Disadvantages of the HUF

• No outside members other than family members can be introduced to the HUF. This makes it very difficult to get additional capital from the market. With limited capital, the chances of expansion are very low. It limits the scope of the business.
• While the Karta has all the power he also has the burden of unlimited liability. This may make him overly cautious and timid in his business dealings. In turn, the business could suffer. Another factor is that he may even be held responsible for the actions of other members.
• Also, the absolute dominance of the Karta overall business and financial decisions make cause conflict among the HUF. His decisions and business acumen may be questioned by other members, and cause issues within the HUF.
• Another issue may be that the Karta may not be the most qualified person to lead the business. The position is given to the senior most family member, whether he is the most qualified or not is not taken into consideration.

Partner by estoppel is one who by his conduct allow him to be represented as a partner of a firm. If anyone advances money to the firm on the basis of his representation, then he becomes liable to that third party and cannot deny its claim.

Partner by holding out is the one who does not deny when he is declared as a partner of a firm. If anyone advances money to the firm on the basis of his declaration, then he becomes liable to that third party and cannot deny its claim.

Both the partner by estoppel and partner by holding out are nominal partners. They just differ on a point that the partner by estoppel represent himself as a partner while partner by holding out is declared as a partner.

Detailed explanation:

Partner by Estoppel

Partners by Estoppel is a person who represents himself/herself as a partner of a firm through his/her own conduct or behaviour or attitude. Such partners are held liable for any credits or debts obtained by such representation. In short, such partners cannot deny being a partner if he/she represents himself/herself as a partner of the firm.

For example, P and Q are the partners and R is a friend of P. They asked R to allow them to use his name for their business. R agrees on this. Let us assume that P and Q took a loan from a bank against R's name and subsequently P and Q became insolvent. In this case, R would be considered as a partner of the firm and would be held liable for such loan.

Partner by Holding Out

Partner by Holding Out is a person who is not a partner in a firm but intentionally or deliberately allows himself/herself to be represented as a partner of the firm. Such partners are held liable to the outsiders for any credit or debts extended to the firm on the basis of such representation. Such a partner can refused to be a partner of a firm immediately by issuing his/her denial and describing his/her position that he/she is not a partner on such representation. But if he/she remain silent on such representation then he/she would be held liable to the third parties.

Example: Let us suppose an instance, where R is represented as a partner by P an Q in their partnership firm at the time of applying loan from a bank, meanwhile, R (knowingly) remained silent on this statement of P and Q. Now, if P and Q became insolvent and failed to repay the bank loan, then in this case R will be liable to repay the loan, as P and Q applied loan against his name with the consent of R.

Sole tradership or proprietorship is the oldest form of business organisation. It is also known as individual proprietorship or single entrepreneurship. This type of organisation is very simple and easy to form.
“Sole proprietorship is the form of business which is owned, managed and controlled by an individual. It is the simplest form of business, established with the limited resources, ability and capital of the individual known as sole trader or entrepreneur.”
A sole tradership enjoys the following merits
(i) Ease of Formation The establishment of a sole tradership concern is easier as compared to other forms of organisation. A person with small amount of capital can start the business without undergoing much legal formalities.
(ii) Flexibility The sole trader is free to change the nature and scope of his business operation, whenever the situation demands.
(iii) Quick Decision-making Sole tradership facilitates quick decision-making and prompts action as the sole trader has exclusive control over his business.
(iv) Secrecy of Information It is easy to preserve secrecy in business in case of sole proprietorship.
A sole tradership has following limitations
(i) Limited Financial Resources The financial resources which a sole trader can raise are limited. He can either depend on his personal resources or on his borrowing capacity.
(ii) Limited Managerial Ability The sole proprietor has to take all the decisions and he may not be an expert in all the matters of business. Also, due to financial constraints, he may not he able to use services of professionals and experts.
(iii) Limited Life of a Business Concern In the eyes of law, owner and business are considered one and the same. Therefore, illness death or insolvency of the owner affects the business and can lead to its closure.
(iv) Unlimited Liability The liability of the sole trader is unlimited in the sense that the business creditors

Group life insurance is a type of life insurance in which a single contract covers an entire group of people. Typically, the policy owner is an employer or an entity such as a labor organization, and the policy covers the employees or members of the group.

