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Types of Commercial Organizations


Posted Date: 07-Jun-2010  Last Updated:   Category: Education    
Author: Member Level: Gold    Points: 15


This resource explains the different types of commercial organization.



The growth of Industrial and Commercial activities have given rise to various types of Business Commercial Organizations. These organizations are as follows:-

Forms of Commercial Organizations:

There are two forms of commercial organization. They are:-
(1) Private Sector
(2) Public Sector

1. Private Sector:

Private sector is owned, managed and controlled by private individuals either individually or collectively. The following are the forms of private sectors:-
(i) Sole Trading Concern: The organization which is owned, managed, supervised and controlled by one person is known as Sole Trading Concern. This organization is as old as human civilization. It is simple type of organization in which one person brings his capital, controls the business and bears all the risks. The profit and losses are also enjoyed by one person only. The formation of sole trading concern is very simple i.e. It can be started at any time, at any place, for any business permitted as per the law of land and registration is also not required. It is one man show business, the owner of this organization is known as Sole Trader and the liability of sole trader is unlimited. This organization is not controlled or regulated by Law / Act.

(ii) Joint Hindu Family Business: This type of commercial organization is found in India only. It is the result of Hindu undivided Family (HUF) system followed in India. It comes into existence by the operation of Hindu Law. The Hindu undivided family runs its family business. The head of the family is known as 'Karta', and he is the manager of the company. Other members of the family are known as 'Co-parceners'. They are the owners of the business. Outsiders are not allowed in this type of business. This organization is regulated by the Hindu law (Hindu Succession Act, 1956). The liability of Co-parceners is limited and liability of Karta is unlimited.

(iii) Partnership Firm: The organization which is owned, managed, supervised and controlled by two or more persons is known as 'Partnership Firm'. Each owner individually is known as partners and all the partners jointly are known as Firm. Partnership is generally identified by the Firm name. The profits and losses are shared by the partners as per agreement. The liabilities of partners is unlimited, joint and several. Firm is governed by Indian partnership Act, 1932.

(iv) Joint Stock Company: The joint stock company as a form of organization came into existence and developed after industrial revolution. Joint stock company as a form of commercial organization is suitable for large scale business. Registration of company is compulsory after that it becomes artificial person. It has common seal and long stable life. A large number of people contribute to the capital and they become shareholder. A company is owned by shareholders but it is managed by Director, who is the elected representatives of shareholders. This organization is regulated by Indian Companies Act, 1956.

(v) Co-operative Society: Generally, this organization is established by middle class and poor class people. The members of the society jointly manage the affairs on co-operative basis. It came into existence during the second half of the nineteenth century. The basic principle of co-operation is "each for all and all for each". The government has made considerable efforts to popularize co-operative stores, housing societies, sugar factories, etc. The membership of this organization is voluntary. This organization controlled and regulated by Indian Co-operative Societies Act, 1912 and Maharashtra Co-operative Societies Act, 1960.

2. Public Sector:

Public sector is owned, managed and controlled by government. It is also known as Government Enterprise. It existed due to some of the limitation of private Sector. It has its own rules and regulations. Almost in every field we find Public enterprises providing various services to entire nation as well as maintaining relation with entire world. Following are the forms of Public Sector:-

(i) Departmental Undertaking: These are run by the government departments. The concerned minister is the head of each department, such as Indian railway, Post and Telegraph Department, All India Radio, etc. Such department understanding provides revenue to the government. These undertaking provide various services to the public but are generally inefficiently managed. Inefficiency results into losses.

(ii) Public Corporation: These are autonomous (self controlled) bodies established under special legislative acts, for example:- Reserve Bank of India, Life Insurance Corporation of India, unit Trust of India, Food Corporation of India, etc. these corporations are formed for providing services to the public & are managed efficiently by the board of directors nominated by the government.

(iii) Government Companies: A government company is one in which at least 51% of its paid up capital is held either by the State Government or Central Government or by both State and Central Government, for example:- Bharat Heavy Electricals Limited (BHEL), State Trading Corporation (STC), and etc.
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