Class: 11 Worksheet Number: GR11/BST/Chapter2/AK01

Subject: Business Studies Chapter: 2–Forms of Business Organization

Section A
Each question carries 1 mark :
1. Define Business Enterprise
Ans: Business Enterprise - A business enterprise is any type of operation that is involved in
providing goods or services with the anticipated outcome of earning a profit.

2. What do you mean by Karta?

Ans: The “Karta” is the eldest member and the head of the Joint Hindu Family.

3. What do you mean by perpetual succession?

Ans: Perpetual succession means that the members may come and go but the company
continues to operate.

4. Explain ‘separate legal existence’.

Ans: Separate legal entity means business has an identity distinct from its members.

5. Name the person who keeps his identity secret from outsiders in
Partnership. Ans: Secret Partner

6. Who elects the Board of Directors in a Joint Stock Company?

Ans: Shareholders

7. Can partnership firm have a minor partner?

Ans: Yes. She/he can be a partner, a minor has the right to share the profit of the firm , but
he/she does not bear any losses.

8. What is meant by partner by estoppel?

Ans: A person is considered a partner by estoppel of through his/ her own initiative, conduct
or behavior, he/she gives an impression to others that he/ she is a partner of the firm is a
Partner by estoppel.

9. Define Joint Stock Company.

Ans: A company is an association of persons formed for carrying out business activities and
has a legal status independent of its members.

10. Name the form of business enterprise where there is a separation of ownership and
management.
Ans: Joint Stock Company

11. Give the full form of LLP.

Ans: Limited Liability Partnership

Each question carries 3/4 marks :

12. Explain the merits of Sole
Proprietorship. Ans: The merits of sole
proprietorship -
i. Quick decision making: A sole proprietor enjoys considerable degree of freedom in
1
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making decisions. Further the decision making prompt because there is no need to
his/her efforts as he/she is the sole recipient of all the profit. The need to share profits
does not arise as he/she is the single owner. This provides maximum incentive to the
sole trader to work hard.
ii. Ease of formation and closure: Starting a sole proprietor business does not
require many legal formalities. There is no separate law that governs sole
proprietorship. Hence it is easy to start and close the business as per the wish of
the owner.
iii. Confidentiality of information: The sole proprietor can keep all the information
related to business operations confidential and maintain secrecy. He is not bound by
law to publish the firm’s books of accounts.
iv. Direct incentive: The sole proprietor directly reaps the benefits of his efforts as he
is the sole recipient of all the profit.
v. Sense of accomplishment: There is a personal satisfaction involved in working for
oneself. The fact that one is responsible for the success of the business not only
contributes to self-satisfaction but also instills in the individual a sense of
accomplishment and confidence in one’s abilities.
13. Explain the demerits of Sole Proprietorship.
Ans:
The demerits of Sole Proprietorship are as follows:
i. Limited resources: Resources of a sole proprietor are limited to his/her personal
savings and borrowings from others. Banks and other lending institutions may hesitate
to extend a long term loan to a sole proprietor. Lack of resources is one of the major
reasons why the size of the business rarely grows much and generally remains small.
ii. Limited life of a business concern: In the eyes of the law the proprietorship and the
owner are considered one and the same. Death, insolvency or illness of a proprietor
affects the business and can lead to its closure.
iii. Unlimited liability: A Sole proprietor has unlimited liability. If the business fails,
the creditors can recover their dues not merely from the business assets but also from
the personal assets of the proprietor.
iv. Limited managerial ability: The owner has various managerial tasks to be
performed such as purchasing, financing, and marketing. It is rare to find an
individual who excels in all these areas. Also due to limited funds, he may not be able
to employ talented employees.
14. Explain the merits of Co-operative society.
Ans:
The cooperative society offers many benefits to its members. Some of the advantages of the
cooperative form of organization are as follows.
i. Equality in voting status: The Principle of ‘one man one vote’ governs the
cooperative society. Irrespective of the amount of capital contribution by a member,
each member is entitled to equal voting rights.
ii. Limited liability: The liability of members of a cooperative society is limited to the
extent of their capital contribution. The personal assets of the members are,
therefore, safe from being used to repay business debts.
iii. Stable existence: Death, bankruptcy or insanity of members does not affect
the continuity of the c-operative society.
iv. Economy in operations: As the focus is to eliminate middlemen, this helps I
reducing costs. The customers or producers themselves are members of the society
and hence the risks of bad debts are lower.
v. Support from government: They find support from the government in the form of
low taxes, subsidies and low interest rates on loans.
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vi. Ease of formation: It can be started with minimum ten members. Very few legal
formalities are involved in its formation.
15. Explain the demerits of Cooperative society.
Ans:
i. Limited resources: Resources of a cooperative society consists of capital
contributions of the members with limited means. The low rate of dividend offered on
investment also acts as a deterrent in attracting membership or more capital from the
members.
ii. Inefficiency in management: Cooperative societies are unable to attract and employ
expert managers because of their inability to pay them high salaries. The members
who offer honorary services on a voluntary basis are generally not professionally
equipped to handle the management functions effectively.
iii. Lack of secrecy: It is difficult to maintain secrecy about the operations of a co-
operative society due to open discussions in the meetings as well as disclosure
obligations as per The Societies Act.
iv. Government control: In return of the privileges offered by the government, co-
operative societies have to comply with several rules and regulations related to
auditing and account, submission of accounts. Thus interference of govt. affects
the freedom of operation.
v. Difference n opinion: Internal quarrels arising as a result of contrary viewpoints may
lead to difficulties in decision making.

