CS Executive:Setting Up & Closure [Ch-6 Different Forms of Business and Selection]

 Factors to consider while choosing a Business 

SOLE PROPRIETORSHIP 

• Merits 

• Easy formation 
• Better control 
• Sole beneficiary of profits 
• Benefits of small scale operations 
• Inexpensive management 

• Limits 

• Management skill 
• Resource limitations 
• Unlimited liability 
• Continuation lack 
• Repairing,tailoring, small factories, retail shops and professional activities. 
• Registration may be required under
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PARTNERSHIP 

• (Section 7) partnership at will 
• (Section 8) particular partnership 
• (Section 28) holding out 
• (Section 39) dissolution 

• Features

• Agreement existence 
• Business engagement 
• Profit/loss sharing 
• Agency relationship 
• Unlimited Liability 
• Common management 
• Restriction on share transfer-ability 
• Registration 
• Duration 

• Partner types

• Active 
• Sleeping 
• Nominal 
• Partner by holding out 

• Merits
  

• Formation ease, financial resource pooling, pooling of managerial stalls, balanced business traditions, risk sharing. 

• Limitations
  

• Uncertainty of existence, risk of implied authority, risk of disharmony, difficulty in firm withdrawal, lack of institutional confidence, expansion difficulties. 
• Medium business, partners can cooperate. 

• Partnership deed
  

• Definitions, vital info, investment, accounting, duties/powers/obligations, withdrawals, expulsion,  dissolution, arbitration. 

• LEGAL rights denied to unregistered firm

• Partner can't file suit against firm/partners for enforcement of contract rights. 
• Contract rights can't be enforced in court or on behalf of your firm against any third party. 
• Firm/partners can't claim a set-off (mutual debts owned by disputant parties to one another) or other proceedings in a 3rd party dispute.

Mandatory for firms to register under IT dept. and have a PAN card. Required to open a current a/c in firm name and operate through this bank a/c.

HINDU UNDIVIDED FAMILY 

• Characteristics
  

• governed by dayabhaga(bengal/assam) and mitakshara law, karta=management, birth membership, liability, permanent existence, implied karta's authority, minor also partner, dissolution by all member's will. 

• Benefits
  

• Easy start, efficient management, secret, prompt decision, well-balanced economy, credit Facilities because of karta's personal relations, natural love of members, freedom to karta for business selection. 

• Legal

• Create deed with all details necessary (not mandatory) (notarized). 
• Register deed. 
• Obtain PAN 
• Open bank a/c. 
• Money/assets transferred to HUF can help in tax exemptions.
• Taxable as a separate person. Apart from 2.5 lakh deducton, a 1.5 lakh also available. 

MULTI-STATE co-operative society 

• Annual auditing by recognized auditors mandatory. 

• Benefits

• Reasonable Loan rates, pan India by starting branches. 
• Low compliance costs, owners/customers same; 
• Sense of belonging among members. 

• Registration procedure

• App in Form-1 (rule 3[1]) with central registrar of Corporate Societies. 
• Credit balance statement, reasonable prospects of, 
• Becoming viable, 4 copies of by-laws, prop. registration  
• Area, at least 50 members from each state, 
• Certified resolution copies, contact & email. 

• For societies of thrift/cr./multi-purpose societies. Additional to above:

• NOC from ROCs of states/UT, where operation area is proposed to be confined. 
• Credential of promoters verified by ROCs of head office state, certificate. 
• All original with signs of chief promoters/promoters. 
• Signed by at-least 50 individuals and at-least 2 duly authorized representatives of societies. 
• App disposed by CG within 4 months from receipt, if refusal not communicated, deemed approved and registration certificate must be issued.
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