NCERT MOST IMPORTANT QUESTIONS CLASS – 11 | Business Studies IMPORTANT QUESTIONS | CHAPTER – 2 Forms of Business Organisation | EDUGROWN |

NCERT Most important question:

Q1. Partners in affirm has different roles and liabilities, Identify and explain the type of partner in a firm from the given examples: 

a) Rama is a partner in a business who has no actual interest in business trade or its profits but she is Paid fee by the firm for lending its name to firm. 

Ans: Rama is a nominal partner in a firm who has no genuine interest in the firm’s trade or earnings, but is paid a fee by the firm for providing its name to the firm.

b) In Ram Hari & co. Ltd, Ram & Hari declare Gopal as a partner with knowing that Gopal remain silent then Gopal will be liable to third parties for any loss.

Ans: Ram & Hari declare Gopal as a partner in Ram Hari & Co. Ltd, knowing that if Gopal remains silent, Gopal will be accountable to third parties for any losses.

c) What type of partner is Geeta if she only contribute capital, shar profit and loss if any? 

Ans: Geeta is a sleeping partner if she merely contributes capital and shares profit and loss if any.

d) What type of patner is Giri in Ram Hari & co. Where he is an outsider but represent himself as a partner.

Ans: Giri in Ram Hari & co, Where he is an outsider but represent himself as a partner-Partner by Estoppel 

Q2. Explain the forms: sole proprietorship, H.U.F & Joint stock company on the basis of following points: Liability, members & Continuity

Ans: The difference between sole proprietorship, H.U.F & Joint stock company is given below:

Basis	Sole Proprietorship	HUF	Joint Stock Company
Liability	Unlimited Liability	Karta’s culpability is boundless, and his personal property is used to pay off his debts. Coparceners’ liability is restricted to their part of the risk, which is precisely defined and precise.	Members’ responsibility is restricted to the amount of money they contribute to a corporation. Members can only be requested to contribute to the loss up to the amount of unpaid share that they own.
Member	Owner is the member	To start a joint hindu family business, at least two family members are required. At the time of birth, one becomes a member.	In a public corporation, the minimum number of employees is seven, and the maximum number is unlimited; in a private firm, the minimum number of employees is two, and the maximum number is 200.
Continuity	Death, insanity, incarceration, physical illness, and bankruptcy all have an impact on a firm and can lead to its closure.	Company operations are not halted, and business continuity is not jeopardised.	It will only be decommissioned after a precise procedure known as winding up is finished. Members may come and leave, but the company remains in existence.

Q3. Explain the concept of mutual agency in partnership with suitable example.

Ans: The legal relationship between participants in a partnership in which each has authorisation powers and the authority to engage the partnership into business contracts is known as mutual agency. To put it another way, each partnership member has the capacity to make business decisions that commit or tie the partnership as a whole to a business deal with a third party or entity. Even though the partnership agreement expressly forbids it, a grocery store partner who purchases a delivery vehicle makes a legally binding contract in the name of the partnership. On the other hand, if a law firm partner bought a snowmobile for the firm, such behaviour would be illegal.

Q4. What is meant by partner by estoppel OR Mr. Singh is in ‘lighting’ business for the post 15 years. To help his friend, Mr Yadav, a beginner he projected himself as a partner before Mohd. Abdul, a whole sale dealer of fancy lights. Mohd. Abdul gave Mr. Yadav the stock without asking for payment and gave him credit limit of one month. Will Mr. Singh be liable to Md. Abdul if Mr. Yadav does not pay him on time ? Classify Mr. Singh’s role here along with an explanation

Ans: Partner by Estoppel is a legal term that refers to a legally binding partnership that can exist even though there is no formal partnership agreement in place. A person who advertises himself or herself as a partner in a firm through conduct or words, or enables himself or herself to be represented as such, is accountable for the credit or loans received by the firm on the basis of such representation. Also known as partnership presumption. The partner does not contribute to the capital or administration of the company, yet his responsibility is limitless.

Q5. What is secret partner

Ans: A secret partner is a person or partner who is not publicly known in a venture or business. He contributes money to the cause. He’s a part of the management team, but only behind closed doors. He also shares in the profits and losses of the firm. His, and others’, responsibilities are infinite.

Q6. Write a short note on producer co-operative society

Ans: Producers’ Cooperative Societies were formed to safeguard the interests of small farmers. Producers interested in obtaining inputs for the creation of items to meet consumer demand are among the members. Profits are divided based on their contributions to the society’s overall pool of products produced or sold.

Q7. Explain a co-operative organisation in democratic setup.

Ans: A cooperative society is a voluntary group of people who get together for the common good of its members. The cooperative society is governed by the premise of “one man, one vote.” Each member has the same number of votes. As a result, democratic values govern cooperative society.