16. What is a Public Company?

Ans: A public company means a company which is not a private company. As per the Indian
Companies Act, a public company is one which:
(a) Has a minimum paid-up capital of Rs.. 5 lakhs or a higher amount which
may be prescribed from time-to-time;
(b) has a minimum of 7 members and no limit on maximum members;
(c) has no restriction on transfer of shares; and
(d) Is not prohibited from inviting the public to subscribe to its share capital or public
deposits. A private company which is a subsidiary of a public company is also treated as
a public company.

17. List the types of Partnerships

Ans: Partnerships can be classified on the basis of two factors: duration and liability.
Classification of partnerships on the basis of duration can be done in the following ways:
1. Partnership at will: This type of partnership exists at the will of partners. It can
continue as long as the partners want and is terminated when any partner gives a notice of
withdrawal from the partnership.
2. Particular Partnership: Partnership formed for the accomplishment of a particular
project say construction of a building or an activity to be carried on for a specified time
period is called Particular partnership.
Classification of partnership on the basis of liability can be done in the following ways:
1. General Partnership: In general partnership, the liability of partners is unlimited and
joint. The partners enjoy the right to participate in the management of the firm and their acts
are binding on each other as well as the firm. Registration of the firm is optional. Existence
of the firm is affected by the death, lunacy, solvency or retirement of the partners.
2. Limited Partnership: In limited partnership, the liability of at least one partner is
unlimited whereas the rest may have limited liability. Such a partnership does not get
terminated by the death, lunacy or insolvency of the limited partners. The limited partners
do
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not enjoy the right of management and their acts do not bind the firm or the other partners.
Registration of such partnership is compulsory.
18. What is a Partnership deed? What are its contents?
Ans: Partnership Deed
A partnership deed is a document setting out the agreement of the partners on how the
partnership is to be conducted (including the arrangements for sharing profits and losses).
The partnership deed generally includes the following aspects:
• Name of firm
• Nature of business and location of business
• Duration of business
• Investment made by each partner
• Distribution of profits and losses
• Duties and obligations of the partners
• Salaries and withdrawals of the partners
• Terms governing admission, retirement and expulsion of a partner
• Interest on capital and interest on drawings
• Procedure for dissolution of the firm
• Preparation of accounts and their auditing
• Method of solving disputes
19. List the characteristics of Private sector enterprise.
Ans: (a)Restricts the right of members to transfer
(a) Has a minimum of 2 and a maximum of 50 members excluding the present and past
employees.
(b) Does not invite public to subscribe to its share capital.

