UNIT I
1. Concept
of Business, Profession, and Employment
Business
Business is any activity where people produce,
buy, or sell goods and services to earn money. The word "business"
comes from “busy,” which means being active. Everyone does some work to earn a
living, and when that work involves making or selling goods or services for
profit, it is called business.
Examples of business activities:
Industrial activities: buying raw materials,
producing goods, assembling products.
Trade activities: wholesalers buying from
producers, retailers selling to customers.
Aids to trade: services that support trade
like transport, banking, warehousing, insurance, advertising, etc.
So, a shopkeeper selling clothes, a banker lending
money, or a transporter carrying goods are all doing business. The main purpose
is to earn profit by providing goods or services.
Profession
A profession is a type of work where a person
uses their specialized knowledge and training to provide services in return for
a fee. A profession needs education, qualifications, and membership in a
professional body. Professionals must also follow rules and a code of conduct
set by their governing bodies.
Examples:
A doctor with an MBBS degree registered with the
Medical Council of India.
A lawyer with an LLB degree registered with
the Bar Council of India.
A Chartered Accountant (CA) who is a member of the Institute of Chartered Accountants of India.
Main features of a profession:
Needs special education and training.
Membership in a professional body is
compulsory.
Professionals must follow ethical rules (code
of conduct).
They charge a fee for their services.
Self-promotion or advertising is often
restricted.
Employment
(or Service)
Employment means working for someone else
under an agreement, usually in return for a salary or wages. The work may be in
government or in private organizations.
Features of employment:
A person works in an organization by joining
as an employee.
There is an employer–employee relationship.
The employer assigns duties, and the employee performs them.
Employees do not need to invest money in the
job.
They earn salary or wages regularly.
Employees must follow the organization’s
rules.
Qualifications depend on the type of job.
Examples: A teacher in a school, a clerk in a
bank, or an engineer in a company.
A) Sole Proprietorship
A sole proprietorship is a business owned and managed by one
person. The owner and the business are the same – there is no separate legal
identity. It is the simplest form of business and is common for small
shops, local businesses, or self-employed people.
Features:
1.
Easy to start and
close – No special
registration is required (except a basic license).
2.
Unlimited liability – If the business cannot pay its debts, the owner
must pay from personal assets.
3.
Risk and profit – The owner takes all the risk but also keeps all
the profits.
4.
No separate identity – Legally, the owner and business are one.
5.
Dependent on owner – If the owner dies, retires, or becomes
incapable, the business usually ends.
Advantages:
- Full control and quick decision-making.
- Owner keeps all profits.
- Privacy – financial details don’t have to be
shared.
- Sense of achievement – being your own boss.
Disadvantages:
- Unlimited liability – personal property can be
lost if debts remain unpaid.
- Limited capital – funds depend on owner’s
savings or borrowings.
- Limited skills – one person may not handle all
areas of business.
- Uncertain life – business may close if
something happens to the owner.
B) Partnership
A partnership is a business owned by two or more people
who agree to share profits and responsibilities. In India, it is governed by
the Indian Partnership Act, 1932.
Features:
1.
Agreement/Contract – Partners sign an agreement (written or oral)
about profit-sharing and responsibilities.
2.
Unlimited liability – Partners’ personal assets can be used to pay
business debts.
3.
Not permanent – Partnership ends if a partner dies, retires, or
becomes insolvent (unless others form a new contract).
4.
Number of members – Minimum 2; maximum 10 for banking, 20 for other
businesses.
5.
Mutual agency – Each partner can act on behalf of others in
business matters.
Types of Partners:
- Active Partner – Invests money, works actively, takes risk.
- Dormant Partner – Only invests money; does not manage
business.
- Secret Partner – Is a partner but not known publicly.
- Nominal Partner – Lends his name and reputation but does not
invest or share profits.
- Partner by Estoppel – Acts like a partner in front of others but
is not officially one; still liable.
C) Company
A company is a legal entity created by law. It has its own
identity, separate from its owners (shareholders). People invest money by
buying shares, and the company is managed by directors.
Features:
1.
Separate Legal Entity – A company is separate from its owners. It can
own property, sue, or be sued in its own name.
2.
Limited Liability – Shareholders are only liable up to the value of
their shares; their personal assets are safe.
3.
Transferability of
Shares – Shares can be
bought and sold easily (in public companies).
4.
Large Capital – Companies can raise big amounts by selling
shares.
5.
Artificial Person – Created by law, works through human
representatives (directors).
6.
Continuous Existence – The company continues even if owners or
directors change.
D) Cooperative Society
A cooperative
society is a voluntary group of people who come together to promote their
common interests, usually to help weaker sections of society. It is registered
under the Cooperative Societies Act, 1912.
Features:
1.
Voluntary membership – Anyone can join or leave freely.
2.
Open membership – No restriction of caste, religion, or gender.
3.
Registered entity – It becomes a legal organization after
registration.
4.
Limited liability – Members’ liability is limited to their capital
contribution.
5.
Democratic control – Managed by an elected committee; one member =
one vote.
6.
Service motive – Formed mainly to provide service, not maximize
profit.
7.
State control – Accounts are audited and regulated by the government.
Types of Cooperative
Societies:
- Consumer Cooperative – Provides goods to members at reasonable
prices.
- Producer Cooperative – Supports small producers with resources and
fair pricing.
- Credit Cooperative – Provides loans to members at low interest.
- Housing Cooperative – Helps members get affordable housing.
- Marketing Cooperative – Helps producers sell goods directly,
avoiding middlemen.
Advantages:
- Goods sold at cheaper rates.
- Loans available easily.
- Removes middlemen.
- Benefits weaker sections of society.
Disadvantages:
- Limited capital (members usually have low
income).
- Often weak management.
- Less efficiency compared to private
businesses.
