Moazzam Ali

Assistant Professor
AIOU
 Sole Proprietorship
 Partnership
 Joint Stock Company
 Other Forms of Business Ownership
 What is a Sole Proprietorship?
 Key Features of Sole Proprietorship
 Advantages of Sole Proprietorship
 Disadvantages of Sole Proprietorship
A sole proprietorship is a business owned
and managed by one person.
 The owner of a sole proprietorship has
complete control over the business assets
and its operations. He is legally responsible
for all debts and legal actions against the
business. A sole proprietorship is suitable for
small scale businesses.
 Examples include Kiryana Store etc.
 Easy to Form and Wind-up:
 Independence of Decision Making:
 Direct Motivation:
 Keeping Business Secrets:
 Close Personal Relations:
 Limited Capital:
 Unlimited Liability
 Inefficient Decision Making
 Limited Size:
 Lack of Experts:
 What is a Partnership?
 Major Characteristics of Partnership
 Kinds of Partners
 Advantages of Partnership
 Disadvantages of Partnership
 Contents of the Partnership Deed
 Registration of Firm
 Rights of the Partners
 Duties of the Partners
 According to the Partnership Act 1932, a
partnership is a relationship between
persons who have agreed to share profits or
losses of a business carried on by all or any
of them acting for all.
 The persons who join partnership are
individually known as partners and
collectively as a firm.
 Limited life
 Unlimited liability
 Co-ownership of property
 Participation in income
 Partnership agreement
 Ordinary or Active Partner is one who has
invested capital in the business and who takes
active part in the conduct of business.
 Dormant or Sleeping Partner retains his capital
in the business but refrains from taking any
active part in its management.
 Nominal Partner is one who neither contributes
any capital nor takes any active part in the
management but merely lends his name and
credit to the firm and thereby incurs the liability
of a partner.
 Quasi Partner retains his capital in the business
as loan after he has retired from the firm and
receives interest o his loan.
 It refers to a partnership firm registered
with the Registrar of Firms. It is optional for
a firm to get register itself with the
government department.
 A partnership can be registered in the office
of the Registrar of Firms located in the
District Administration.
 A Registrar of Firms works in the District
Administration and receives applications
from the partners of the partnership firm.
 Advantages:  Disadvantages:
 Division of Risk:  Unlimited Liability:
 Team Work:  Uncertain Life:
 Profit Incentive:  Lack of Public
 Ease of Dissolution Confidence:
 Tax Advantage:  Limited Capital

 Easy to Start:  No Transferability of

Share:
 Right to take part in the management of the business.
 Right to access to all records, books and accounts of the
business.
 Right to be consulted and heard in all matters affecting the
business of the firm.
 Right to share the profit in the agreed ratio, or equally where
there is no partnership agreement.
 Right of indemnity for all acts done or payments in the course of
the partnership agreement.
 Right to act prudently in an emergency for protecting the firm
from the loss.
 Right to prevent the introduction of a new partner without his
consent.
 Right of not becoming liable for any debts or liabilities of the
firm before his admission as a partner.
 Right to retire from the firm at any time.
 Right to continue to share either profit or interest after death or
leaving the firm.
 To work for the greatest common advantage.
 To give true and fair information to other
partners obtained during the course of
partnership business.
 To indemnify the firm for any loss sustained by
his fraud or his willful negligence in the conduct
of business.
 To share losses equally with the partners in
addition to the profits, unless other ratio has
been provided for this purpose.
 To attend diligently to the business of the firm.
This should be without remuneration unless
contrary is provided in the agreement.
 To act within authority conferred upon him.
 Introduction to Joint Stock Companies
 Difference between a Company and a
Partnership
 Types of Companies
 Advantages of Companies Form of Business
 Disadvantages of Companies Form of Business
 Differences between Public and Private
Limited Companies
 Steps in the Formation of company
 A limited company or corporation is an artificial
person existing only in the books of the law.
 This artificial legal person, once created, is
separate from its founders, and shareholders or
members.
 It is called an artificial person because it has
certain qualities that are being attributed to
human beings e.g. it can own property, sue and
can be sued, and generally carry on activities
through its officer and agents.
 A company is allowed to perform its functions
according to the law under which it has been
registered.
 A company is created by registration under the Companies
Ordinance 1984 while a partnership firm is created by an
agreement under the Partnership Act 1932.
 A company is a corporate body with a distinctive name,
able to sue and can be sued in its own name in a court of
law. A partnership firm is not a separate legal entity. The
rights and obligations of the firm are those of the partners
personally.
 The member of a company is not its agent, whereas a
partner in the firm is its agent in making various business
deals.
 A shareholder of a company is not entitled to take active
part in its management, whereas a partner can do so
subject to the willingness of other partners. .
 A partnership cannot have more than 20 partners in a
business. A company, on the other hand, may have large
number of shareholders subject to the limit of authorized
capital.
 Incorporation Basis:
 Registered Companies:
 Statutory Companies:
 Chartered Companies:
 Liability Basis:
 Unlimited Companies:
 Limited by Guarantee:
 Limited by Shares:
 Ownership Basis:
 Public Companies
 Private Companies
 Holding Companies
 Government Companies
 Single-Member Company:
 Subsidiary Companies
 Nationality Basis:
 Local Companies
 Foreign Companies
 Advantages:  Disadvantages:
 Limited Liability  Higher Tax Rate:

 Larger Size:  Expenses of

Organization:
 Transfer of
 Government
Ownership: Restrictions and
 Efficiency in Reports:
Management:  Lack of Personal
 Permanent Interest:
existence:  Lack of Secrecy:
 A private company can have at least two members, whereas a
public company must have at least seven members for
registration.
 The maximum number of members in a private company is fifty
while no maximum limit is prescribed by law in the case of public
companies subject to the limit of the authorized capital of the
company.
 A private company may allot shares immediately after its
incorporation, but a public company cannot do so unless it has
received the minimum subscription amount mentioned in its
articles of association.
 A private company is required to add the words “Private Limited”
at the end of its name, but a public company is not required to
do this.
 A private company cannot invite public to subscribe to its shares
but a public company has to do so and also file information with
the registrar of joint stock companies to this effect.
 The minimum number of directors of a private company is two,
whereas for those of a public company it is seven.
 Founders and Promoters:
 The Memorandum of Association:
 The Articles of Association:
 Incorporation of Company:
 Issuance of Prospectus:
 Commencement of Business:
 State Owned Enterprises
 Causes of State Ownership of Business Entities
 Characteristics of State Owned Enterprises
 Advantages and Disadvantages of State Owned
Enterprises
 Co-operative Societies
 Characteristics of Co-operative Societies
 Types of Cooperative Societies
 Distinction between Co-operative Society and a
Company
 Advantages and Disadvantages of Co-operative
Societies
 State-owned enterprises refer to those
business or industrial enterprises which are
directly owned, controlled and managed by
the government.
 A government can participate in a market by
starting a business organization in different
sectors of economy.
 In Pakistan, the government has established
various business organizations to serve the
general public i.e. Utility Stores Corporation
of Pakistan, Pakistan State Oil, Pakistan
International Airlines etc.
 Breaking Monopolies:
 Heavy Capital Expenditure:
 Public Interest:
 The majority of the shares are owned by the government
(usually more than 50%).
 It is subject to the direct control of the head of the
department/ministry.
 It is financed by annual budget passed by the parliament
and its revenues go to the government treasury.
 The staffs of the enterprise are government employees.
 It is created by a special law or procedure of the country
which defines its powers and functions.
 As a corporate body, it has got a separate legal entity like
a joint stock company.
 It is administered by a board of directors appointed by the
concerned ministry.
 It makes its decision by keeping commercial as well as
social aspects in a country.
 Advantages:
 The government retains full
control over strategic sectors
of economy.
 It enables the government to
realize its economic and social
objectives.
 It has got freedom in
administration and elasticity in
management.
 It provides employment to the
general public.
 They promote private
enterprise by allowing private
investors to subscribe to their
share capital.
 Disadvantages:
 Since it is controlled by the
politically responsible officials, it
fails to provide flexibility which is
required for the efficient
functioning of the business.
 There is unusual delay in coming to
a decision as it requires approvals
at many levels.
 The costs of running a government
enterprise sometimes eat up the
tax revenues reserved for social
services.
 It is provided hidden subsidy by the
government disturbing the balance
in the market.
 The cooperative form of organization, commonly
known as a cooperative society, is voluntary
association of individuals for the common
purpose of conducting some business activity for
their mutual benefit.
 The main purpose of this form of business is not
to earn profit but to supply their own needs in
the forms of goods and services.
 In Pakistan, there are various cooperative
societies registered under the Cooperative
Societies Act 1925. To deal with them, all four
provincial governments have formed the
Department of Cooperative Societies.
 The membership of a cooperative is voluntary
and unrestricted.
 The liability of the members of a cooperative
society may be limited or unlimited. If it is
limited, then word “Limited” should appear at
the end of its name.
 Each member has got only one vote irrespective
of his capital contribution and thus enjoys equal
rights.
 A Managing Committee is elected by the
members to carry on the day to day management
and administration which is responsible for its
actions to the general body of members.
 It is not established for a profit motive and thus
ordinarily there is no profit to distribute.
 Credit Societies:
 Industrial Societies:
 Farming Societies:
 Housing Societies:
 Women Societies:
 Multipurpose Societies:
 A cooperative society is governed by the Cooperative
Societies Act 1925 whereas a company is subject to
the Companies Ordinance 1984.
 A company can be formed with a minimum of two
members while a cooperative society cannot be
established by less than ten persons.
 In cooperative society, profits are not distributed
whereas in case of a company profits are distributed.
 In a company, the members can sell their ownership
right (a share) whereas in case of a cooperative
society, the sale of share is prohibited.
 A cooperative society is not merely a business, but a
combination of business and spirit of service, which
evokes loyalty, fellowship and a corporate feeling. A
company, on the other hand, is purely a business
concern.
 Advantages:
 It eliminates middlemen and thus makes
the goods available to the consumers at
cheaper price.
 Since its members are its regular
customers, it has not to bother for
marking the goods and is thus saved
from expenses in this respect.
 It enjoys the economy of management
and administration since its members
often render voluntary services to
manage the affairs of the society.
 Since it can sell goods at a cheaper
price, it can easily attract a good
number of customers.
 The cooperative societies formed in the
field of small scale industries can
employ a large number of people and
thus can help in solving the problem of
unemployment.
 Disadvantages:
 Since its members are generally poor, they
cannot generally supply large capital to run a
large scale enterprise.
 Since the services from the mangers are
generally free, the skilled and efficient persons
may not be interested to join the society.
 It may be difficult to carry on the business
successfully under cooperatives where the
demand of goods changes frequently.
 As the market of the commodities of the society
is normally guaranteed, the mangers may not be
tempted to make efforts for increasing the
business of the society.
 In Pakistan like other Government officers, the
Registrars of Cooperative Societies have vast
powers of interference into affairs of such
societies. They are often corrupt and thus prove
a handicap in efficient working of cooperative
societies.