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Business organization, an entity formed for the purpose of carrying on commercial enterprise. Such an organization is predicated on systems of law governing contract and exchange, property rights, and incorporation.
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From Business Organization
An entrepreneur performs functions such as identifying business opportunities, preparing plans and feasibility studies, and organising resources like finance, manpower, technology and materials. He bears risk, introduces innovation in product/process/market, coordinates activities and takes important decisions. He also monitors and controls performance to achieve goals.
Important clauses of MOA include Name clause, Registered office (situation) clause, Object clause (main and ancillary objects), Liability clause, Capital clause and Association/Subscription clause. These clauses define the identity, location, scope, liability and capital structure of the company.
Joint Hindu Family (HUF) business is a form of business organisation governed by Hindu law. It is owned by members of a Hindu Undivided Family and membership is acquired by birth. The business is managed by the Karta, the head of the family.
Features: HUF arises by status and does not require an agreement. Membership is by birth and the members are called coparceners. The Karta manages and controls the business and his decisions are binding. Coparceners generally have limited liability up to their share in family property, while the Karta’s liability is unlimited. HUF business enjoys continuity as it continues even after death of a member.
Merits: It provides continuity and stability. Centralised authority of Karta ensures quick decisions and effective control. Limited liability of coparceners reduces their risk. Family members generally show loyalty and cooperation which strengthens business.
Demerits: Capital is limited because it depends on family property and it is difficult to raise large funds. Karta may exercise autocratic control and there may be misuse of authority. Management talent may remain limited to family members even if they are not competent. Family disputes among members can negatively affect the business.
Thus, HUF business is suitable mainly for traditional family enterprises with moderate capital needs and strong family unity.
