UNIT- II ENTERPRISE PLANNING

Forms of Private Sector Enterprises

Private sector enterprises

Sole Trading Concern Partnership Joint Stock Company Co – operative Society

I. Sole proprietorship

It is the first, oldest, simplest and commonly used form of business. A business owned,
financed,controlled and managed by single individual is called sole trading concern. It is also called
single entrepreneurship, individual proprietorship, one man business, single owner business etc. The
owner of the business is called sole trader or Proprietor.

Characteristics of sole proprietorship

1) One man ownership and control – business is owned and controlled by one person
2) Individual financing – investment is made by single owner.
3) No separate legal entity – with owner's death business also dies.
4) Unlimited liability – liability of the owner is unlimited, his personal properties are liable for the
debts of the business.
5) Sole beneficiary – need not share the profits.
6) Easy formation and closure – it need not be registered, so very easy to form and close.

Advantages
1). Easy formation 2). Quick decisions 3). Maintenance of business secrets 4). Sole beneficiary

Disadvantages
1). Shortage of capital 2). Unlimited liability 3). Lack of continuity 4). lack of managerial ability.

Registration of Sole proprietorship

A sole proprietorship need not to be registered .

Suitability of sole proprietorship

Sole trading concern is suitable for Stationery, Bakery, Beauty parlour, Hotel, Flower shop etc,
where business is small, capital requirement is less, limited area of operation, and quick decision
making is possible.

II. Partnership

Indian Partnership Act 1932 defines Partnership as “the relation between persons who have
agreed to share the profits of a business carried on by all or any of them acting for all.”
Minimum two persons are required to form a partnership. Maximum number of partners can be 100.
owner of the business is called Partner.

By Krishnanunni.T, GVHSS Karakurissi, Palakkad

Characteristics of partnership
1) Agreement – Partnership is the result of an agreement. It may be oral or written. Written agreement
is called Partnership Deed.
2) Profit sharing – profit is shared by partners
3) Unlimited liability
4) Utmost good faith – Partners should disclose all material facts and present true accounts to one
another. No one should make secret profits
5) Restriction on transfer of share of interest – A partner cannot transfer his share of interest to an
outsider without the consent of other partners.
6) Continuity – Death, retirement, insolvency of any partner may result in closure of the firm.

Advantages
1). Easy formation 2). Larger resources 3). Division of work 4). Maintenance of business secrets

Disadvantages
1). Unlimited liability 2). Lack of continuity 3). Non transferability of interest 4). Lack of harmony

Registration procedure of a partnership firm

Registration of a partnership firm is optional. A partnership firm can be registered at any time.
Partners needs to file an application with the Registrar of Firms. Application should include;

1) Name of the firm 2) Name of the place where business is carried on 3) Names of any other place
where business is carried on 4) Date of partners joining the firm 5) Full name and permanent address
of partners 6) Duration of the firm.
Every partner needs to verify and sign the application. The following documents and prescribed
fees are enclosed along with the application. a) Application for registration in the prescribed form.
b) Duly filled specimen of affidavit. c) Certified copy of the partnership deed. d) Proof of ownership
of the place of business. Once the Registrar is satisfied with the application, he will issue the Certificate
of Registration.

III. Joint Stock Company

Sole trading concern and partnership firms were incompetent to meet challenges of modern
business. Joint stock company is a modern form of business organisation emerged to meet the
requirements of large sized business with huge capital and great managerial skill.
According Indian companies Act, 1956, “a company means a company formed and registered
under this Act or any previous act.”
Shareholders are the owners of the company and their liability is usually Limited. One share
one vote is the principle of company.

Characteristics of a Company
1) Voluntary association – Company is a registered association of persons. Registration is compulsory.
Minimum number of persons required to form a private company is Two and maximum is 200.
While a minimum of Seven persons is required for a public company and maximum is unlimited.
2) Artificial person – Company is an artificial person created by Law. Like individuals it can buy, sell
and own property, lend and borrow money, open bank account in its own name, sue and be sued by
others. On registration a company becomes a legal person.

