SVKMS

Narsee Monjee Institute of Management Studies

Anil Surendra Modi

School Of Commerce

Fundamentals of Business Law

LAW ASSIGNMENT

By:
Group 4

S No.
1
2
3
4
5
6

Name Roll No.

Archit Jain
D012
Ashwin Gupta
D013
Daksh Gupta
D016
Kanishk Gupta
D025
Raghav Mongia
D038
Shreyansh Daruka
D052

Table of Contents

Acknowledgement......................................................................................................................3
Definition of a Partnership.........................................................................................................4
Merits of a Company..................................................................................................................4
Demerits of a Company.............................................................................................................5
Differences between a Company and Partnership......................................................................5
Sole Proprietorship.....................................................................................................................6
Definition............................................................................................................................6
Advantages..........................................................................................................................6
Disadvantages.....................................................................................................................6
Distinction between Company and Sole Proprietorship.....................................................6
Hindu Undivided Family............................................................................................................7
Definition............................................................................................................................7
Advantages..........................................................................................................................7
Disadvantages.....................................................................................................................7

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ACKNOWLEDGEMENT
We would like to express our gratitude to our teachers Ms. Bijal Shah and Ms. Krishna Bhatia
for giving us the golden opportunity to do this wonderful project, which made us do a lot of
Research and we came to know about many new things. Secondly, we would also like to
thank our parents and friends who helped us a lot in finishing our project within the limited
time frame.
Thanks again to all who helped us
Archit Jain
Ashwin Gupta
Daksh Gupta
Kanishk Gupta
Raghav Mongia

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Shreyansh DarukaDEFINITION OF A COMPANY

A company is an association or collection of individuals, whether natural persons, legal
persons, or a mixture of both. Company members share a common purpose and unite in order
to focus their various talents and organize their collectively available skills or resources to
achieve specific, declared goals.
Companies take various forms such as:
Voluntary associations which may be registered as a Non-profit organizations
A group of soldiers
Business entity with an aim of gaining a profit
Financial entities and Banks

DEFINITION OF A PARTNERSHIP
A partnership is an arrangement in which parties agree to cooperate to advance their mutual
interests. A partnership is formed between one or more businesses in which partners (owners)
co-labour to achieve and share profits and losses. Partnerships exist within, and across,
sectors. Non-profit, religious, and political organizations may partner together to increase the
likelihood of each achieving their mission and to amplify their reach.

MERITS OF A COMPANY
1) Large capital resources
a) Its capital is divided into shares of small value so that people with limited means can
also buy them.
b) A public company can have unlimited number of members and sell shares to them.
2) Limited liability
a) The liability of a member of a company is limited to the face value of shares held by
him.
b) His personal property cannot be attached even if the company is unable to meet its
creditors' claims.
3) Continuity of existence
a) Death, insolvency or insanity of any member of the company will not affect its life
and existence.
b) Men may come and they may go but a company remains forever. It can be wound up
under the provision of the act.
4) Efficient management
a) The Company appoints experienced, competent and expert to manage the business.
b) Their services lead to managerial and administrative efficiency and accuracy.
5) Transferability of shares
a) Shares of Company, especially public companies, are freely transferable.
b) A member who wants to sell his shares can easily do so in the stock market. This
encourages the public and other to invest in shares.
6) Economies of scale
a) A company operates on a high scale and so it enjoys economies in production,
distribution, management and financing.

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7) Legal Status
a) Since the company is created by law, it has separate legal existence compared to its
members. Therefore the members cannot be personally held responsible for the acts of
company and company cannot be held liable for the acts of the members.

DEMERITS OF A COMPANY
1) Difficult formation
a) Formation of Joint Stock Company is an expensive and time consuming process as a
number of legal formalities have to be undertaken in order to register the company.
2) Lacks flexibility
a) The working of a Joint Stock Company is less flexible s compared to other
organizations.
b) For very small thing they either have to follow a detailed procedure or obtain
sanctions from various authorities.
3) No business secrecy
a) This form of organization lacks business secrecy because it is compulsory for the
company to publish accounts and other records

DIFFERENCES BETWEEN A COMPANY AND PARTNERSHIP

Basis
Formation

Company
Created by registration under the
Companies Act.

