Last Updated on June 13, 2021 by admin
What Is A Business? Definition Concepts And Types Of Business
What is a Business? Want to start a Business? Most Profitable business Ideas. Learn About the Definition, Concepts, types, Laws, companies Act of Business.
Also read : Wholesale Business Ideas in Hindi.
Definition Concepts And Types Of Business. What is a Business? How Many Types Of Business Are There? Busssiness or Business is a very famous and popular word and occupation of the people of this world. So Today we will discuss about What is business? What is the definition of business. How to do bussiness? So my Request is to read the complete article to understand the whole concept clearly.
What Is The Definition Of A Business?
Answer: Business is the Production of goods and services, exchange of goods and services. Basically business is Organized efforts & activities of individuals to produce and sell goods and services for profit. This is simple definition of Business.
There are three types of Modern Business . These Are,
- 1) Industry.
2) Commerce.
3) Direct Services.
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1) INDUSTRY : ( What is a Business )
Answer: The process of converting raw material or primary product through factory based manufacturing process into secondary or final product is called industry.
Or
A Industry is the process by which natural resources are extracted, molded and processed into raw materials for human consumption.
There are four types of art based on size. These are
- A) Large scale industry
B) Medium industry
C) Small scale industries
D) Factory industry
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(A) Large scale industry:
The value of fixed assets in this industry is more than 10 CRORE INR and more than 100 workers work.
B) Medium industry:
The value of fixed assets in this industry is less than 10 CRORE INR and 25 to 100 workers work.
(C) Small scale industries:
These industries have fixed assets worth Rs. 1.50 CRORE INR and employee less than 25 workers.
(D) Cottage industry:
In this industry only family members are engaged in production without sitting at home.
The industry is mainly divided into five parts. These are,
- 1) Genetic Industry
2) Extractive Industry
3) Construction Industry
4) Manufacturing Industry
5) Service Industry
1) In Genetic Industry:
Materials produced in the breeding industry are used for regeneration or production.
Such as nursery, hatchery etc.
2) Extractive Industry:
Natural resources are extracted from groundwater, water or air through the extraction industry.
Such as mining.
3) Construction Industry:
Roads, bridges etc. are constructed through construction industry.
4) Manufacturing Industry:
In the manufacturing industry, raw materials are processed and converted into final products through the use of labor and machinery. Such as – textile industry.
5) Service Industry:
The service industry makes people’s lives easier and more comfortable by providing a variety of services. Such as – electricity and gas production and distribution, banking and health services, etc.
2) Commerce:
A. Trade is the act of delivering raw materials used in business or industry to producers or delivering goods or services produced in industry to consumers.
There are two types of trade. These are
- 1) Internal trade
2) International or foreign trade.
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Internal trade:
When goods are exchanged between two regions of the same country, it is called internal trade.
International or foreign trade:
When goods are exchanged between two or more countries, it is called foreign trade.
3) Direct Services:
You know A Professionals like doctors, lawyers, engineers, etc., who are engaged in independent professions for the purpose of earning money, provide various services in exchange for money. And all these services or scholarships are known as direct services. Such as: medical clinic, law chamber, engineer firm, audit firm etc. So Direct service is an important branch of modern business.
Business organizations can be divided on the basis of ownership as follows:
- 1. Monopoly business
2. Partnership business
3. Joint venture business or company organization
4. Cooperative Society
5. State business
What is a business?
Joint venture business or company organization:
Concept of Joint Stock Companies:
The formal journey of business in the world through monopoly business has not been limited to monopoly over time. Some of the limitations of monopoly business are the emergence of partnership business especially for scarcity of capital and unit management and small size.
But the partnership business also could not get rid of the limitations of capital, legal constraints, instability and unlimited liability. At one time people’s demand, necessity and scope of business began to increase further. As a result, more capital and large-scale joint ventures, also known as company organizations, are created on the basis of law.
The nature and scope of business organization has changed drastically, along with the massive changes that have taken place in the production system, mainly due to the Industrial Revolution. Production, distribution system comes out of the family boundaries and takes place in the factory.
