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)