Ownership

Types of ownership:
1. Single ownership (Sole Proprietorship)
It is a form of business organization in which an individual introduces his own capital,
uses his own skill and intelligence in management of its affairs and is solely responsible
for the results of its operations.
Advantages
1. Easy to establish as it does not requires to complete any legal formality
2. Simplicity of organization
3. Owner is free to make all decisions
4. The owner enjoys all the profits
5. There is a great deal of personal motivation and incentive to succeed
6. Minimum legal restriction
7. Secrecy of raw material, method of manufacture can be maintained
8. Discontinue the business is also easy
Limitations
1. Limited money
2. Lacks skill
3. Unlimited liability for debts and losses
4. Employees side – No profit sharing, bonus, promotions, etc
5. Sudden death may force to close the company
2. Partnership:
 Rise money, duties, responsibilities, etc
 Partnership are based upon a partnership agreement
Kind of Partners:
1. Active
2. Sleeping
Types of Partnerships:
1. General partnership
2. Limited partnership
3. Joint stock company:
Types:
1. Private limited company

 Restricts the right to transfer shares, avoids public to take up shares or
debentures
 Need not file documents such as consent of directors, list of directors, etc
with the registrar of joint stock companies
 Need not circulate the balance sheet, profit and loss account, etc among its
members, but AGM should be conducted.
2. Public limited company:
 Has to issue a prospectus to the public
 Has to send financial statements to all members and to the registrar
 It has to hold AGM every year
Advantages:
1.
2.
3.
4.

Huge sum of money can be raised
Liability is limited
Shares are transferable
Company’s life is not affected by the death of any shareholder

Disadvantages:
1. Legal formalities are more
2. Company is managed by big shareholders only
3. High paid executives run the shows, they may not have high interest like
shareholder.
4. Inside persons familiar with the financial positions may buy or sell shares for their
personal profits
5. Difficult to maintain secrecy
6. No team spirit
7. Divided responsibility
4. Co-operative organizations:
 The main aim is to eliminate profit and provide goods and services to the
members of the cooperative at cost.
 Members pay fees or buy shares of the cooperative and profits are periodically
redistributed to them.
 Each member has only one vote, this avoids the concentration of control in a few
hands.
 It is a kind of voluntary, democratic ownership formed by some motivated
individuals for obtaining necessities of everyday life at rates less than those of the
market.

Forms of cooperative enterprises:
1.
2.
3.
4.
5.

Consumer’s cooperatives
Producer cooperatives – dairy products, fruits, etc
Cooperative forming
Cooperative housing
Cooperative credit society – loans

Advantages:
1.
2.
3.
4.
5.
6.
7.

Daily necessities of life can be made available at lower rates.
It is the democratic form of ownership.
Overheads reduced, as members of the cooperative may render honorary services.
Chance of large stock holding and black marketing are eliminated.
Common man is benefited by cooperatives.
Monetary help can be secured from government
Goods are purchased directly from manufacturers, therefore can be sold at less
rates.

Disadvantages:
1.
2.
3.
4.
5.

The members may not be competent enough to make it a good success.
Specialist services cannot be available as finance is limited
Conflict may arise for sharing responsibility and enjoying authorities.
Members who are in position may try to take personal advantages.
Members being in services may not be able to devote necessary attention and
adequate time for supervising the works.

Public Sector:





Owned and managed by government solely or association with private.
Government runs with service motto.
No problem for capital.
Public sectors are accountable to parliament and state assembly.

Evolution:
 Industrial revolution gave rise to many social evils.
 Consumers and workers were exploited.
 To avoid concentration of economic power in a few hands.
Advantages:
 Profits earned by public sector may be used for the general welfare of the
community.
 Gives equitable employment opportunities (discrimination)

 Capital, raw material, fuel, power and transport are made available to them.
Disadvantages:
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Efficiency is low compound to private companies.
Administrative expenses are more.
Government and politicians interference is more, it lowers efficiency
Delay in decisions
Incompetent persons may occupy high levels.
Workers are shortage in skills.

Private Sector:
 Profits is main objective.
 Won’t take low profit margin sectors.
 Private enterprises lead to unbalanced growth of industries.