20. Mention the upper and lower limits of membership of

a. Joint Hindu family
b. Consumer’s Co-operative society
c. Private limited company
d. Public limited company
Minimum Maximum
Joint Hindu family 2 No limit
Consumer’s cooperative 10 No
limit society
Private limited company 2 200
Public limited company 7 No limit

Section B
Each question carries 1 mark :
21. Which form of business is suitable for tailoring shop?
Ans: Sole Proprietor

22. Who controls the functioning of the Co-operative society?

Ans: Elected Managing Committee

Each question carries 6 marks :

23. Describe some of the privileges available to Private company over Public company.
Ans:
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1. A private company can be formed with only two members whereas at least
seven members are needed to form a public company.
2. A private company must have at least two directors whereas a public company
must have minimum three directors.
3. It is not compulsory for a private company to maintain index of its members
whereas it is compulsory for public company to maintain the index of its members.
4. A private company can issue loans to its directors without prior permission of the
government whereas a public company must take permission of government
before giving loans to its directors.
5. It is not compulsory for a private company to hold a statutory meeting and file
a statutory report with the registrar whereas it is essential for the public
company.
6. It is not necessary for the private company to issue a prospectus whereas it is
essential for a public company.
7. Private company can commence its business after getting Certificate of
Incorporation whereas Public company can start business only after receiving
Certificate for the commencement of business.
8. There are no restrictions on the numbers, appointments and remuneration of directors
of a private company whereas there are many restrictions on the appointment, number
and remuneration of directors of public company.
24. Describe Co-operative societies. Explain its features.
Ans: The cooperative society is a voluntary association of persons, who join together with
the motive of welfare of the members. They are driven by the need to protect their
economic interests in the face of possible exploitation at the hands of middlemen obsessed
with the desire to earn greater profits.
Features:
(i) Voluntary membership: The membership of a cooperative society is voluntary. A
person is free to join a cooperative society, and can also leave anytime as per his desire.
There cannot be any compulsion for him to join or quit a society. Membership is open to all,
irrespective of their religion, caste, and gender.
(ii) Legal status: Registration of a cooperative society is compulsory. This accords a
separate identity to the society which is distinct from its members. Thus the co-operative
societies can enter into contracts and hold property in its name, sue and be sued by others.
(iii) Limited liability: The liability of the members of a cooperative society is limited to
the extent of the amount contributed by them as capital.
(iv) Control: In a cooperative society, the power to take decisions lies in the hands of an
elected managing committee. The right to vote gives all the members a chance to choose their
members who will constitute the managing committee and then lends the co-operative society
a democratic character.
(v) Service motive: The cooperative society through its purpose lays emphasis on the
values of mutual help and welfare. Hence, the motive of service dominates its working.

25. Kiran is a sole proprietor. Over the past decade, her business has grown from operating a
neighborhood corner shop selling accessories to a retail chain with three branches in the city.
Although she looks after the varied functions in all the branches, she is wondering whether
she should form a company to better manage the business. She also has plans to open
branches countrywide.
a) Explain two benefits of remaining a sole proprietor.
Two benefits of remaining sole proprietor are:
● Sole beneficiary of profits
● Personal touch
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b) Explain two benefits of converting to a Joint stock
company. Two benefits of converting in joint stock
company are:
● Large amount of capital
● Limited liability

c) What role will her decision to go nationwide play in her choice of form of
the organization?
If she plans to go nationwide then she will have to manage her form of business from
sole proprietor to joint stock company.

d) What legal formalities will she have to undergo to operate business as a company?
If she plans to operate as joint stock co., she will have to complete many legal
formalities such as:
● Getting certificate of incorporation
● Getting certificate of commencement of business, if she plans to operate as public
ltd. Co
● Appoint professional experts, brokers, who charge fees.
● Prepare various documents such as Prospectus, Memorandum of Association, and
Articles of Association.
26. Why is it important to choose appropriate form of organization? Discuss the factors
that determine the choice of form of organization?
Ans: It is evident that each form has certain advantages as well as disadvantages. Therefore,
it is important to choose an appropriate form of organization.
Factors that determine the choice of form of organization:

1. Cost and ease in setting up the organization: From the ‘point of view of initial
cost, sole proprietorship is the preferred form as it involves least expenditure.
A company form of organization, on the other hand, is more complex and involves
greater costs.
2. Liability: In case of sole proprietorship andpartnership firms, the liability of the
owners/ partners is unlimited. In Joint Hindu Family Business, only the Karta
has unlimited liability. In cooperative societies and companies, however, liability
is limited.
3. Continuity: In case the business needs a permanentstructure, company form is more
suitable. For short term ventures, proprietorship or partnership may be preferred.
4. Management ability: A sole proprietor may find it difficult to have expertise in all
functional areas of management. In other forms of organizations like partnership and
company, there is no such problem.
5. Capital consideration: Companies are in a betterposition to collect large amount of
capital by issuing shares to a large number of investors. Partnership firms also
have the advantage of combined
resources of all partners. But the resources of a sole proprietor are limited.
6. Degree of control: If direct control over operationsand absolute decision
making power is required, sole proprietorship may be preferred.

