Chapter 2: Forms of Business Organizations Flashcards

Vocabulary flashcards covering key business organization terms, partner types, co-operative models, and company structures based on the lecture notes.

Sole Proprietorship

A form of business organization owned, managed, and controlled by a single individual who invests the entire capital, bears all risks, and receives all profits.

Joint Hindu Family Business

A form of business organization unique to India, owned by members of a Joint Hindu Family and governed by Hindu Law, where membership is acquired by birth.

Karta

The head of a Joint Hindu Family business who is the eldest member of the family, holds full management control, and has unlimited liability.

Co-parceners

The male and female members of a Joint Hindu Family who possess equal ownership rights over ancestral property by birth.

Partnership

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, as defined by Section 4 of the Indian Partnership Act 1932.

Active Partner

A partner who contributes capital, participates in the day-to-day management of the business, shares profits and losses, and has unlimited liability.

Sleeping Partner

Also known as a dormant partner, this is a partner who contributes capital, shares profits and losses, and has unlimited liability, but does not participate in business management.

Secret Partner

A partner whose association with the firm is kept secret from the public, but who contributes capital, participates in management, shares profits/losses, and faces unlimited liability.

Nominal Partner

A partner who lends their name and reputation to a firm without contributing capital, participating in management, or sharing profits, but remains liable to outsiders for the firm's debts.

Partner by Estoppel

An individual who represents themselves as a partner through their words or conduct, making themselves liable for the firm's debts despite not being an actual partner.

Partner by Holding Out

A person who is declared to be a partner by outsiders and fails to deny the statement after becoming aware of it, rendering them liable for the firm's debts.

Particular Partnership

A partnership formed specifically for a particular venture or a fixed time period, which automatically dissolves upon completion of the purpose or expiration of the duration.

Partnership at Will

A partnership created without specifying its duration, which continues for an indefinite period and can be dissolved when any partner gives notice.

Partnership Deed

Also known as the Articles of Partnership, this is the document containing all agreed terms, rules, and conditions governing the partnership.

Co-operative Society

A voluntary association of persons formed to protect their economic and social interests, operating under the principle of 'Self help through mutual help'.

Consumers' Co-operative Societies

Societies formed by consumers to procure consumer goods directly from manufacturers or wholesalers at fair prices and eliminate middlemen.

Producers Co-operative Societies

Societies established by small producers and craftsmen to procure raw materials, equipment, and sell finished products jointly.

Marketing Co-operative Societies

Societies formed by small producers to pool their outputs, perform grading and processing, store goods, and sell them collectively under favorable market conditions.

Farmers' Co-operative Societies

Associations of small farmers in a village who pool their land and resources for joint cultivation to gain benefits of large-scale farming.

Credit Co-operative Societies

Societies established to provide short-term loans to members at reasonable interest rates, protecting them from exploitation by moneylenders.

Joint Stock Company

A voluntary association of individuals having a separate legal existence, perpetual succession, and an optional or required common seal, incorporated under the Companies Act.

Perpetual Succession

A feature of a company ensuring that its existence is unaffected by the death, insanity, or insolvency of its members, ending only through legal processes.

Common Seal

The official signature of a company used on legal documents to execute contracts and authenticate transactions on behalf of the artificial entity.

Private Company

A company having a minimum of 2 and maximum of 200 members that restricts the right to transfer shares, prohibits public subscription to securities, and uses 'Private Limited' in its name.

Public Company

A company with at least 7 members and no maximum limit that allows unrestricted share transfers and can invite the public to subscribe to its shares and debentures.

One Person Company (OPC)

A legal business entity introduced under Section 3(1) of the Indian Companies Act 2013 that consists of only one person as its member with limited liability.

Oligarchic Management

A organizational situation where real control is concentrated in the hands of a small group of directors or managers, potentially overriding minority shareholders' interests.