Characteristics of Business
(i) Economic Activity Business is considered to be an economic activity because it is
undertaken with as aim of earning money or livelihood.
(ii) Production or Procurement of Goods and Services Goods are offered to consumers after they are either produced or procured by business enterprises. Thus, every business enterprise either manufactures the goods it deals in or it acquires them from other producers, to be further sold to consumers or users.
Goods may be consumer goods like television, tea, pen, etc or capital goods like machinery, furniture, etc. Services may include facilities offered to consumers in the form of transportation, banking, electricity, etc.
(iii) Sale or Exchange of Goods and Services Business involves transfer or exchange of goods and services for value addition. If goods are produced for self consumption and not for selling purpose, it cannot be called a business activity. Cooking food at home for the family is not business, but cooking food and selling it to others in a restaurant is business. Thus, one essential characteristic of business is that there should be sale or exchange of goods or services between the seller and the buyer.
(iv) Regular Dealings in Goods and Services Business involves dealings in goods or services on a regular basis. Therefore, one single transaction of sale or purchase does not constitute business.
(v) Profit Earning The primary objective of business is to earn profit. For this businessmen make all possible efforts by increasing the volume of sales or reducing cost. It is an essential factor as growth and expansion would be possible only when a business is making profit.
(vi) Uncertainty of Return Business should not be considered as bed of roses. At every step
problems and obstacles hinder the path of success. One cannot expect the actual returns an investment as there is always a possibility of losses.

 Synthetic industry : In this industry, two or more materials are mixed together to create a new product. For example, producing soap, biscuits, etc.
 Assembling industry : In this industry, the finished product is produced by assembling the various parts or components. For example, radio, car, T. V., etc.

Demerits of partnership firm

a. No Business secrets: The partner can keep the secrets to himself but these secrets can be known to competitors or others when there is conflict among the partners

b. Uncertain existence: Death of any partner can sometime cause death of entire firm. Dishonesty, conflict and lack of resource also can collapse the firm

c. No Personal contact: A partner can’t be in a position to maintain intimate contacts with his customers and employees. He cannot be able enter to the requirements of each and every customer. Then there is no close personal touch which decreases the competitive strength of the business.

e. Unlimited liability: Proprietor is liable for all the debts of the business. In case the assets are insufficient to meet the debts, the personal property of the proprietor can be attached.

1. Sources of Income

Investors invest their money in the business with the sole purpose of earning profit, since profit is a source of income, it is therefore provides the owners of business the mean with which they and their family members can live a comfortable life.

2. Continuity of Business

The incentive of earning profit keeps the man engaged in business activities. A business can only grow and gain strength if it earns profit. So earning of profit is necessary for the continuity of business.

3. Expansion of Business

One of the roles of profit in business is that businessman retains and reinvests a part of its profits in business undertaking stands on sound footing. It can expand and diversify business not only from reinvestment of funds but also getting loans from external sources for business.

4. Reward of Risk Bearing

Profit is the reward for bringing new products or processes to the market. It is a reward for a risk successfully undertaken. Profit, therefore, is a reward for the future which is uncertain.

5. Profit and Economic Development

Another role of profit in business is economic development. Profit and economic development are closely related with each other. If the firms are not earning profit then there is no economic progress in the country. If there is no economic development there is no profit to the business.

6. Profit Acts as Measure of Efficiency

Profit acts as an index of performance for business, if the business firms are earning profits. It shows that the country is progressing satisfactorily

Registration of a partnership firm is not compulsory under law. The Partnership Act, 1932 provides hat if the partners so desire they may register the firm with the Registrar of Firms of the state in which the main office of the firm is situated.
Read more on Sarthaks.com - https://www.sarthaks.com/99451/is-registration-partnership-firm-compulsory-what-are-the-consequences-non-registration

Definition of Sole Proprietorship:

• It is that type of business organization which is owned, managed and controlled by a single owner.
• The word “sole” means “only” and “proprietor” notes to “owner”.
• A sole proprietor is the beneficiary of all profits.
• All risks are to be borne by the sole proprietor.
• The sole proprietor has unconditional and full control over its business.
• Example: Beauty parlour, barbershop, general store and sweet shop run by a single owner.

Public sector:

1.It is controlled and managed by the government.
2.The main aim of the sector is public welfare.
3.The sector provides basic facilities like education, health, food and security to the people. For Example: Railways, Post office, BSNL.

Private sector:

1.It is controlled and managed by an individual or a group.
2.The main aim of the sector is to earn profits.
3.Private sector does not provide any service at a reasonable rate. For example: Tatas, Birlas, Reliance.

• One of the biggest limitations of a sole proprietorship is the unlimited personal liability of the owner. If the business fails it can wipe out the personal wealth of the owner as well as affect his future business prospects too
• Another problem is that a sole proprietor has access to limited capital. The money he can borrow from his own personal savings may not be enough to expand the business. Moreover, banks and financial institutions are also wary of lending to proprietorships.
• The life cycle of a sole proprietorship is undecided and attached to its owner. An incapacitated owner may have a negative effect on the business, and it may even lead to the closure of the business. A sole proprietorship cannot carry on without its proprietor.
• A sole proprietor also has limited managerial ability. He cannot be an expert in all the fields of the business. Furthermore, limited resources may mean that he cannot hire competent people to help him out. As a result, the business may suffer from mismanagement and poor decisions.