Section C
Each question carries 1 mark :
27. On Ananya’s request, Avni accompanies her to a business meeting and actively participates in
the negotiation process of business. Identify the type of partner Avni is.
Ans: Partner by estoppel

ANSWER KEY
28. 2023-2024
“He is the one who is falsely represented partner of the firm whereas actually he is not. And
even after becoming aware of it, he does not deny it. His liability is unlimited towards the
party who has dealt with the firm on the basis of this representation.” Identify the type of
partner.
Ans: Partner by holding out

29. Name the type of partnership in which the liability of atleast one member is unlimited while
others have limited liability.
Ans: Limited partnership

30. Pankaj and Sons s a firm formed for the construction of dam. Name the type of
partnership. Ans: Particular partnerships

31. Can a minor be a partner?

Ans: Yes, a minor can be admitted as a partner only to the profits of the firm and with the
consent of the other partners.

32. Mr. Ram is the owner of HUF. He does not have a son. If he adopts a male child, can he be
treated as a co-parcener?
Ans: No, as birth of a child in the family is needed to make him the co-parcener.

33. The existence of HUF is permanent. Comment.

Ans: Yes. Even after the death of the karta, the next eldest member takes the position of the
karta. However it can be terminated by mutual consent of members.

34. What is the role of the Common seal?

Ans: Since company is an artificial person, it has no physical existence and it cannot sign. So
to undertake or to enter into contracts of different kinds, common seal is used. It is a
replacement of sign of a company.

35. In case of heavy losses, creditors can claim the recovery of their dues from the personal assets
of sole proprietor. Which feature of sole proprietor is highlighted here?
Ans: Unlimited liability.

36. In which business organization there is separation of ownership and management?

Ans: Joint stock company

37. Explain the principle of “One Man One Vote”.

Ans: The cooperative societies work with democratic principle of ‘one man one vote’. All the
members get only one voting right irrespective of capital contributed by them. Taking an
example if a person is having 100 shares, does not mean that he is having a chance to caste
100 votes, but he will get a chance to caste one vote only.
38. Why is company called as an artificial person?
Ans: A company is a legal entity that has been created by the statues of law. Like a natural
person, it can do certain things, like own property in its name, enter into a contract, borrow and
lend money, sue or be sued, etc. It has also been granted certain rights by the law which it
enjoys through its board of directors. However, not all laws/rights/duties apply to a company. It
exists
only in the law and not in any physical form. So we call it an artificial legal person.

39. How can one identify from the name of the company whether it is a private company or a
public company?
Ans: The name of private companies always ends with the words “Pvt Ltd.” E.g. Nirma
Chemicals Pvt. Ltd. The name of public company always ends with the word “Ltd” for e.g.
Reliance India Ltd.

40. All the members of a company sitting in a general meeting were killed by a bomb. Was the
company wound up?
No, company enjoys its existence distinct from its members. The life and death of the
members does not affect the existence of the company.

41. In 2016, Shalu started a textile mill. She was the sole owner of the mill. This business earned
a lot of profit in the first year. So, to expand her business, she took a loan from a bank. Due to
a change in government policy, Shalu’s business started declining. After a year full of
struggles to revive the business, it started incurring losses and Shalu could not repay the loan.
She decided to wind up the business and sold the assets used in the business. Only half of the
loan taken could be repaid from the assets sold. The bank claimed the remaining amount to be
paid from Shalu’s personal assets. Can the bank make such a demand? Choose the correct
alternative.

a. Yes, because Shalu has a lot of b. Yes, as Shalu is personally liable to

personal assets. repay the debt.
c. No, because the business has a separate d. No, because the losses were incurred
legal entity distinct from its owner; due to a change in government policy
therefore, Shalu’s assets cannot be and not because of Shalu
used to repay the debt.

42. For businesses like grocery shop, health clinic, tailoring shop etc., which form of business
organization is most suitable?

a. Partnership b. Sole proprietorship

c. Cooperative society d. Joint Hindu family business

43. In 2017, the directors and major shareholders of a company were travelling to Delhi for the
Annual General Meeting of their company XYZ Pvt. Ltd. Due to technical reasons, the plane
crashed leading to the death of all the members travelling in that aircraft. Will the company
continue to exist in this case?

a. Yes, because a company b. Yes, because other minor shareholders

has perpetual succession. are alive.
 c. No, because the company dissolves in d. No, the entire management has ceased
case of death of any of the to exist.
shareholders or directors.

