Business Organisation and Management
This domain of the UPMSP Commerce paper asks you to compare forms of business ownership, justify one for a given situation, and explain how managers plan, organise, staff, direct and control. Marks come from exact terms - separate legal entity, unlimited liability, unity of command - not from vague description.
Forms of business organisation
- Sole proprietorship: one owner, no separate legal entity, unlimited liability, no registration, full control and secrecy, limited capital.
- Partnership (Indian Partnership Act, 1932): minimum two partners, joint and several unlimited liability, governed by a partnership deed; registration is optional but advisable.
- Hindu Undivided Family: managed by the karta, membership by birth.
- Cooperative society: minimum ten adult members, one member one vote, limited return on capital, registered under the cooperative law.
- Joint stock company (Companies Act, 2013): separate legal entity, perpetual succession, limited liability; a private company needs at least 2 members and 2 directors, a public company 7 members and 3 directors.
Management
Management means getting things done through other people. Its functions - planning, organising, staffing, directing, controlling - are bound together by coordination. Levels are top (policy), middle (departmental) and supervisory (day-to-day). Fayol's principles include division of work, unity of command (one boss per employee), unity of direction (one plan per group), scalar chain and esprit de corps; Taylor's scientific management stressed science in place of rule of thumb and cooperation between management and workers.
Worked example
A family cloth shop wants to grow to ₹2 crore with four outside investors. Sole proprietorship fails: one person bears unlimited liability and the firm ends with him. Partnership brings capital but keeps unlimited liability. A private company gives limited liability, continuity and transferable ownership, so it is the better form, at the cost of registration and disclosure.
Traps that cost marks
- Unlimited liability applies to proprietorship and partnership only; companies and cooperatives give limited liability.
- Partnership registration is optional; company registration is compulsory.
- Do not interchange unity of command with unity of direction.