Exercise Solutions Available
Step-by-step answers for all textbook questions in this chapter
How to Use This Solutions Page
1. Attempt all NCERT questions on your own before checking answers. 2. Compare the structure of your answer — especially for comparison questions. 3. For case studies, practise identifying the correct form based on given characteristics.
Key Concepts Recap
- Sole proprietorship: 1 owner, unlimited liability, easy formation, no separate legal entity.
- HUF: Karta manages, co-parceners by birth, Karta has unlimited liability.
- Partnership: 2–50 partners, mutual agency, unlimited liability, partnership deed.
- Cooperative: Voluntary, one member one vote, service motive, limited liability.
- Company: Separate legal entity, limited liability, perpetual succession, Companies Act 2013.
- Partner types: Active, Sleeping, Secret, Nominal, Estoppel, Holding out.
Intext Questions
Q: In which form of business is the risk borne by a single person?
Q: Who has unlimited liability in an HUF?
Q: Can a partnership firm have more than 50 partners?
Chapter-End Exercise Solutions
Q1: Discuss the features of sole proprietorship.
Sole proprietorship is a business owned, managed, and controlled by a single individual.
Features: 1. Formation and closure — no legal formalities; easy to start and close. 2. Liability — unlimited; the proprietor's personal assets can be used to pay business debts. 3. Sole risk bearer and profit recipient — the owner alone bears all risk and enjoys all profit. 4. Control — complete control rests with the owner; decisions are quick. 5. No separate legal entity — the owner and the business are not distinct in law. 6. Lack of continuity — business ends with the death, insolvency, or incapacity of the proprietor.
Q2: What is a partnership? State its features.
Partnership is the relation between two or more persons who agree to share the profits of a business carried on by all or any of them acting for all (Indian Partnership Act, 1932).
Features: 1. Two or more persons — minimum 2, maximum 50 (10 for banking). 2. Agreement — partnership deed (written or oral) governs the terms. 3. Business — must be a lawful business activity. 4. Sharing of profit — partners share profits and losses as per the deed. 5. Mutual agency — every partner is both an agent and principal; acts of one bind all. 6. No separate legal entity — though it can sue/be sued in the firm's name. 7. Unlimited liability — each partner is jointly and severally liable for firm's debts.
Q3: Distinguish between a private company and a public company.
| Basis | Private Company | Public Company |
|---|---|---|
| Minimum members | 2 | 7 |
| Maximum members | 200 | No limit |
| Minimum directors | 2 | 3 |
| Share transfer | Restricted | Freely transferable |
| Public invitation | Cannot invite public to subscribe | Can invite public |
| Name suffix | Private Limited | Limited |
| Statutory meeting | Not required | Required |
| Commencement | After Certificate of Incorporation | Needs Certificate of Commencement |
| Index of members | Not required | Required |
Q4: What is a cooperative society? Explain its features.
A cooperative society is a voluntary association of persons who join together to protect their economic interests through mutual help, based on the principle of 'one member, one vote'.
Features: 1. Voluntary association — membership is open and voluntary. 2. Registration — compulsory under the Cooperative Societies Act, 1912. 3. Separate legal entity — can own property, sue, and be sued in its own name. 4. Limited liability — members' liability is limited to their share capital. 5. Democratic management — 'one member, one vote' irrespective of shareholding. 6. Service motive — primary objective is service to members, not profit maximisation. 7. Distribution of surplus — surplus distributed as per the Societies Act provisions.
Q5: Compare all forms of business organisation on the basis of: (a) Formation (b) Liability (c) Capital (d) Control (e) Continuity
| Basis | Sole Proprietorship | HUF | Partnership | Cooperative | Company |
|---|---|---|---|---|---|
| Formation | No legal formalities | By Hindu law | Agreement (registration optional) | Registration compulsory | Registration compulsory |
| Liability | Unlimited | Karta unlimited | Unlimited | Limited | Limited |
| Capital | Very limited | Limited | Moderate | Limited | Very large |
| Control | Owner | Karta | Partners | Elected committee | Board of Directors |
| Continuity | Unstable | Stable | Unstable | Stable | Perpetual |
Q6: Explain the different types of partners.
| Type | Description |
|---|---|
| Active/Working Partner | Participates in day-to-day management; contributes capital; shares profit/loss. |
| Sleeping/Dormant Partner | Does not participate in management; contributes capital; shares profit/loss; not known to public as active. |
| Secret Partner | Not known to public as a partner; contributes capital; shares profit/loss; participates in management secretly. |
| Nominal Partner | Lends name to the firm for goodwill; does not contribute capital; does not share profit; liable to third parties. |
| Partner by Estoppel | Not a real partner but holds out as one through own words or conduct; liable to outsiders who relied on such representation. |
| Partner by Holding Out | Allows their name to be used as a partner; does not participate; liable to third parties who believed they were a partner. |
Q7: State the merits and limitations of a company form of organisation.
Merits: 1. Limited liability — shareholders' liability is limited to the face value of shares. 2. Large capital — can raise huge capital from the public. 3. Professional management — can hire experts and qualified managers. 4. Perpetual succession — not affected by death or insolvency of members. 5. Transferability of shares — easy entry and exit for shareholders (public company). 6. Public confidence — published accounts and legal regulation build trust.
Limitations: 1. Complex formation — many legal formalities and lengthy process. 2. Lack of secrecy — accounts and reports are published. 3. Delay in decisions — board meetings and procedures slow down decisions. 4. Separation of ownership and management — may lead to conflict of interest. 5. Government regulation — heavy compliance burden under the Companies Act.
Internal Links
- [Chapter 2 Guide — Forms of Business Organisation](/school/cbse/class/11/business-studies/cbse-forms-of-business-organisation)
- [All Class 11 Business Studies Solutions](/school/cbse/class/11/business-studies/solutions)
- [Class 11 Business Studies Subject Guide](/school/cbse/class/11/business-studies)