Q8. Shiv, Anandi & John were partners John died in a car accident Both Shiv & Anandi decided to admit his son Ryan who was 16 years old as partner. Can they do so? Justify.

Ans: Yes, they can admit Ryan as a partner to the partnership firm’s advantages with the permission of the partners. A minor is a person who is under the age of eighteen. Because a minor is incapable of forming a legally binding contract. He is unable to become a partner in a firm. A minor can, however, be added to the advantages of an established partnership business with the agreement of all other partners. It’s unrealistic to expect him to absorb the losses. His responsibility will be limited to the amount of money he has put into the business. He will be unable to engage fully in the running of the company.

Q9. Differentiate between private co. and public company

Ans: Difference between private company and public company are as following:

Basis for Comparison	Public Company	Private Company
Meaning	A publicly traded firm that is owned and exchanged by the general public.	a privately held and traded corporation
Minimum member	7	2
Maximum Member	unlimited	200
Minimum Director	3	2
Suffix	Limited	Private  limited
Start of Business	Following receipt of a certificate of incorporation and a certificate of company start-up,	Following receipt of the certificate of incorporation
Statutory Meeting	Compulsory	Optional
Issue of Prospectus/ Statement in lieu of Prospectus	Obligatory	Not required
Public Subscription	Allowed	Not allowed
Quorum at AGM	5 members must present in person	2 members must present in person
Transfer of shares	Free	Restricted

Q10. Akriti, Sonam & Supreeti were friends who started a partnership business. They did not get their firm registered as it was optional. Soon, Sonam & Supreeti started having conflicts. Sonam wanted to approach a lawyer. If you were a lawyer than how would you guide her ? OR Mangal, Sazia & Suqhbeer Singh wish to start a business in partnership. They want to make a partnership deed, Suggest what aspects of the deed should be included in it ? 

Ans :The term “partnership” refers to a relationship between people who have agreed to split the profits from a firm that is run by all of them or by one of them acting on behalf of all of them. Although firm registration is optional, a partnership deed might be produced to avoid problems between partners. The partnership deed is a written agreement that contains the rules and conditions that govern the partnership.:

A partnership deed generally has the following elements:

• Firm name 

• Nature of company and location of operation 

• Duration of business 

• Each partner’s investment 

• Profit and loss distribution

• The partners’ responsibilities and obligations 

• The partners’ salaries and withdrawals 

• The terms regulating a partner’s admission, retirement, and expulsion

Q11. Explain limitations of Joint Stock Company

Ans: The following are the restrictions: 

• When ownership as well as management are separated, there is a lack of effort and personal commitment on the part of the company’s executives.

• A company’s information is periodically given to the Registrar of Companies, and therefore information is available to the general public. This restricts a company’s operational flexibility and wastes a significant amount of time, effort, and money.

• Communication and acceptance of various ideas to top, middle, and lower level management may cause delays in not just making choices but also carrying them out.

• The Board of Directors is made up of the company’s owners, the shareholders.

Q12. Which form of business is suitable for following types of business and why ? 

(a) Beauty Parlour

Ans: Sole Proprietorship for a Beauty Salon. Created and operated in a simple and cost-effective manner. On his or her personal tax return, the owner declares profit or loss.

(b) Coaching Centre for science students 

Ans: Partnership with a science coaching centre. It’s easy to make and run, and it’s cheap. On their personal tax returns, partners record their share of profit or loss.

(c) Hotel 

Ans: Joint Stock Companies in the Hotel Industry The limitation on their owners’ personal liability for company debts and court judgements against the firm is the major aspect of LLCs and corporations that attracts small enterprises. Another issue to consider is income taxes: you can establish up an LLC or a corporation to take advantage of lower tax rates. Furthermore, an LLC or corporation may be able to offer a variety of fringe benefits to its employees (including the owners) and deduct the cost as a business expense.

(d) Shopping mall 

Ans: JSCs (joint stock companies) are shopping malls. Owners’ personal liability for commercial debts is limited .

(e) Restaurant 

Ans: Sole proprietorship of a restaurant. Created and operated in a simple and cost-effective manner. On his or her personal tax return, the owner declares profit or loss.

(f) Small repair business

Ans: Sole Proprietorship for a small repair business. Created and operated in a simple and cost-effective manner. On his or her personal tax return, the owner declares profit or loss.

Q13. In what type of business, individuals associate voluntarily for profit, having capital dividend into transferable shares, the ownership of which is the condition of membership? Explain with features

Ans: A joint stock company is a voluntary group of people founded for the purpose of carrying out profit-making business activities. It has a different legal position from its members and a capital structure that is divided into transferable shares. A corporation is a legal entity that possesses its own legal identity, perpetual succession, and common seal. The shareholders are the company’s owners, and the Board of Directors is the company’s top management body, which is elected by the shareholders.