This results in more capital, limited liability, joint management and joint venture business organizations with legal entities and separate entities. It is to be noted that the technological changes that took place in the agriculture, industry, coal extraction and transportation system of Europe during the middle of the eighteenth and nineteenth centuries (1750-1850) are called the Industrial Revolution.
Mutual capital business is created and governed by law.
The first company law was passed in Britain in 1844, known as The Joint Stock Company Act 1844. The first Company Act was passed in the British ruled Indian subcontinent in 1850. In 1913, the Indian Companies Act was passed .
In the Companies Act, 1913, a company means a company formed or registered under this Act or a company in an existing corner. A company organization is a type of organization created by law, with a separate entity, with an artificial entity, and with limited liability, where a group of individuals jointly invest capital for the purpose of making a profit.
Features of Joint Stock Company:
Such business is more important in today’s large scale business world. This type of business has some features that give it a distinct status from other business organizations.
Below is an analysis of the characteristics of the company organization –
1) A joint stock company is a legal business organization.
This business is formed under the conventional company law of the country. As it is under legal process, its structure is quite complex and formal. The number of its members is determined by law. In case of private limited company minimum 2 members and maximum 50 members and in case of public limited company minimum members 6 members and maximum number is limited by number of shares.
2) The company is a voluntary organization in business.
The company is formed by a group of people who are interested in doing business. However, members can easily leave the business by transferring shares if they wish. Anyone can also gain membership by purchasing shares if they wish.
3) This business is owned by an artificial person as it is created by law.
Artificial person refers to being an entity, to acquire legal status and rights as an individual even if he is not an individual. The Company may enter into agreements and transactions with others in its own name and may sue where necessary in the opinion of an independent person. Elsewhere, parties can sue the company.
4) Since the company business is created by law,
If it wants to abolish it, it has to do so in the formal process of law, thus it gains the status of eternal existence. The company is not liquidated by the death of a shareholder, bankruptcy or transfer of shares.
5) The company has to use a seal because it is an artificial person.
The use of this seal is mandatory in all works and papers of the company.
6) Legally the capital of the company is divided into small units of some equal axis.
Each such unit is called a share. The company raises capital through the sale of shares. That is why they are called share capital. Anyone above 18 years of age and any organization can acquire its membership by purchasing shares. Due to the large number of members and the opportunity to raise capital by selling shares, the company accumulates more capital in business.
7) In the case of company business, management is completely different from company ownership.
Owners do not participate in direct management as part of a sole proprietorship or partnership business. Management is the responsibility of the other paid party. Directors or owners participate in policy making.
8) The liability of the members of the company business is limited.
Ownership or partnership is not infinite in terms of business. Members’ liability is usually limited by share price and commitment. Needless to say limited by the share price, a shareholder is only responsible for the amount of money he buys.
In other words, if a shareholder buys 100 shares of a company worth Rs. 100, his liability will be limited to Rs. 10,000 only. On the other hand, in a company limited by a promise, a shareholder will be liable for the amount of money he promises to buy.
9) Democratic norms and values are followed in the management and administration of company business.
The shareholders directly appoint the board of directors by VAT/GST and the business is conducted as per the decision of the council.
Classification of Join Stock Company:
The touch of multiple changes and developments in the socio-economic aspects of the world social system touches the business world. Due to which joint capital business originated as a large scale business by overcoming the limitations of monopoly and partnership business. Company organizations are the most well-known of all the joint ventures.
Company organizations in India are mainly divided into two parts.
These Are
A) Private Limited Company.
B) Public Limited Company.
A) Private Limited Company :
A company with a minimum number of 2 members and a maximum of 50 members and whose shares are not freely transferable is called a private limited company. The Companies Act of 1913, which is in force in India, defines a private limited company as a company with a limited number of 50 members.
Limited right to transfer shares to members and prohibited from inviting the public to purchase shares and debentures. Due to the limited number of members and the amount of capital, the size of such companies is relatively small.
