IGNOU ECO 01 Exam Notes Download B.Com Notes

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Essential Features of Business

We can list the following five broad features of business.

Dealings in goods and services: Business deals with goods and services. The goods may be consumer goods such as sweets, bread, cloth, shoes, etc: They may be producer’s goods such as machinery, equipment, etc., which are used to produce further goods for consumption.
Production and/or exchange: You can call an economic activity a ‘business’ only when there is production or transfer or exchange or sale of goods or services for value. If goods are produced for self-consumption or presentation as gift, such activities shall not be treated as business. In a business activity, there must be two parties i.e., a buyer and a seller.
Continuity and regularity in dealings: A single transaction shall not be treated as business. An activity is treated as business only whon it is undertaken continually or at . least recuriently. For example, if a person sells his residential house, it is not contidered as business. If he repeatedly buys houses and sells to others, such activity comes under business.
Profit motive: Earning profit is the primary motive of business. This is not to undermine the importance of the element of service in business activity.
Element of risk: In every business, there is a possibility of incurring loss. This possibility of incurring loss is termed as risk.

Classification of Industry

There are various approaches of classifying industries. All these approaches are listed below.

1.On the basis of the nature of activity

a) Ex tractive industries
b) Genetic industries
c) Manufacturing.industries
d) Construction industries

2 On the basis of the nature of goods produced

a) Consumer goods industries
b) Producer goods industries

3 On the basis of the level of investment

a) Heavy industries
b) Light industries

4. On the basis of size of the activity

a) Small scale industries
b) Large scale industries

5 On the basis of area of operations

a) Regional industries
b) National industries
C) Multinational industries

SOLE TRADER ORGANISATION

The sole trader organisation (also called proprietorship) is the oldest form of organisation and the most common form of organisation for small business even today. It is the simplest and easiest to form. What is required is that an individual decides about the type of business to be started and arranges the necessary capitaI. Required capital may be mobilised from his own savings, or may be borrowed from friends and relatives.

The business may be carried either in a portion of his own residence or in a rented building. The person generally manages the business on his own. He may also take the help of his family members or employ some persons, if necessary.

He can take the advice from others in running the business, but his own will bk the final decision. Thus, the sole trader enjoys full control over the affairs of the firm. He enjays a the profits earned by the business. So in case of loss, naturally, he has to bear the full burnt of it.

Main Features of SOLE TRADER ORGANISATION

1 One man ownership: The ownership lies with one person only. There are no associates I or partners. He invests his own money or borrows from the friends and relatives. I; I
2 No separation of ownership and management: The owner himself manages the business. Therefore, the separation of ownership and management which is quite common in big business is not present in this form of organisation. Since the proprietor himself manages the business, he exercises a high degree of supervision and control in the working of his business.
3 No separate entity: The business dpes not have an entity separate from the owner. The i proprietor and the business entkrprise are one and the same. c
4 All profits t’o proprietor: Since there are no partners, all the profits are enjoyed by the sole proprietor.
5 Individual risk: All losses in the business are borne by the proprietor himself.
6 ‘ Unlimited liability: The proprietor has an unlimitedliability. This means that in caw of loss even the personal propeity of the owner can be utilised for clearing the business obligations and debts,

PARTNERSHIP FORM OF ORGANISATION

The partnership form of organization is a business structure where two or more people come together to carry out a business activity with the objective of making profits. Here are the step-by-step procedures to set up a partnership:

Choose your partners: The first step in forming a partnership is to choose your partners. You should choose partners who have complementary skills, experience, and resources that will contribute to the success of the business.