44. Which of the following conditions are necessary for the existence of a Joint Hindu family
business?
1. Minimum two members
2. Number of members in the family must not be less than 10
3. Existence of ancestral property
4. The eldest male member must be above the age of 20 years.
a. 2 and 4 b. 1 and 2
c. 2 and 3 d. 1 and 3

45. A minimum of members are required to form a cooperative society.

a. 10 b. 7
c. 11 d. 5

46. A person has 100 shares of Bee Ltd, a company limited by shares, of the face value of Rs 10
each. He paid Rs 6 per share. What will his liability be at the time of winding up?
a. He will have the liability to pay Rs 600 b. He will have the liability to pay Rs
which is the paid amount. 1000, the entire cost of shares.
c. He will have the liability to pay Rs d. He will have the liability to pay Rs 400
400 which is the unpaid amount. which is the unpaid amount.

47. Mr Raman and Mr Bhatia’s partnership firm named ‘Jewels’ started a diamond trading
business. The firm faced difficulties as the supplier was not ready to provide diamonds to the
new firm. Mr Raman’s best friend Karan, who is a renowned jeweller (but not a partner in the
firm) requested the supplier to supply diamonds to ‘Jewels’ stating that he is also a partner in
the firm. What kind of a partner is Karan?

a. Partner by estoppel b. Sleeping partner

c. Active partner d. Secret partner

48. Shivlal and all other farmers of Nagaon opened an association wherein they help each other to
work and procure modern technologies of farming. This helps in increasing their output. To
fund this association, they share a part of their income earned by selling their agricultural
produce. Identify the type of business organization reflected in this case.
a. Credit Cooperative Society b. Marketing Cooperative Society
c. Farmer’s Cooperative Society d. Consumer’s Cooperative Society

49. Which of the following statement is not true about Minor partner?
a. He has to bear losses only b. He has the option to continue with the
firm even after attaining Majority
c. He can inspect books of accounts d. He shares only profits

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50. The maximum number of partners in a partnership firm is
a. 10 b. 20
c. 50 d. 200

51. Provision for residential accommodation to members at reasonable rates is the objective of:
a. Credit Cooperative Society b. Marketing Cooperative Society
c. Cooperative Housing Society d. Consumer’s Cooperative Society

52. Sole proprietor is responsible for all he activities of the business because sole proprietorship
firm has legal identity which is from that of his owner.
a. Separable b. Inseparable
c. Diluted d. None of the above

53. Rakesh started a garment shop few years back. Due to continuous losses in the business, he
decided to close it down. However, he owes Rs 2,00,000 to Aniket from whom he had purchased
garments on credit. His business funds are not sufficient to repay the debt. Can Aniket recover
his dues from personal assets of Rakesh?
Ans: Yes, Aniket can recover his dues of ₹ 2,00,000 from the personal assets of Rakesh because
of unlimited liability of a sole proprietor.
Each question carries 3 marks :
54. The business assets of a firm are worth Rs.70000/- but the debts remain unpaid are worth
Rs.100000/-. What course of action can the creditors take in the following cases:
i) The organization in sole proprietorship firm.
ii) The creditors may claim from the personal property of the proprietor as he has
unlimited liability.
iii) The organization in partnership firm with A and B, two partners sharing profit
equally.
A and B are jointly and individually liable to pay back the debts. Both are responsible
to pay back the debt in the profit sharing ratio and if one of the partners becomes
insolvent then the other is liable to pay back the full debt.

55. Registration of a partnership firm is not compulsory but beneficial. Do you agree? Give
reasons in support of your answer.
Ans: Though the registration of a partnership firm is not compulsory but non registration will
lead to the following consequences:
i) A partner of unregistered firm cannot file a suit against the firm or otherpartners.
ii) The firm cannot file a suit against third parties
iii) The firm cannot file a case against the parties

56. Kavya is the only daughter of her parents.. Her grandfather deals in the business of garments
and her father is the member of the same. Is she eligible to enter in her family business?
Comment.
Ans: Yes, she can join her family business.
With the introduction of Hindu Succession (Amendment) Bill, 2004, the government has
made a step further in fulfilling its commitment towards gender equality and gives women
equal rights in the inheritance of ancestral property.