Status at Law

Artificial legal person with

perpetual succession

Transfer of Shares Freely transferable unless the

companys constitution provides
restrictions
Number of Shares
Management

Agent
Liability of
Members
Powers

Termination
Majority Rule

Minimum: 2 Members;
Maximum: 50 Members
Not entitled to take part in
management unless they are
directors
not an agent of the company or
that of other members
Limited by shares or by
guarantee
Company can only operate
within the objects laid down in
the memorandum of association
No one member of a company
can wind up the company
All policy decisions are taken on
the basis of majority opinion in a

Partnership
Created by agreement which may
be express or implied from the
conduct of the partners.
Not a legal person though it may
sue and be sued in the firms
name
Partner may transfer the shares
but assignee doesnt become a
partner and is merely entitled to
partners share of the profits.
Maximum: 20 Persons ( 10 in
case of Banking Sector)
Entitled to share in the
management of the firm
Each partner is an agent of the
firm and his partners
Liability of a partner is unlimited
Carry on any business as they
please so long as it is not illegal
Partnership may be dissolved by
any partner at any time
all policy matters are decided
through the unanimous consent
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meeting of the Board of Directors of all the partners

Accounts and
audit

Regulating statute

Must maintain its accounts in the

prescribed form and must get
them audited by a qualified
auditor
Governed by The Companies Act
1956.

Not obligatory for a partnership

unless receipts exceed 10 lacs in
case of professionals and 40 lacs
in other cases
Regulated under the partnership
Act 1932

SOLE PROPRIETORSHIP
Definition
A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of
business entity that is owned and run by one individual and in which there is no legal
distinction between the owner and the business.

Advantages

It is easy to organize this business. Only small amounts of capital are needed to start
and run a business.
It permits a high degree of flexibility to the owner since he/she is the boss of the
business establishment.
Due to the owner's unlimited liability, some creditors are more willing to extend
credit.

Disadvantages

It has limited resources.

Unlimited liability for business debts. The single owner is responsible for paying all
debts and damages of their business.

If the firm fails, creditors may force the sale of the proprietor's personal property as
well as their business property to satisfy their claim.

Distinction between Company and Sole Proprietorship

Sole Proprietorship
Not a separate legal entity
Owner has unlimited liability
Can sue or be sued in individuals own
name or the Businesss
Can own property in individuals
name
Owner personally liable for debts
and losses of business

Company
A separate legal entity from its
members and directors
Members have limited liability
Can sue or be sued in companys
name
Can own property in companys
name
Members not personally liable for
debts and losses of company

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HINDU UNDIVIDED FAMILY

Definition
A business, which continues from one generation tom another generation is known as joint
Hindu family business or firm. This is special form of business organization, which now
exists only in India. And the business is within the family. The head of the family is the head
of the business also. He is known as karta and the members are known as coparceners. Joint Hindu Family is governed by the Mitaksara Law.

Advantages

Easy formation: -Formation of Joint Hindu family is very easy. Because it does not
require any legal formalities to form. It comes into existence under the Hindu succession
Act 1956.
Quick decisions and prompt action: -The Karta is the sole manager of the business and
head of the family. He need not consult any one before taking any decisions. Therefore
he can take quick decisions and prompt actions

Flexibility in operation: -The management is in the hands of the Karta. He takes the
decisions according to the changing circumstances. He can expand or contracts his
business at his convenience. He enjoys maximum flexibility in operation.

Business Secrecy: -A joint Hindu family business can maintain business secrecy.
Because they need not have to publish theres any account to any outsider of the family.

Continuity of business: -Joint Hindu family business does not dissolve due to death of
Karta. Because a minor members that is a co-parceners can become a karta after the
death of the Head of the family

Minimum Government regulations: -Though the Hindu undivided Family is the result
of Hindu Law, there is least Government control over Hindu undivided Family because
the business are conducted by the family members itself so they no need to publish any
accounts and reports to any outsiders.

Limited liability of co-parceners: - The Co-parceners enjoy limited liability. The

liability of the co-parceners is limited to the extent of the shares in the family business.
However, the liability of the Karta is unlimited.

Disadvantages

Limited Capital: -This type of business does suffer from the limitation of capital. This is
because the business has to depend upon the savings of the family. Again, limited amount
of borrowings is possible from friends, banks and others.

Unlimited liability of Karta: -The liability of the karta is unlimited but the liability of
co-parceners is limited. The karta is liable to pay the dues even from his personnel
property. Unlimited liability makes him more cautions and he may not take any risk.

Lack of stability: -The continuity and stability of the firm depends upon good relations
among the family members but in practice it is not possible. Therefore there may be
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results in the discontinuation of the firm. However in many case there is continuity of
business.

Less motivation: -All the members of the family are entitled to equal share whether they
put in work or not. There is no relation between efforts and rewards. Hence, there is less
motivation to put in more effort.

Limited Growth and Expansion: -The investment of the joint Hindu family business is
limited. Growth and expands is possible only when there is large investment. But the
liability of the Karta is unlimited. Hence, there is less scope for Growth and expansion.

No entry for non-family members: -Only family members can get entry into the
business. Outsiders are not allowed to interfere in the family business. So there is less
scope for increasing the capital of family members.

No Legal Status: -Like Sole trading concern, the Joint Hindu family business lacks legal
status. The registration of this type of business is not compulsory. The members and the
firm do not have separate entity.

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