Utility Primarily based Questions
Query 1. Through which type of organisation is a commerce settlement made by one proprietor binding on the others? Give causes to assist your reply.
Reply: In a partnership type of organisation, a commerce settlement entered into by one proprietor is binding on the opposite homeowners. In India, “The Indian Partnership Act 1932” regulates all points and actions of partnerships. This explicit legislation signifies {that a} partnership is an affiliation of two or extra individuals or events who’ve agreed to share the income generated from the agency whereas managing it collectively or on behalf of different members. It’s an alliance of two or extra individuals created by an settlement or contract. The settlement (accord) is the premise for the partnership between the events. Such a settlement is in writing. An oral settlement is legally binding. To minimise misunderstandings, it’s at all times preferable if the companions have a replica of the written settlement. The settlement must be to conduct some enterprise. The mere co-ownership of a property doesn’t set up a partnership.
The definition of the Indian Partnership Act of 1932 states {that a} partnership enterprise is carried on by all or one of many companions appearing for all. In easy phrases, each companion of a partnership agency acts as an agent and a principal. As an agent, a companion represents different companions of the partnership agency and thereby binds them by means of his acts. As a principal, a companion is sure by the acts of different companions of the partnership agency. Subsequently, a commerce settlement made by one of many companions of a partnership agency is binding on different companions.
Query 2: The enterprise belongings of an organisation quantity to Rs. 50,000, however the money owed that stay unpaid are Rs. 80,000. What plan of action can the collectors take if
(a) The organisation is a sole proprietorship agency
(b) The organisation is a partnership agency with Anthony and Akbar as companions. Which of the 2 companions can the collectors method for compensation of the debt? Clarify, giving causes.
Reply:
(a) In accordance with James Stephenson, a sole proprietorship is an individual who carries on enterprise completely by and for himself. He isn’t solely the proprietor of the capital of the endeavor however is normally the organiser and supervisor and takes all of the income or duty for losses. In a sole proprietorship agency, the only real proprietors have limitless legal responsibility. It implies that if the corporate’s belongings are inadequate to pay all its money owed, the proprietor is personally answerable for paying the money owed. For this, private objects of the proprietor, comparable to his non-public automobile and different belongings could also be bought to repay the debt.
Within the given case, the whole excellent debt is ₹80,000, however the organisation’s belongings are solely ₹50,000. In such a scenario, the collectors can recuperate their dues from the non-public belongings of the proprietor; i.e., the remaining ₹30,000 may be recovered from the organisation’s proprietor’s private belongings.
(b) In accordance with the Indian Partnership Act 1932, a partnership is an affiliation of two or extra individuals or events who’ve agreed to share the income generated from the agency whereas managing it collectively or on behalf of different members. In a partnership agency, all companions are personally held accountable for legal responsibility. In easy phrases, all companions have limitless legal responsibility and if the corporate’s belongings are inadequate to pay all its money owed, the companions are personally answerable for paying the money owed. For this, their private objects, comparable to non-public autos and different belongings could also be bought to repay the debt.
Within the given case, the organisation is a partnership firm with Anthony and Akbar as companions, they usually have limitless legal responsibility. The overall debt left unpaid is ₹80,000, and the belongings of the agency quantities to ₹50,000. In such a scenario the collectors of the agency can recuperate their dues from the non-public belongings of the companions, as they’re collectively and individually answerable for paying off the money owed of the agency. Subsequently, the remaining ₹30,000 may be recovered from the non-public belongings of Akbar and/or Anthony.
Query 3: Kiran is a sole proprietor. Over the previous decade, her enterprise has grown from working a neighbourhood nook store promoting equipment comparable to synthetic jewelry, luggage, hair clips and nail artwork to a retail chain with three branches within the metropolis. Though she takes care of the numerous features in all of the branches, she wonders whether or not she ought to kind an organization to handle the enterprise higher. She additionally has plans to open branches countrywide.
(a) Clarify two advantages of remaining a sole proprietor
(b) Clarify two advantages of changing to a joint inventory firm
(c) What position will her determination to go nationwide play in her selection of type of the organisation?
(d) What authorized formalities will she need to endure to function the enterprise as an organization?
Reply:
(a) In accordance with James Stephenson, a sole proprietorship is an individual who carries on enterprise completely by and for himself. He isn’t solely the proprietor of the capital of the endeavor however is normally the organiser and supervisor and takes all of the income or duty for losses.
The benefits to Kiran of being a sole proprietor are as follows:
- Fast Determination Making: Complete Administration and management of the agency lie within the fingers of the only real proprietor; i.e., Neha solely. She enjoys the liberty of motion and has all of the authority to make selections and run the enterprise in the way in which she needs. It results in fast decision-making as she doesn’t need to seek the advice of with others and might take all minor and main selections. In addition to, well timed selections additionally assist her in benefiting from completely different market alternatives.
- Simple to Type and Dissolve: In a sole proprietorship, hardly any authorized formalities are required for organising the enterprise besides in some instances the place a license is required. Additionally, she will shut the enterprise at any time when she needs by paying again its money owed. Subsequently, it’s straightforward to kind and shut this sort of enterprise organisation.
- Private Contact: In a sole proprietorship, all of the work is completed by the proprietor himself. So, Neha is in direct contact together with her staff and prospects of the organisation and might make adjustments within the product in accordance with the calls for of the shopper. Additionally, she is going to be capable to resolve the issues confronted by the staff simply.
(b) In accordance with Justice Lindley, Joint Inventory Firm is an affiliation of many individuals who contribute cash or cash’s value to a standard inventory and make use of it for some widespread function.
The advantages to Neha of changing her enterprise to a joint inventory firm are:
- Restricted Legal responsibility: The legal responsibility of the members of an organization is proscribed to the extent of the share contributed by them within the firm. If an organization faces a loss, the shareholders of the corporate should not have to unload their private property for compensation. As Neha is a sole proprietor and has to bear all of the losses of the agency, by changing the enterprise right into a joint inventory firm she will have restricted legal responsibility.
- Switch of Curiosity: Because the shares of an organization are transferrable and may be simply purchased and bought out there, it brings liquidity to the funding within the firm. The shareholders can anytime convert their share funding into money and might use that quantity to purchase the shares of one other firm.
(c) With the intention to develop nationwide, it’s crucial to alter the corporate kind from a sole proprietorship agency to a joint inventory firm as it’s thought-about essentially the most appropriate type of organisation for working enterprise actions on a big scale.
(d) Following formalities shall be wanted to kind a joint inventory firm:
- Kiran should receive a certificates of incorporation.
- If she desires to function as a public firm, a certificates of graduation is required.
- She should rent professionals and brokers.
- Numerous paperwork, comparable to a prospectus, Articles of Affiliation (AoA), and Memorandum of Affiliation (MoA) should be ready.