Economic activity is an activity of providing, making, buying or selling commodities or services by people to satisfy day-to-day needs of life. Any activity that includes manufacturing, distributing or utilising products or services.

Non-economic activity is an activity performed with the purpose of rendering services to others without any consideration to financial gain. Those activities which are initiated for personal content or to meet human sentiments are non-economic activities.

Causes of Business Risk

Natural causes: Natural causes are beyond the control of human beings. Natural disasters can lead to huge losses in business. Let us take example of various small hotels which were wiped out during the massive floods in Uttarakhand. Nobody could do anything when the flood hit the hilly state.

Human causes: Strikes, dishonesty, carelessness, etc. are examples of human causes of business risk. Labour unrest have often resulted in shutdown of many factories. The factory of Maruti at Gurgaon is an example of crippling operations due to labour unrest.

Economic causes: Inflation, unemployment, economic slowdown, etc. are examples of economic causes of business risk. The recent economic slowdown has resulted in reduced demand for housing. According to leading newspapers, there is huge inventory in the housing sector which would take at least ten years to be sold. Luxury products suffer severe decline in demand during an economic slowdown.

Other causes: Some political events can change the business scenario. A major policy change by the government can change the business environment. A very good example of effect of policy change on a business is the upsurge in mobile telephony market in India when the then telecommunications minister favoured CDMA by making some changes in policy. It is always seen that a stable government at the centre improves the business climate, while an unstable government is detrimental to the business climate.

South Mumbai is home a major port and is the biggest port in India. India has 13 major ports viz. Kolkata Port, Paradip Port, New Mangalore Port, Cochin Port, Jawaharlal Nehru Port, Mumbai Port, Kandla Port, Vishakhapatnam Port, Chennai Port, Tuticorin port, Ennore Port, Mormugao Port and Port Blair Port. Based on the number of shipping services calling each port, Mumbai (Nhava Sheva) is by far India's busiest port, having 30 inter-regional shipping services calling its port, according to information from BlueWater Reporting.

FORMATION OF A COMPANY

Formation of a company means bringing a company into existence and starting its business. The steps involved in the formation of a company are:

(i) Promotion

(ii) Incorporation

(iii)Capital subscription

(iv) Commencement of business.

A private company has to undergo only first two steps but a public company has to undergo all the four stages.

1. Promotion:

Promotion means conceiving a business opportunity and taking an initiative to form a company.

Step in Promotion:

1. Identification of Business Opportunity : The first and foremost function of a promoter is to identify a business idea e.g. production of new product or service.

2. Feasibility Studies: After identifying a business opportunity the promoters undertake detailed studies of technical, Financial, Economic feasibility of a business.

3. Name Approval: After selecting the name of company the promotors submit an application to the Registrar of companies for its approval.

4. Fixing up signatories to the Memorandum of Association: Promotors have to decide about the director who will be signing the memorandum of Association.

5. Appointment of professional: Promoters appoint merchant bankers, auditors etc.

6. Preparation of necessary documents: The promoters prepare certain legal documents such as memorandum of Association, Articles of Association which have to be submitted to the Registrar of the companies.

2. Incorporation

Incorporation means registration of the company as body corporate under the companies Act 1956 and receiving certificate of Incorporation.

Steps for Incorporation

1. Application for incorporation: Promoters make an application for the incorporation of the company to the Registrar of companies.

2. Filing of necessary documents: Promoters files the following documents:

(i) Memorandum of Association.
(ii) Articles of Association.
(iii) Statement of Authorized Capital
(iv) Consent of proposed director.
(v) Agreement with proposed managing director.
(vi) Statutory declaration.

3. Payment of fees: Along with filing of above documents, registration fee has to be deposited which depends on amount of the authorized capital.

4. Registration: The Registrar verifies all the document submitted. If he is satisfied then he enters the name of the company in his Register.

5. Certificate of Incorporation: After entering the name of the company in the register. The Registrar issues a Certificate of Incorporation. This is called the birth certificate of the company.