By Krishnanunni.T, GVHSS Karakurissi, Palakkad

3) Separate legal entity – The company's existence will not be affected by death, insolvency etc. of the
members. It has an independent status different from its members.
4) Common seal – Company cannot sign the documents, so a common seal with the company's name
is used for its signature.
5) Limited liability – Liability of the shareholder is limited to the amount of shares held. Share holders
are not liable for the debts of the company.
6) Transferability of shares – Share holder of a public company can transfer their shares without the
consent of others.

Advantages
1). Huge capital 2). Limited liability 3). Transfer of shares 4). Continuity of existence

Disadvantages
1). Difficulty of formation 2). Delay in decisions 3). No secrecy of business 4). Inflexibility

IV. Co-operative Organisations

The word co-operation is derived fro the Latin word “Co-operari” which means 'working
together'. The primary object of a co-operative society is to render service. One man one vote, self
help and mutual help, Each for all and all for each etc. are the principles of co-operative society.
The Indian Co-operative Societies Act 1912 defines Co-operative Society as “a society,
which has its objectives for the promotion of economic interests of its members in accordance with
co - operative principles.”
In Kerala, co-operative societies are formed under The Kerala State co-operative societies Act 1969.
Minimum 25 persons are required to form a society. owner of the society is called Member.

Characteristics of Co-operative Soceity

1). Voluntary association - A person is free to join or leave the society at any time.
2). Democratic management – Members select the Board of directors based on one man one vote
principle.
3). Service motive – Primary objective of a society is to render service to its members rather than to
earn profits.
4). Unrestricted membership – Maximum number of members is unlimited
5). Government control - Activities of societies are regulated by the Govt.
6). Liability of members is generally limited.

Advantages
1). Easy formation 2). Saves members from exploitation 3).Continuity of existence
4). Democratic Management

Disadvantages
1). Inadequate capital 2). Inefficient management 3). No secrecy of business
4). Excessive state control

By Krishnanunni.T, GVHSS Karakurissi, Palakkad

Registration procedures of co-operative society
The procedure for registration of co-operative societies are detailed below :
1. Every application of registration shall be in duplicate in Form NO. 1.
2. The application shall be signed by not less than 25 persons belonging to different families.
3. A court fees stamp of the value of Rs. 5 shall be affixed to the original application.
4. The application shall be sent to the Registrar by registered post or delivered in office in person.

The application form should be accompanied by:

• Three copies of the proposed Bye Law of the Society.
• A certificate from the bank stating the credit balance in favour of the society.
• A list of persons in duplicate who have contributed to the share capital.
• The scheme showing the details as to the Economic Soundness of the society ; and
• Such other documents as may be specified by the Registrar.

On receipt of an application, the Registrar shall enter the particulars of the application and
then examine the application and bye laws. If the Registrar is satisfied, he will issue a certificate of
registration signed by him. The certificate of registration shall contain the register number of the
society and the date of its registration.
If he is is not satisfied, he shall pass an order of refusal together with the reasons and communicate it
by registered post with in 7 days of such order.

The Micro Small and Medium Enterprises Development (MSMED) Act 2006
The Act has come into force from 2nd October 2006.
Classification of Enterprises under MSMED Act
The enterprises have been classified into two. Manufacturing enterprises & Service enterprises.
The classification is based on investment in plant and machinery.