According to the law, the number of directors of this company must be at least 2. The number of private limited companies in India is increasing day by day.
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B) Public Limited Company:
A public limited company is a company which has a minimum number of 6 members and a maximum number of members limited to the number of shares mentioned in the company’s marquee and the shares and debentures can be sold to the public and the shares are freely transferable.
A public limited company can increase the number of members by increasing the number of shares by amending the markup as required. According to the law, the company must have at least 3 directors.
Importance of Joint Stock Company:
In the current business world, the company business established on the basis of joint ownership is also very popular in the country. Moreover, company organization is most useful for creating employment opportunities for a large number of people by establishing large scale businesses.
With employment, not only is unemployment eliminated, living standards are improved and per capita income increases. Again, in a monopoly and partnership business, the risk and liability are infinite, so large risky investments are not possible in the company organization.
Moreover, the company organization is more suitable to build a factory rich in advanced technology. This is because the huge amount of capital and money required for the establishment of such business organizations and industries can be collected from the people in public limited companies through the sale of shares. As a result, the involvement in the development of industrial development of the country increased.
Through the establishment of company organizations, the business spread in the international arena increased and the mutual relations between different countries were also strengthened. At present, multinational companies conduct their business worldwide.
TATA, Bata, RELIANCE PVT Limited, Unilever and other multinational companies are also working in our country. In this way, companies from one country opened branches in other countries and international relations were developed. Over the last two decades, a number of public limited companies have been established in INDIA which are contributing to the economic development and employment growth of the country.
Process of Formation of a Company:
According to the Companies Act of 1913, which is prevalent in India, a company has to be formed following a series of procedures.
The company formation process is usually done in four consecutive stages. These are-
- A) Initiative stage
B) Document preparation stage
C) Registration paper collection stage
D) Commencement stage
E) Initiative stage:
At this stage, the people who are interested in forming a company come together and find out the possible name of the company, type of company, amount of capital, way of raising capital, address of the company etc.
Etc. decided. Entrepreneurs try to collect clearances from the registrar’s office in the name of a possible business organization.
B) Document preparation stage:
At this stage the directors of the company prepared two important documents of the company business. One is the hallmark and the other is the rules. The marquee is called the original document, charter or constitution of the company.
It records important matters of the company such as company name, registered office address, purpose, amount of capital, liability of shareholders, minimum subscription etc. On the other hand, all the necessary matters related to the internal management of the company are recorded in the parcel rules.
C) Registration stage:
At this stage, the company has to collect the application form for registration from the registrar’s office with a fee. The application form has to be duly filled and the prescribed fee and necessary documents have to be submitted to the Registrar.
If the registrar is satisfied with all the matters after receiving the prescribed application form, all the documents and fees, then the name of the company is listed in the deed book and the deed of deed is issued. After receiving this letter, the private limited company can start the work, but the public limited company has to get the work permit from the fund to start the work.
D) Starting stage:
A public limited company has to apply for a work permit along with a declaration of collection of minimum subscription and declaration of sale of shares to the public along with some important documents. If all the paperwork is in order and the registrar is satisfied, the public limited company is given a license to start operations. After receiving this letter, the public limited company can start business.
The Business Law governs the world of commerce. We call all of these rules as Commercial law or Business Law. The Business Law governs all of businesses, dealings and the conduct of people associated with such kind of businesses.
In India, some of the Business Laws followed are from the pre-independence era, however, after time to time laws are changed. Newer Business Laws are always being passed. Let us educate ourselves about the knowledge of Business Laws of India.
BUSINESS LAWS IN INDIA
Many business laws in India pre era of the India’s independence in 1947. For example, the Indian Contract Act of 1872 is still in force in India, although specific contracts such as partnerships and the sale of goods are now covered by newer laws.
Partnership firms in India covered by The Partnership Act of 1932. And Business laws regulating CA and cost accountants were passed in 1949 and 1959, respectively.
1949 Banking Regulation Act of India continues to regulate private banking companies and manage banks in India. In 2012, it was amended by the Banking Law.
