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Entrepreneurial Opportunity — Entrepreneurship STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEntrepreneurshipEntrepreneurial Opportunity3 Marks
Question
After passing his $12^{th}$ class with entrepreneurship as an elective subject 'Guru' started his own business. He invested Rs. $2,00,000$ as capital which was given to him by his father. He obtained a loan of Rs. $1,00,000$ from his elder brother Ravi, who was working as an assistant manager in Bank of Baroda. In the first year, he incurred a loss of Rs. $50,000$ and had to pay to his suppliers their outstanding bills. This created a financial problem for him, and he had to take a loan of Rs. $1,00,000$ from the Bank of Baroda on the personal guarantee of his brother, He started doing hard work, lowered the prices and informed his customers about the qualities of goods sold by him. Because of this, the sales increased four times, and he earned a net profit of Rs.$75,000$ in the second year.
  1. Identify the form of business organisation started by "Guru".
  2. State any five features of such a form of business organisation.
✓

Answer

  1. Sole proprietorship: Sole proprietorship is a business initiated, and operated by one individual who carries all financial and administrative responsibilities, employing such assistants as may be necessary.
  2. Features of Sole proprietorship:
  • Individual ownership: This business is exclusively owned by a single person.
  • Individual financing: All investment is made by the proprietor. Though, if required he/ she has access to loans and debts to procure funds for business.
  • No separate legal entity: Legally, the proprietor and proprietorship are one and the same business and owner exists together, thus with owner's death, business too dies.
  • Easy formation and closure: Sole proprietorship is subjected to minimum legal formalities and regulations both at the time of commencing and/ or closing.
  • Unlimited liability: The proprietor is liable/ responsible for all losses arising from business.

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