• The cost of debt capital, represented by debentures is lower than the cost of preference or equity capital. This is because the interest on debentures is tax deductible and hence it helps in increasing the rate of return. Thus debenture issue is a cheaper source of finance.
• The fixed monetary payment associated with debentures is interest. This fixed return appeals to many investors, since they are not affected by the fluctuating fortunes of the company.

Partner by estoppel: A person is considered a partner by estoppel if, through his/her own initiative, conduct or behaviour, he/she gives an impression to others that he/she is a partner of the firm. Such partners are held liable for the debts of the firm because in the eyes of the third party they are considered partners, even though they do not contribute capital or take part in its management. Suppose Rani is a friend of Seema who is a partner in a software firm — Simplex Solutions. On Seema’s request, Rani accompanies her to a business meeting with Mohan Softwares and actively participates in the negotiation process for a business deal and gives the impression that she is also a partner in Simplex Solutions. If credit is extended to Simplex Solutions on the basis of these negotiations, Rani would also be liable for repayment of such debt, as if she is a partner of the firm.

1. Acceptance of Deposits : Accepting of deposits from the public is the most important function of bank. It takes the savings and surplus of people. Banks provide a safe custody of the deposited cash. Depositors can easily transfer money and can make the payments through cheques.
Banks provide an attractive rate of interest on their deposits. There are various types of deposits which can be opened in the bank like Fixed Deposit. Savings Deposit and Current Deposit.

2. Making Loans and Advances : It is another equally important functions of bank. Banks accept surplus money of people and provide loans and advances to the needy persons. It is through loans and advances, banks earn profit. Loans and advances are provided through banks in the following forms :
(i) Loan, (ii) Overdraft, (iii) Cash credit, (iv) Discounting of bills and exchange.

(i) Loan : Loan is a lumpsum advance made by a bank against security or otherwise. In it specified amount is either paid to the customer in cash or is credited in his account. The borrower is required to pay a prefixed rate of interest on the amount of loan from the date of the sanction of the loan.
The loan may be refunded in instalment or in lumpsum. Short and medium term loans are provided by commercial banks.

(ii) Overdraft: Under this system a current account holder is allowed to overdraw his bank account i.e., he can draw upto a fixed limit more than the balance in his account withdrawal at any time.

(iii) Cash-credit: In cash credit, a customer is given credit upto a definite limit against a surety bond or against other securities. The interest is charged on the amount overdrawn by customer on the daily balance and not on the entire amount of the limit.

(iv) Discounting of Bills of Exchange : Bill of Exchange is a negotiable instrument. It is drawn by the seller and is accepted by the buyer. The drawer has got a facility to discount the bill of exchange before maturity if money is required immediately. The bank discounts the bill and deducts a certain amount as discounting charges and pays the remaining money to the drawer.

Secondary functions subsidiary functions can be classified as :

(a) Agency functions
(b) Utility functions.

(a) Agency functions : These are the functions which banks perform as an agent of their customers.

1. Collection of cheques and bills : It collects local and outstation cheques, drafts, bills of exchange, and promissory notes of its customers and credit to their account.

2. Collection of Interest and Dividend : It also collects interest and dividend on debentures and securities held by its customers.

3. Purchase and sale of securities : On instructions from its customers banks purchase or sell stock securities, debentures, bonds etc.

(b) Utility functions : Banks provide the following utility or miscellaneous functions :

1. Safe custody of customers' valuable articles and securities : Some banks provide the facilities of lockers where on nominal rent a customer can keep its valuable articles such as ornaments, jewellery etc.

2. Facility of Foreign Exchange : After obtaining a license from the Reserve Bank of India, commercial banks can deal in foreign exchange. The banks can exchange the various foreign currencies and even discount foreign bills of exchange.

3. Provide Trade Informations : Banks provide useful trade information to its customer through publishing various journals.

Perpetual succession : A company being a creation of the law, can be brought to an end only by law. It will only cease to exist when a specific procedure for its ClBsure, called winding up, is completed. Members may come and go out, but the company continues to exist.

No Separate Entity

• According to the accounting system, the owner and the business are considered as two separate entities.
• But the law does not make any distinction between the sole trader and its business.
• Hence, without the sole trader, the business has no identity because he is the only person who performs all the business activities.

The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. A sole proprietorship can operate under the name of its owner or it can do business 

Characteristics of Business Risk:

• The Time. In ancient times, business-risks were less and limited. ...
• The Size of Business Enterprise. ...
• Nature of Business Risks. ...
• Terms of Sales. ...
• The Degree of Competition. ...
• The Competence of Management. ...
• The Age of the Business Enterprise. ...
• Opportunities for Gains are Hidden in Business Risks.

Management is required for an established life and essential to managing all types of management. Sound management is the fortitude of thriving companies. Managing life implies getting everything done to accomplish life’s aspirations and maintaining an establishment means getting things done with and by other people to deliver its objectives.

Mutual agency implies that every partner is both an agent and principal. He is an agent of other partners as he represents them and there by binds them through his decisions and acts. He is a principal as he too can be bound by the acts of other partners.