Each question carries 4 marks :

57. Co-operative society exemplifies democracy and secularism. Discuss.
● A co-operative society is a voluntary association of persons, who join together with the
motive of welfare of members. 10.
 ● The membership is voluntary. A person is free to join co-operative society and can leave
anytime.
● The decision making lies in the hands of the elected managing committee. Every member
has one vote.
All these features lend the co-operative society a democratic character.
● The membership of co-operative society is open to all, irrespective of their religion, caste
and gender. The co-operative society lays emphasis on the values of mutual help and
welfare. This proves the secular nature of co-operative society.

Each question carries 5 marks :

58. One man control is the best in the world if that man is big enough to manage
everything. Explain.
Ans: One man control is considered as best because of the following reasons:

1. Ease of Formation and closure: The formation of this form of business enterprise is
very simple and easy because it does not require any legal formalities.
2. Secrecy: The sole trader is not required to share business secrets with others and as
such he can retain the secrecy of the business.
3. Control: The sole trader can exercise effective control over his business and
therefore this form of organisation is considered to be best.
4. Direct incentives: It acts as stimulation because of linking of reward and efforts.
5. Quick decision: He can take quick and flexible decisions.

59. Distinguish between Joint Hindu Family business and Partnership.

Basis Joint Hindu Family Partnership
business
No. Of members Minimum two members Minimum – two members
No maximum limit Maximum – 50

Law applicable Hindu Succession Act, The Partnership Act, 1932

1956
Control Managed and controlled by
Karta
Continuity of business Death of karta doesn’t
affect the continuity of
business. The next senior
member becomes the karta.
Managed and controlled by
all the partners
Death, Insolvency, insanity
of any of the partner leads
to the termination of
partnership.

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60. Distinguish between Co-operative society and Partnership.
Basis Co-operative society Partnership
Purpose The main purpose is to Registration is
serve its members compulsory to earn profits
Registration Registration is compulsory Registration is not
compulsory
Liability The liability of members The liability of members
is limited is unlimited
Dissolution Not dissolved on death, Dissolved on death, lunacy
lunacy or insolvency of or insolvency of members.
members.
Legal status It has a separate legal entity No separate legal entity

Section D
Each question carries 3 marks :
61. Most of the companies today are profit oriented. Do you feel it is the duty of these
companies to contribute and help in the welfare of the society in which they are prospering?
Justify. Ans: A business enterprise should do business and earn money in ways that fulfill the
expectations of the society. Every individual living in society has certain obligations towards
society, so does a business enterprise. . In fact, it is through socially responsible and ethically
upright behavior that business enterprises can get durable success.
62. The term "partnership" refers to a relationship between people who have agreed to split the
profits from a firm that is run by all of them or by one of them acting on behalf of all of
them. Although firm registration is optional, a partnership deed might be produced to avoid
problems between partners. The partnership deed is a written agreement that contains the
rules and conditions that govern the partnership.:
A partnership deed generally has the following elements:
• Firm name
• Nature of company and location of operation
• Duration of business
• Each partner's investment
• Profit and loss distribution
• The partners' responsibilities and obligations
• The partners' salaries and withdrawals
• The terms regulating a partner's admission, retirement, and expulsion

63.
A joint stock company is a voluntary group of people founded for the
purpose of carrying out profit-making business activities. It has a
different legal position from its members and a capital structure that is
divided into transferable shares. A corporation is a legal entity that
possesses its own legal identity, perpetual succession, and common
seal. The shareholders are the company's owners, and the Board of
Directors is the company's top management body, which is elected by
the shareholders.

The company's capital is divided into smaller units called "shares,"

which can be freely transferred from one shareholder to another
(except in a private company). The following are the characteristics of a
joint stock company:
• A corporation is a fictitious person. It is a legal creation that exists
independently of its members.

• A corporation acquires its own legal personality. The business and its
owners are not considered one and the same by the law.

• Starting a business is a time-consuming, expensive, and difficult

process. It is necessary for businesses to be incorporated.

• It will only be decommissioned after a specialised procedure known as

winding up is finished. Members may come and leave, but the company
remains in existence.

• A company's affairs are managed and controlled by the Board of

Directors, which appoints top management for corporate operations.

• A company may or may not have a common seal.

• The risk of a company's losses is shared by all shareholders.

12.