the selection of the form of organisation.
Answer:- Before undertaking a description of the various forms of organisation
and their respective merits and weaknesses it will be desirable to refer
to the features which make for an ideal form of business organisation.
These characteristics will be found applicable to the various forms of
organisation in varying degrees. In choosing a particular form of
organisation an entrepreneur will try to find out how far his
requirements will be met by a particular form of organisation. The
following factors will be taken into account.
(i) Ease of formation:
An ideal form of organisation is one which can be brought into
existence with the least difficulty, i.e., in the form of least expenses in
formation and minimum legal formalities.
(ii) Ease of financing:
Another important feature of a good form of organisation is the facility
of raising the required amount of capital.
(iii) Limited liability:
From the point of view of risk, the entrepreneurs will naturally prefer
limited liability. In case of insolvency or winding up owner or owners
must be in a position to lose only to the extent of their investment in
(iv) Direct relationship between ownership and control of
As a rule, the control should lie where the ownership lies. It will ensure
that the management takes active interest in running the business
efficiently and effectively.
If the control is not with the owners, the management may not show
required interest in maximising profits through increase in efficiency
(v) Flexibility of operations:
The organisation should lend itself to change and adjustment without
much difficulty as and when the need arises. A good form of o
rganisation offers the maximum flexibility and adaptability.
(vi) Continuity and Stability:
An ideal form of organisation enjoys uninterrupted... [continues]
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