The company’s capital is divided into smaller units called “shares,” which can be freely transferred from one shareholder to another (except in a private company). The following are the characteristics of a joint stock company: 

• A corporation is a fictitious person. It is a legal creation that exists independently of its members. 

• A corporation acquires its own legal personality. The business and its owners are not considered one and the same by the law.

• Starting a business is a time-consuming, expensive, and difficult process. It is necessary for businesses to be incorporated. 

• It will only be decommissioned after a specialised procedure known as winding up is finished. Members may come and leave, but the company remains in existence. 

• A company’s affairs are managed and controlled by the Board of Directors, which appoints top management for corporate operations. 

• A company may or may not have a common seal. 

• The risk of a company’s losses is shared by all shareholders.

Q14. If registration is optional, why do partnership firms willingly go through this legal formality? Explain the reason with procedure to get them registered.

Ans: The registration of a partnership firm is optional. However, it is preferable to have a formal agreement to avoid problems between partners. The following are the implications of a firm’s failure to register: 

I. A partner in an unregistered firm cannot sue the firm or other partners; 

Ii. The firm cannot sue third parties; and 

iii. The firm cannot bring a case against the partners. 

The partnership deed is a written agreement that contains the rules and conditions that govern the partnership.

The following elements are usually included in a partnership deed:

• Name of firm 

• Nature of business and location of business 

• Duration of business 

• Investment made by each partner 

• Profit and loss distribution 

• Partners’ duties and obligations 

• Salaries and withdrawals of partners 

• Terms governing admission, retirement, and expulsion of a partner 

• Interest on capital and interest on drawings 

• Procedure for dissolution of a partnership

Firm registration procedure:

1. Submit an application to the Registrar of Firms in the specified form. The following information should be included in the application:

• The firm’s name 

• its location 

• the names of other locations where the firm does business 

• the date each partner joined the firm 

• the partners’ names and addresses 

• the duration of the relationship All of the partners should sign this application.

2. Make a fee deposit with the Registrar of Firms.

3. Following approval, the Registrar will enter the firm into the register of firms and provide a certificate of registration.

Q15. Who have equal ownership right over the property of an ancestor? Highlight with its essential characteristics

Ans: A Joint Hindu Family is a type of organisation in which the members of the Hindu Undivided Family own and operate the business (HUF). Membership in the company is based on birth in a certain family, and three generations can be members. The eldest member of the family, known as karta, is in charge of the family’s company. Co-parceners are members of a Joint Hindu Family Business who have equal ownership rights over an ancestor’s property.

The following are the characteristics of a joint Hindu family business: 

• There is no need for an agreement because membership is by birth. 

• All members, excluding the karta, are only liable for their part of the business’s co-parcenery property. The liability of the karta is limitless. 

• The family business is controlled by Karta, and his decisions are binding on everybody. 

• The business continues even after Karta’s death, as the next eldest son becomes Karta.

Q16. Why cooperative forms of organisation are formed? Explain various types of cooperative societies

Ans: A cooperative society is a voluntary group of people who get together for the common good of its members. They are driven by a desire to protect their economic interests against potential abuse by middlemen who are just out to make more money. The procedure of forming a cooperative organisation is straightforward, and all that is required is the approval of at least ten adult individuals. The capital of a society is raised by issuing shares to its members. Following its registration, the society gains an unique legal identity.

Consumer Cooperative Societies are one type of cooperative society. 

• It was established to safeguard the interests of consumers.
• The society aims to eliminate middlemen in order to achieve operational efficiencies. It buys goods in bulk directly from wholesalers and sells them to members. 
• Profits are distributed based on either capital contributions to the society or individual member purchases.
• Producers’ Cooperative Societies are a type of producer cooperative society. 

• It was created to protect the interests of small farmers.
• Producers seeking inputs for the creation of commodities to meet consumer wants make up the members. 
• Profits are dispersed based on their contributions to the total pool of goods produced or sold by the society.
• Marketing Cooperative Societies This organisation was founded to assist small producers in selling their goods. 

• The members are producers who want to get fair pricing for their goods. 
• It combines the production of individual members and engages in marketing operations such as shipping, storage, packaging, and so on in order to sell the items at the highest possible price. Profits are distributed according on how much each participant contributed.
• Farmers’ Cooperative Societies are founded to defend farmers’ interests by offering superior inputs at a fair cost. 

• Members are farmers who want to take up farming activities together. 
• The goal is to reap the benefits of large-scale farming while increasing production. Improves yield and returns to farmers while also addressing the issues that come with farming on fragmented land holdings.
• Cooperative Credit Societies: It was founded to provide members with quick credit on affordable terms. 

• The members are those who are looking for financial assistance in the form of loans. 
• The goal of such organisations is to safeguard members from being exploited by lenders who charge exorbitant interest rates on loans.
• Cooperative Housing Societies are a type of cooperative housing organisation. 