Choose a business name: You and your partners should agree on a business name. The name should be unique, easy to remember, and relevant to the type of business you intend to run.Create a partnership agreement: A partnership agreement is a legal document that outlines the terms and conditions of the partnership. It should include details such as the roles and responsibilities of each partner, the amount of capital each partner will contribute, the profit-sharing ratio, and the decision-making process.
Register your business: Depending on your country’s laws, you may be required to register your partnership with the relevant government agencies. This will ensure that your business is recognized as a legal entity and can operate legally.
Obtain necessary licenses and permits: Depending on the type of business you intend to run, you may be required to obtain specific licenses and permits before you can start operations.
Set up your business location: You will need to choose a location for your business and set up your office or shop. This may involve leasing or buying a property, setting up a website, or creating a virtual office.
Open a bank account: You will need to open a separate bank account for your partnership to keep track of your finances and make transactions.
Start operations: Once you have completed all the necessary steps, you can start operating your partnership. You should keep accurate records of your business activities, including income, expenses, and taxes.

Cooperative Form of Organisation

The cooperative form of organization is a business structure that is owned and operated by a group of individuals who have come together to achieve a common goal. Here are the step-by-step procedures to set up a cooperative:

Choose your members: The first step in forming a cooperative is to choose your members. You should choose members who share a common goal and are committed to working together to achieve it.
Choose a name: You and your members should agree on a cooperative name. The name should be unique, easy to remember, and relevant to the type of business you intend to run.
Create bylaws: Bylaws are legal documents that outline the structure and purpose of the cooperative. They should include details such as the cooperative’s name, purpose, membership requirements, governance structure, and decision-making process.
Register your cooperative: Depending on your country’s laws, you may be required to register your cooperative with the relevant government agency. This will ensure that your cooperative is recognized as a legal entity and can operate legally.
Raise capital: You will need to raise capital to start and operate your cooperative. This may involve asking members to contribute funds, applying for loans or grants, or crowdfunding.
Set up your business location: You will need to choose a location for your cooperative and set up your office or shop. This may involve leasing or buying a property, setting up a website, or creating a virtual office.
Open a bank account: You will need to open a separate bank account for your cooperative to keep track of your finances and make transactions.
Start operations: Once you have completed all the necessary steps, you can start operating your cooperative. You should keep accurate records of your business activities, including income, expenses, and taxes.
Provide member services: As a cooperative, you should prioritize providing member services that meet the needs of your members. This may involve offering discounts, training programs, or other benefits.

Requisites of an Ideal Form of Business Organisation

An ideal form of business organization is one that fulfills the needs and goals of the owners, maximizes profitability, and ensures long-term sustainability. Here are some requisites of an ideal form of business organization:

Legal Recognition: An ideal form of business organization should be recognized and protected by law. It should be registered with the relevant government authority and should comply with all legal requirements.
Limited Liability: An ideal form of business organization should provide limited liability protection to its owners. This means that the owners’ personal assets should be separate from the business’s assets, and they should not be liable for any debts or losses incurred by the business.
Flexibility: An ideal form of business organization should be flexible enough to accommodate changes in the business environment. It should be able to adapt to new challenges, opportunities, and technologies without requiring significant structural changes.
Ease of Formation: An ideal form of business organization should be easy to form and operate. The process of starting the business should be straightforward, and the administrative requirements should be minimal.
Availability of Capital: An ideal form of business organization should have access to sufficient capital to fund its operations and growth. This could come from equity investments, debt financing, or other sources.
Clear Ownership Structure: An ideal form of business organization should have a clear ownership structure that defines the roles and responsibilities of each owner. This helps to prevent conflicts and ensures effective decision-making.
Efficient Management: An ideal form of business organization should have an efficient management structure that can effectively and efficiently operate the business. This includes defining the roles and responsibilities of each manager, setting clear goals and objectives, and establishing systems for performance evaluation.
Good Corporate Governance: An ideal form of business organization should have good corporate governance practices in place. This includes transparent decision-making processes, ethical practices, and accountability to stakeholders.

