of his
share. • Company limited by guarantee: A company having the liability of its members limited
by the memorandum to such amount as the members may respectively undertake to
contribute to the assets of the company in the event of its being wound up (Sec 21, ICA
2013). • Company limited by shares: A company having the liability of its members limited by
the memorandum to the amount, if any, unpaid on the shares respectively held by them (Sec
22, ICA 2013).

6. Transferability of Shares : • The members of a company are free to transfer the shares
held by them to anyone else.

• 7. Formation : A company comes into existence only when it has been registered after
completing the formalities prescribed under the Indian Companies Act 2013. • A company is
formed by the initiative of a group of persons known as promoters. •

8. Membership : A company having a minimum membership of two persons and maximum

200 (fifty earlier) is known as a Private Limited Company. • But in case of a Public Limited
Company, the minimum is seven and the maximum membership is unlimited.

9. Management :  Companies have democratic management and control.  Even though

the shareholders are the owners of the company, all of them cannot participate in the
management process.  The company is managed by the elected representatives of
shareholders known as Directors. 10. Capital :  A Company generally raises a large amount
of capital through issue of shares.

Advantages of Company-

1. Limited Liability : In a Company the liability of its members is limited to the extent of
shares held by them.  This attracts a large number of small investors to invest in the
company.  It helps the company to raise huge capital.  Because of limited liability, a
company is also able to take larger risks.

2. Continuity of existence : A company is an artificial person created by law and possesses

independent legal status.  It is not affected by the death, insolvency etc. of its members.
Thus it has a perpetual existence.

3. Benefits of large scale operation :  It is only the company form of organization which
can provide capital for large scale operations.  It results in large scale production
consequently leading to increase in efficiency and reduction in the cost of operation.  It
further opens the scope for expansion.

4. Professional Management :  Companies, because of complex nature of activities and

operations and large volume of business, require professional managers at every level of
organization.  And because of their financial strength they can afford to appoint such
managers.  This leads to efficiency.

 5. Social Benefit : A company offers employment to a large number of people.  It

facilitates promotion of various ancillary industries, trade and auxiliaries to trade. 
Sometimes it also donates money for education, health, community service and renders help
to charitable and social institutions.  6. Research and Development : A company generally
invests a lot of money on research and development for improved processes of production,
designing and innovating new products, improving quality of product, new ways of training its
staff, etc.
Disadvantages of Company:

1. Formation is not easy: The formation of a company involves compliance with a number of
legal formalities under the companies Act and compliance with several other Laws.

2. Control by a Group: Companies are controlled by a group of persons known as the Board
of Directors.

3. Speculation and Manipulation :  The shares of a company are purchased and sold in
the stock exchanges.  The value or price of a share is determined in terms of the dividend
expected and the reputation of the company.  These can be manipulated.

4. Excessive government control :  A company is expected to comply with the provisions

of several Acts.  Non-compliance of these invites heavy penalty.  This affects the smooth
functioning of the companies.

5. Delay in Policy Decisions : A company has to fulfill certain procedural formalities before
making a policy decision.  These formalities are time consuming and, therefore, policy
decisions may be delayed. 6. Social abuses : A company is a large scale business organisation
having huge resources.  This provides a lot of power to them.  Any misuse of such power
creates unhealthy conditions in the society e.g. having monopoly of a particular business,
industry or product; influencing politicians and government in getting their work done;
exploiting workers, consumers and investors.