The Limited Liability Partnership Act, 2008.
The Parliament of the Country India Passes and amends regulations for both of businesses and investors.
Indian Companies Act 1956, enacted in 1956, which enabled companies to be formed by registration, sets out the responsibilities of companies, their directors and secretaries and also provides for the procedures for its winding.
Companies Act 2013
The Companies Act 2013 is the law covering dissolution, incorporation, and the running of companies in India. The Act came into force across India on 12th Sept 2013 and has a few amendments to the previous act of 1956. It has also introduced new concepts like a One Person Company. (We may Discuss it in another blog)
ONE PERSON COMPANY
In addition to provisions from the Companies Act of 1956, the Companies Act of 2013 features provisions regarding mergers, board room decision-making, and acquisitions,
related party transactions, corporate social responsibility, and shareholding.
The act was again amended through the Companies Act of 2015 which eliminated the procedural common seal, declarations for commencement of businesses, and minimum paid-up capital requirements. The amendment also relaxed governing Related party transactions while limiting access to strategic corporate resolutions in the country India.
India introduced The L.L.P Act in 2008 to legally authorize the concept of Limited Liability Partnerships (LLP). A blend between a PVT company and a partnership LLP’s have recently become a very popular form of business vehicle. (We will Discuss it in another blog)
Indian business/company law is now regulated by the Companies act 2013 and it regulates the companies which are registered under the Companies act 2013. Which was Previously regulated by the Companies act 1956 and all the companies registered under the Companies act 1956 were taken into the account.
Have a little look at
Major differences between the companies Act 1956 and Companies Act 2013.
1. Companies Act 1956 was enacted 1st April of 1956 by Indian parliament.
Companies Act 2013 was enacted 1st April 2013.
2 . And 2013 Companies ACT has been divided into 29 chapters along with 470 sections and 7 schedules.
Where Companies Act 1956 was separated into 13 parts having 658 sections, along with 15 schedules
3. Act 2013 consider some definitions which Companies act 1956 did not considered as of :
- Associate company,
Independent director,
Auditing standards
CEO & CFO,
Promoter,
Small company ,
Promoter,
Global Depository receipt,
Related party,
Key managerial.
4. 1965 Act only inbound merger i.e. foreign company merging into an Indian company was allowed but outbound merger i.e. Indian company merging into foreign company was not permitted.
Act 2013 Both inbound as well as outbound company merger is allowed.
5. Companies Act 1956, Maximum Shareholders in Pvt Ltd Company was 50 excluding past and present employees.
Companies Act 2013, Maximum shareholders in Pvt Ltd Company is 200 excluding past and present employees.
6. Companies Act 1956,
A One Person Company did not exist.
DIFFERENCES BETWEEN COMPANIES ACT
Act 2013, One Person Company which has only one natural person as its member exists under this Act.
7. Act 1956, Section 79 permitted issue of shares at a discount.
Act 2013, Issue of Share at discount: Section 53 prohibits issue of shares at a discount.
Though Section 54 permits issue of ESOPs to its employees at a discount.
8. Act 1956, Utilization of Securities Premium Reserve was provided in Sections 77A and 78.
Act 2013 Utilization of Securities Premium Reserve is provided for in Section 52(2).
There are also some changes into between Companies Act 1956 and companies Act 2013.
We only mentioned some important points here.
India as member of the International Labor Organization, India offers protections for all employees. Which includes THE PAYMENT OF WAGES ACT 1936, THE INDUSTRIAL EMPLOYMENT ACT OF 1946 , THE INDUSTRIAL DISPUTES ACT OF 1947, AND THE PAYMENT OF BONUS ACT OF 1965. AND THE Payment of GRATUITY ACT 1972. And Protections includes Annual Bonuses of 8.33 percent and separation fees of about 15 days per year of employment.
This is from us today all about of
What is business? concept & definition.
So I hope If you read the Full Article, You surly get some Important knowledge about Business and it’s types. Business Laws and companies Act.
Thank You.