III. Capital Subscription:

A public company can raise funds from the public by issuing shares and Debentures. For this it has to issue prospectus and undergo various other formalities:

Step required for raising funds from public:

1. SEBI Approval: SEBI regulates the capital market of India. A public company is required to take approval from SEBI.

2. Filing of Prospectus: Prospectus means any documents which invites offers from the public to purchase share and Debenture of the company.

3. Appointment of bankers, brokers, underwriters: Banker of the company receive the application money. Brokers encourage the public to apply for the shares, underwriters are the person who undertake to buy the shares if these are not subscribed by the public. They receive a commission for underwriting.

4. Minimum subscription: According to the SEBI guide lines minimum subscription is 90% of the issue amount. If minimum subscription is not received then the allotment cannot be made and the application money must be returned to the applicants within 30 days.

5. Application to Stock Exchange: It is necessary for a public company to list their shares in the stock exchange therefore the promoters apply in stock exchange to list company shares.

6. Allotment of Shares: Allotment of shares means acceptance of share applied. Allotment letters are issued to the shareholders. The name and address of the shareholders submitted to the Registrar.

IV. COMMENCEMENT OF BUSINESS:

To commence business a public company has to obtain a certificate of commencement of Business. For this the following documents have to be filled with the registrar of companies.

1. A declaration that 90% of the issued amount has been subscribed.
2. A declaration that all directors have paid in cash in respect of allotment of shares made to them.
3. A statutory declaration that the above requirements have been completed and must be signed by the director of company.

Important documents used in the formation of company:

1. Memorandum of Association – It is the principal document of a company. No company can be registered without a memorandum of association and that is why it is sometimes called a life giving document.

Contents of Memorandum of Association:

1. Name clauses – This clause contains the name of the company. The proposed name should not be identicator similar to the name of another exiting company.

2. Situation clauses – This clause contains the name of the state in which the registered office of the company is to be situated.

3. Object clause – This clause defines the objective with which the company is formed. A company is not legally entitled to do any business other than that specified in the object clause.

4. Liability Clauses – This clause limits the liability of the members to the amount unpaid on the shares held by them.

5. Capital clause – This clause specifies the maximum capital which the company will be authorized to raise tough the issue of shares called authorized capital.

Capital Subscription:

A public company can raise funds from the public by issuing shares and Debentures. For this it has to issue prospectus and undergo various other formalities:

Step required for raising funds from public:

1. SEBI Approval: SEBI regulates the capital market of India. A public company is required to take approval from SEBI.

2. Filing of Prospectus: Prospectus means any documents which invites offers from the public to purchase share and Debenture of the company.

3. Appointment of bankers, brokers, underwriters: Banker of the company receive the application money. Brokers encourage the public to apply for the shares, underwriters are the person who undertake to buy the shares if these are not subscribed by the public. They receive a commission for underwriting.

4. Minimum subscription: According to the SEBI guide lines minimum subscription is 90% of the issue amount. If minimum subscription is not received then the allotment cannot be made and the application money must be returned to the applicants within 30 days.

5. Application to Stock Exchange: It is necessary for a public company to list their shares in the stock exchange therefore the promoters apply in stock exchange to list company shares.

6. Allotment of Shares: Allotment of shares means acceptance of share applied. Allotment letters are issued to the shareholders. The name and address of the shareholders submitted to the Registrar.

The memorandum of association and articles of association are the two charter documents, for setting up of the company and its operations thereon. ‘Memorandum of Association‘ abbreviated as MOA, is the root document of the company, which contains all the basic details about the company. On the other hand, ‘Articles of Association‘ shortly known as AOA, is a document containing all the rules and regulations designed by the company.

(i) Amer is a professional. Akbar is engaged in business. Anthony is an employee.

(ii)

Principle of Subrogation

Subrogation means one party stands in for another. As per this principle, After the insured, i.e. the individual has been compensated for the incurred loss to him on the subject matter that was insured, the rights of the ownership of that property goes to the insurer, i.e. the company.

Subrogation gives the right to the insurance company to claim the amount of loss from the third-party responsible for the same.

Yes Definitely Every Business Has to Face Some Risk. No Business Can Avoid Risk.

The Business Wont't Grow If There Is No Risk And Profit.
Thus Not only Risk But Profit Is Also A Inherent Element Of Business
More The Risk The Less Problems You Will Face