Comparison of Various Forms of Organisations

There are several forms of business organizations, each with its advantages and disadvantages. Here’s a comparison of some of the most common forms of business organizations:

Proprietary Concern: A proprietary concern is a type of business owned and operated by a single person. The advantages of a proprietary concern are that it is easy to start, requires minimal legal formalities, and the owner has complete control over the business. The disadvantage is that the owner has unlimited liability, meaning that personal assets may be at risk if the business incurs debts or losses.
Partnership Firm: A partnership firm is a type of business owned and operated by two or more persons. The advantages of a partnership firm are that it is easy to start, requires minimal legal formalities, and the owners can share the workload and risk. The disadvantages are that partners have unlimited liability, and conflicts may arise between partners.
Joint Stock Company: A joint stock company is a type of business owned by shareholders and run by a board of directors. The advantages of a joint stock company are that it has limited liability, can raise a large amount of capital through the sale of shares, and can continue to exist even if shareholders change. The disadvantages are that it requires significant legal formalities, has complex governance structures, and shareholders may have limited control over the company.
Cooperative Society: A cooperative society is a type of business owned and operated by its members. The advantages of a cooperative society are that it is owned and run by its members, shares the workload and risk, and may have access to capital through members. The disadvantages are that it may be difficult to raise capital from non-members, and there may be conflicts between members.

Criteria for the Choice of Organisation

Choosing the right form of business organization is a critical decision that can affect the success and sustainability of a business. Here are some criteria for the choice of organization:

Nature and Size of Business: The nature and size of the business are important factors to consider when choosing a form of organization. For example, a small business may be better suited to a sole proprietorship or partnership, while a large business may require the legal and financial benefits of a corporation.
Liability Protection: Liability protection is another important criterion when choosing a form of organization. A business owner should consider how much personal risk they are willing to take on, as well as the potential risks and liabilities of the business. A sole proprietorship or partnership may have unlimited liability, while a corporation offers limited liability protection.
Tax Implications: Different forms of organization have different tax implications. A business owner should consider the tax benefits and disadvantages of each form of organization before making a decision. For example, a sole proprietorship may have more tax advantages than a corporation, but a corporation may be able to take advantage of tax deductions that are not available to other forms of organization.
Capital Requirements: The capital requirements of a business are also important when choosing a form of organization. A business owner should consider the amount of capital needed to start and grow the business, as well as the potential sources of funding. A corporation may be better suited for businesses that require significant capital investments, while a sole proprietorship or partnership may be more appropriate for businesses that require less capital.
Management and Control: The management and control of a business are important considerations when choosing a form of organization. A business owner should consider who will be responsible for the day-to-day operations of the business, as well as how decisions will be made. A corporation may offer more formalized management and control structures, while a sole proprietorship or partnership may offer more flexibility.
Regulatory Requirements: Different forms of organization may have different regulatory requirements, such as registration, reporting, and compliance with specific laws and regulations. A business owner should consider the legal and regulatory requirements of each form of organization before making a decision.

An Entrepreneur

Step by Step Guide to Becoming an Entrepreneur:

Identify a Business Opportunity: Entrepreneurs identify a gap in the market or an opportunity to solve a problem that exists in society.
Develop a Business Plan: A business plan is essential to outline the goals, objectives, and strategies of the business. It also includes details of the products or services, target market, financial projections, and marketing plans.
Secure Funding: Entrepreneurs need to secure funding to start and grow their businesses. This can come from personal savings, loans, investors, or crowdfunding.
Set up the Business: Entrepreneurs need to register their business, obtain necessary licenses and permits, and set up the physical or online infrastructure.
Launch the Business: Once the business is set up, entrepreneurs can launch their products or services and start marketing to their target audience.

Characteristics of an Entrepreneur:

Visionary: Entrepreneurs have a vision for their business and the ability to see opportunities where others see problems.
Risk-taker: Entrepreneurs are willing to take calculated risks to start and grow their businesses.
Innovative: Entrepreneurs are creative and innovative, constantly looking for new ways to solve problems or improve existing products or services.
Passionate: Entrepreneurs are passionate about their businesses and are willing to work hard to achieve their goals.
Resilient: Entrepreneurs are resilient and able to bounce back from setbacks and failures.

