Chapter-2

Forms of business organisations.

Q1. Rani is a friend of Seema who is a partner in a software firm
Simplex Solutions. On Seema’s request Rani accompanies her to
a business meeting with Mohan software and actively
participates in the negotiation process for a business deal and
gives the impression that she is also a partner in Simplex
Solutions. Three months credit is extended to Simplex solutions
on the basis of these negotiations.
On the basis of the given information about Rani answer the
following questions:
a. Will Rani be liable to the lender if Seema does not make
payment to him by the due date?
b. Specify and explain Rani’s role in the aforesaid situation. (3
marks)
Q2. X and Y are partners in a firm. They admit Z as a new
partner. X asked Y and Z to get the firm registered. But Y and Z
did not agree and said that the registration procedure will
involve lot of formalities.
If you are X, how will you convince them to get the firm
registered? (3 marks)
Q3. Ajay is the sole owner of a shoe manufacturing factory. He
took loan of rs 20 lakhs from Yes bank for the expansion of his
business. Because of continuous losses however he was not able
to repay the loan on time. Assets of the business were not
enough for repaying liabilities in full. As a result, the finance
company asked him to repay their loan. He refused to do so on
the ground that the loan was taken by his business and not by
him for his personal use. Bank filed a case against him. The
court gave decision in favour of the bank on the ground that
Ajay was operating as the sole proprietor and a sole proprietor
did not have a separate entity distinct of his own. The court
further stated that Ajay had unlimited liability and held him
liable to repay the loan even by selling his personal property, if
need be.
Identify and explain the two features of the form of business
organization formed by Ajay by quoting the lines from the
above paragraph. (3 marks)
Q4. Harsh, Dinesh and Kunal were partners in a financing firm.
Harsh and Kunal had gone for a meeting in London for
analyzing business prospects in that country. In the meanwhile,
Dinesh invested a huge amount in buying shares of a new
company by borrowing money from Rajesh. This turned out to
be a bad deal as the share prices soon fell down. When Harsh
and Kunal came back they said they were not liable to pay to
Rajesh as they did not take money.
On the basis of the given information , answer the following
questions
a. Were Harsh and Kunal right in doing so?
b. Under which aspect of partnership are they bound?Explain.
(3 marks)
Q5. Mahesh operates a iron and steel business for last 25
years. His family is joint and has a lot of ancestral property.
All the twenty 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. Mahesh grandson was born a few days
ago and he is also a member of the business.
On the basis of the given information, answer the following
questions
a. Which form of business is being undertaken by Mahesh.
b. Identify and explain any three features of the form of
business identified in part (a) (4 marks)
Q6. Gopaldas, in order to promote local craftsmen of Gujarat,
formed an organization where in the persons voluntarily
associate themselves to protect common economic interest. The
basic purpose of this organisation was to help these craftsmen to
find market for their products. It had a managing committee that
was elected on the basis of ‘one member one vote’.
On the basis of the given information, answer the following
questions
a. Which form of business is being undertaken by Gopal Das.
b. Quoting the lines from the above para explain any three
features of the form of business identified in part (a)
c. How does the kind of organization identified in part a
exemplify democracy and secularism. Explain(5marks)
Q7. Rohan, Sohan and Mohan decide to start a business which is
created by law and only law can bring it to an end. Rohan has
four sons so he wants that his business should be such in which
he can easily shift the ownership to his sons whenever he wants.
Sohan believes that its functions should be performed by elected
representatives. Mohan suggests the owners should be
responsible for the losses of the business only to a limited
extent.
On the basis of the given information, answer the following
questions
 a. Which form of business does the above case indicate.
b. Identify and explain three features of the form of business
identified in part (a) by quoting lines from the paragraph (4
marks)
Q8. Samarth was born in Delhi and is a fashion designer. He
runs his hi- fashion garments business from the posh Greater
Kailash market of Delhi. After running the business for five
years Samarth feels that he should get his business registered in
a way that he can save himself from the threat of unlimited
liability. But at the same time, he does not want anyone else to
be a part of decision making or to interfere in his business.
On the basis of the given information, answer the following
questions
a. State the form of business organization to be formed by
Samarth to get it registered.
b. Identify and explain any three features of the form of
business identified in part (a) (4 marks)
Q9. Varnika wanted to pitch in to reduce the financial crisis
prevailing in her house and thought of working as a cook. She
started working in three different households, one Punjabi , one
Gujrati and one south Indian family. She soon realized that all
the three households had diffderent cuisine. It was indeed a
challenge for her to learn the techniques of the cuisine. All the
families greatly appreciated the timeframe within which she had
mastered the local cuisine. After working for them for a year ,
she decides to open a small eating joint of her own along with
two of her friends by the name “Apna Bhoj”. They decided to
share profits and losses equally and that each of them will be
liable for acts performed by the other two. Soon the eatery
became a hot spot because of the fusion platter which was being
offered.
On the basis of the given information , answer the following
questions
a. Which form of business is being undertaken by Varnika and
her friends.
b. Quoting the lines from the paragraph, Identify and explain
any three features of the form of business identified in part
(a) (4 marks)
Q10. Sahara India Pariwar owns many companies. Sahara India
Life Insurance company limited is the first wholly Indian owned
private life insurance company. It offers an exhaustive range of
competitive products/plans that caters to everyone from all
segments along with prompt and quality customer services and
support. Sahara Asset Management Company Pvt. Ltd. is a
professional mutual fund house which manages many mutual
fund schemes.
On the basis of the given information about Sahara India
Pariwar, answer the following questions:
a. Sahara India Pariwar owns both public and private
companies. How is a public company different from a
private company?
b. Give two similarities between company and cooperative
society form of business organisations. (4 marks)
Q11. After passing his 12 class with entrepreneurship as an
th

elective subject Ryan started his own business. He invested Rs.

2lakh as the seed capital which was gifted to him by his father.
He obtained a loan of Rs 1 lakh from his friend. In the first year
he incurred a loss of Rs 50000. This created a financial problem
for him and he had to take a loan of Rs 1 lakh from Yes Bank on
the personal guarantee of his father. He started doing hard work,
lowered the prices and informed his customers about the
qualities of goods sold by him. Because of this the sales
increased four times and he earned a net profit of Rs 175000 in
the second year.
On the basis of the given information, answer the following
questions
a. Which form of business is being undertaken by Ryan.
b. Explain any four advantages of such a form of business
organisation (5 marks)
Q12. Rishabh won a lottery of Rs 10 lakhs . He wants to invest
this money in some business opportunity. One of his friends
suggested him to form a company. So he decided to manufacture
tubelights and bulbs in his manufacturing unit and give jobs to
unemployed youth in his village area. He has identified the
business opportunity but is unaware about the other functions to
be performed by him as a promoter of the company.
Explain the other 5 steps to be performed by him as a promoter
of the company.(5 marks)
Q13. Rahul is working as a CEO in a reputed company having
head office in Mumbai. The company is following a dynamic
approach and thus keeps launching innovative products in the
market. Know that the shares of his company are not freely
transferrable.
On the basis of the given information , answer the following
questions
a. Name the type of company mentioned in the above case

Q14. A, B,C,D are partners in a firm with unlimited liability. But

after 1991 A,B,C decided that they did not want to bear
unlimited risk. With the consent of D they made amendments in
the partnership deed and changed their liability. Now A,B,C are
liable for the losses only to the extent of the capital invested by
them.
On the basis of the given information , answer the following
questions
a. Name the two types of partnership formed before and after
1991
b. State 4 differences between them. (6 marks)