• It was created to assist low-income people in building dwellings at an affordable cost. 
• People who want to get a cheaper place to live make up the members of these societies. 
• The goal is to solve the members’ housing concerns by building houses and allowing them to pay in instalments.

Q17. Dhirubhai Chaurasiya operates a textile business. His family is joint and has a lot of ancestral property. All the 15 family members are a part of this business. He is the eldest male member in the family so he heads the business. He is liable to all the creditors of the business as he is the decision maker. Dhirubhai’s grandson has just born a few days ago and he is also the member of the business. 

(a) Which form of business is being undertaken by Dhirubhai Chaurasiya ? 

Ans: Dhirubhai Chaurasiya is involved in a joint Hindu family business.

(b) Identify the features of this form of business based on the information given. 

Ans: The following are the features of a joint Hindu family company based on the previous information:

• As 15 family members are involved in the business and have a lot of ancestral property, there should be at least two individuals in the family and ancestral property to be inherited by them.

• Except for the karta, all members’ responsibility is restricted to their share of co-parcenery property. The karta has unrestricted liability to all business creditors since he is the decision maker.

(c) Textile business is part of which type of industry according to you ?

Ans: Textile business is part  of Agro based industries.

Q18. ‘Reva Chemicals’ is a partnership firm. Sona and Mona one two partners in this firm. It is recorded in the Partnership Deed that Sona’s liability is unlimited, whereas Mona’s is limited. Sona wants to set up the Anti-Pollution plant in his factory, but Mona does not let him do so. Almost all the transactions of this firm are done through the internet. The firm Sells its goods to other Business units only. The firm gets its Research and Development work done by another firm, who is a specialist of such work.  

i. Describe the type of partnership.  

Ans: It’s a limited partnership in which at least one partner’s liability is limitless, but the others may have limited liability. Limited partners have no management powers and are unaffected by the firm’s or other partners’ activities. A partnership of this nature must be registered.

ii. identify the two values being overlooked.  

Ans: The following are the two ideals that are being overlooked: 

• Government rules are being broken; 

• The social responsibility clause is not being followed.

iii. Name the type-business being done by the firm

Ans: It is a B2B (Business to Business) transaction. Short for business-to-business electronic commerce, B2B e-commerce (sometimes written as e-Commerce, eCommerce, or similar variants) is the sale of items or services between businesses over the internet using an online sales portal. In general, it is utilised to help businesses become more efficient. Instead of manually processing orders over the phone or by e-mail, ecommerce allows orders to be processed digitally.

Q19. Ravi, Pradeep, Satyender and Dharmender are partners in a partnership firm. Ravi and Satyender take active part in the operation of business whereas Pradeep has contributed in Capital but do not take part in day to day activities of the business. Dharmender is a nominal partner. All four make partnership for a specified time period and also make written agreement to govern the partnership but they does not get the firm registered.  

a. What is meant by nominal partner? 

Ans: A nominal partner is one who permits a firm to use his or her name. He neither contributes to the capital nor participates in the administration of the company. He usually does not share profits or losses, and his liability is infinite.

b. Which type of partnership is there between the partners in above?  

Ans: The partners have formed a general partnership. In a general partnership, the partners’ responsibility is limitless and joint. The partners have the right to participate in the firm’s management, and their actions are binding on both the partners and the firm.

c. What is written agreement between the partners called?

Ans:  The partnership deed is a written agreement between the partners. The partnership deed is a written agreement that contains the rules and conditions that govern the partnership.

d. What type of partners Pradeep and Ravi are?

Ans:  Ravi is a hands-on partner. Active partners are individuals who actively participate in the firm’s business on behalf of their fellow partners. They invest money and participate in the operation of the company. He shares in the partnership’s profit and loss. His legal responsibility is limitless.

Pradeep is my sleeping companion. Sleeping partners are those who do not participate in the day-to-day operations of the company. They invest capital but do not participate in the management of the company. He shares in the partnership’s profit and loss. His legal responsibility is limitless.

e. Give two merits of getting firm registered.

Ans: The following are two advantages of registering a business: 

• An unregistered firm’s partner cannot sue the firm or other partners; 

• The firm cannot sue third parties.

Q20. Explain different types of Partnership on the basis of duration and liability?

Ans: Types of Partnership are as follows:

On the basis of duration: It can endure as long as the partners want it to, and it will terminate when one of them gives written notice of his or her intention to leave the relationship. A partnership created for the aim of completing a specified project, such as the construction of a structure or the performance of a time-limited activity.

On the basis of Liability: Partners have unlimited and joint liability; they have the right to participate in the firm’s management, and their acts bind them as well as the firm. 

The limited partners have no authority over the firm or the other partners, and their acts have no legal consequences for the firm or the other partners. It is necessary to register such a partnership.