Functions of an Entrepreneur:

Innovation: Entrepreneurs innovate by developing new products or services, improving existing ones, or creating new business models.
Risk-taking: Entrepreneurs take calculated risks to start and grow their businesses.
Management: Entrepreneurs manage their businesses, including finances, marketing, operations, and personnel.
Networking: Entrepreneurs build networks of contacts and collaborators, including customers, suppliers, partners, and investors.
Decision-making: Entrepreneurs make critical decisions that affect the success and sustainability of their businesses.

Promotion

Promotion is the process of raising awareness and interest in a product, service, or brand with the goal of increasing sales or visibility. Here are the steps typically involved in a promotion:

Identify your target audience: Determine the group of people who are most likely to be interested in your product or service. This could be based on demographics, interests, location, or other factors.
Set your promotion goals: Decide what you want to achieve with your promotion. This could include increasing sales, raising brand awareness, generating leads, or engaging with customers.
Develop your promotion strategy: Determine the best tactics to reach your target audience and achieve your goals. This could include advertising, social media, email marketing, influencer marketing, events, or other methods.
Create your promotion materials: Develop the creative assets and messaging for your promotion, such as ads, social media posts, email campaigns, or event materials.
Launch your promotion: Implement your promotion strategy and start reaching out to your target audience. Monitor your progress and adjust your tactics as needed.

Entrepreneur and promoter are two distinct roles in the business world. An entrepreneur is someone who creates and runs a business, taking on financial risk in exchange for potential rewards. A promoter, on the other hand, is someone who raises awareness and generates interest in a business or product. A promoter may work for a company or may be an independent contractor hired to promote a specific product or service.

There are several types of promoters, including:

In-house promoters: These are employees of a company who are responsible for promoting the company’s products or services. They may work in marketing, sales, or other roles.
Independent promoters: These are individuals or agencies who are hired by companies to promote their products or services. They may work on a contract basis or on a commission basis.
Celebrity promoters: These are well-known individuals who are hired to promote products or services. They may be actors, athletes, musicians, or other public figures.
Event promoters: These are individuals or companies who organize and promote events, such as concerts, festivals, or trade shows.
Digital promoters: These are individuals or agencies who specialize in promoting products or services through digital channels, such as social media, email marketing, or search engine optimization.

Promotion of Different Types of Oganisations

Promotion is the process of setting up a new business. Here are the steps involved in promoting different types of organizations:

1. Proprietary Concern:

A proprietary concern is a type of business owned and run by an individual. Promotion of a proprietary concern involves the following steps:

Choosing a business name
Registering the business with the relevant government authority
Obtaining necessary licenses and permitsSetting up a business location
Identifying sources of capital
Starting operations

2. Partnership Firm:

A partnership firm is a type of business owned and run by two or more partners. Promotion of a partnership firm involves the following steps:

Choosing a business name
Drafting a partnership deed, which outlines the terms and conditions of the partnership
Registering the partnership with the relevant government authority
Obtaining necessary licenses and permitsSetting up a business location
Identifying sources of capital
Starting operations

3. Joint Stock Company:

A joint stock company is a type of business owned by shareholders and run by a board of directors. Promotion of a joint stock company involves the following steps:

Choosing a business name
Drafting articles of association and memorandum of association, which outline the rules and regulations of the company
Registering the company with the relevant government authority
Obtaining necessary licenses and permitsIssuing shares to raise capital
Setting up a business location
Appointing directors and other officers
Starting operations

4. Cooperative Society:

A cooperative society is a type of business owned and run by its members, who share a common goal. Promotion of a cooperative society involves the following steps:

Identifying a common goal among the members
Choosing a business name
Drafting bylaws, which outline the rules and regulations of the society
Registering the society with the relevant government authority
Obtaining necessary licenses and permits
Raising capital from members
Setting up a business location
Starting operations

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