Forms of Business Organisations — Important Questions

Profit maximisation as the primary objective

Step 1: The question asks which option is NOT a characteristic of cooperative societies. Step 2: Cooperative societies are fundamentally different from other business forms because their PRIMARY objective is SERVICE to members, not profit maximisation. Step 3: Options A, B, and D are all genuine characteristics — voluntary membership, one-man one-vote democracy, and compulsory registration are all real features. Step 4: While cooperative societies do earn some profit, it is NOT their main goal. The surplus is distributed as bonus or kept as reserve. Step 5: This is a common exam question — alw

6% per annum

Step 1: When there is no written Partnership Deed, the Indian Partnership Act 1932 provides default rules. Step 2: As per these rules, a partner who gives a LOAN to the firm (beyond their capital contribution) is entitled to interest at 6% per annum. Step 3: It is important to distinguish: No interest is allowed on CAPITAL contribution in the absence of an agreement. Step 4: But interest on LOAN is allowed at 6% even without an agreement. Step 5: This is a frequently tested fact — memorise the figure 6% specifically for loans, and 'no interest' for capital.

Sole Proprietorship

Step 1: The question mentions businesses involving manual skills and personal craftsmanship. Step 2: Sole proprietorship is most suitable when: the market is small/localised, capital requirement is small, and the business involves personal manual skills. Step 3: Handicrafts, jewellery, tailoring, and haircutting are classic examples given for sole proprietorship suitability in the textbook. Step 4: Joint Stock Companies require large capital and are for large-scale operations — not suitable. Step 5: Cooperative societies focus on collective benefit for members. Partnership involves sharing — b

Partner by Estoppel

Step 1: Let us carefully read the situation — Ramesh gives an IMPRESSION through his own conduct/behaviour that he is a partner. Step 2: When a person's OWN behaviour or conduct leads others to believe he is a partner, he is a PARTNER BY ESTOPPEL. Step 3: He is fully liable if any third party suffers because of this false representation. Step 4: PARTNER BY HOLDING OUT is different — here the FIRM declares that a certain person is a partner, and that person doesn't deny it. Step 5: Nominal partner only lends their name officially; sleeping partner is a real partner who doesn't participate. Rame