Manufacturing Enterprises Service Enterprises

Micro Enterprises Investment up to 25 Lakhs Investment up to 10 Lakhs

Small Enterprises Investment above 25 Lakhs Investment above 10 Lakhs

and up to Rupees 5 Crore and up to Rupees 2 Crore

Medium Enterprises Investment above 5 Crore and Investment above 2 Crore and
up to 10 Crore up to Rupees 5 Crore

(Now this classification does not exist)

Registration procedure under MSMED Act
1. Any person who intends to start an MSME shall file part I of the memorandum and after
commencing production shall file part II. Existing units can file part II directly.
2. The memorandum shall be filed in four copies.
3. Date of commencement of production shall be mentioned and applicant shall sign all four copies
with seal of the enterprise.
4. It also requires name, location, category of the enterprises, details of all partners or directors.
5. The memorandum shall be accompanied by income tax receipt, proof of ownership, No Objection
Certificate (NOC) from concerned local body etc.

By Krishnanunni.T, GVHSS Karakurissi, Palakkad

Legal formalities expected to be complied by the entrepreneur
1. Obtain PAN – Permanent Account Number (PAN) is a 10 digit alpha numeric number issued by
Income Tax department. It helps Income Tax department to link all financial transactions of the
person. It is required for all tax payers, businessmen whose total sales exceeds 5lakh in a financial
year and any person who intends to enter financial transactions.
2. Open a current account – Any person satisfactorily introduce to the bank may open a current account
in his own name. He may not open more than one such account.
3. Register your company
4. GST Registration – Goods and Service Tax (GST) registration may be done, if applicable.
5. Excise duty (If applicable) – It is a tax on manufacture or production of goods.
6. Customs duty – It is an indirect tax. It is levied on goods imported to India as well as goods exported
from India.
7. Apply for TAN – Tax deduction and Collection Account Number (TAN) is a 10 digit alpha numeric
number. It is required for all persons who are responsible for deducting or collecting tax.
It is compulsory to quote TAN in TDS (Tax Deducted at Source) and TCS (Tax Collected at
Source) return.
8. EPF and ESI – Employee's Provident Fund (EPF) is applicable for industrial units employing 20 or
more persons. Employee's State Insurance (ESI) is applicable to non seasonal factories employing
10 or more persons.

Recent Trends in Entrepreneurship Development

E-Entrepreneurship
E-Entrepreneurship refers to establishing a new company with an Innovative business idea within
the net economy, offers its products and services based upon a purely electronic creation of value.
E entrepreneurship is the act of managing an electronic enterprise. An E - entrepreneur is an individual
willing to take the risk of investing time and money in an electronic business.

Technopreneur
Technopreneur means an Entrepreneur with high technology. It is derived from two words
technology and entrepreneur. Technopreneur is a new age entrepreneur who makes use of technology to
come out with something new to make some innovation. It includes;
• Website Design and development • Software design and development
• Animation and 3D • Game development

Virtual Marketing
In such markets, buyers purchase goods and services through Internet. In such a market the buyers and
sellers do not meet physically, instead the transaction is done through Internet.
Examples – Rediff shopping, e-Bay, etc.

Enlightened Marketing
Enlightened Marketing is consumer oriented, innovative, and beneficial to the society. It is based on the
philosophy that a company should make good marketing decisions by considering some of the long
term factors in mind. Those factors should support the best long run performance of the marketing
system.

By Krishnanunni.T, GVHSS Karakurissi, Palakkad

Institutional Support to Entrepreneurs

Specialised financial Institutions :- Apart from commercial banks, the following special financial
Institutions are giving financial and re-financial assistance to the Entrepreneurs.
1.Industrial Finance Corporation of India (IFCI - 1948)
IFCI provides long term finance to the manufacturing and industrial sector.

2. Industrial Credit and Investment Corporation of India (ICICI - 1955)

Its main objective is to provide medium-term and long-term project financing.

3. Industrial Development Bank of India (IDBI - 1964)

IDBI provides credit and other financial facilities for the development of industries. It also
provide refinancing facility to industrial loans granted by banks and financial institutions.

4. Small Indistries Development Bank of India (SIDBI - 1990)

Apex financial institution for Promotion, Financing and Development of MSMEs.

5. National Bank for Agriculture and Rural Development (NABARD - 1982)

National Bank for Agriculture and Rural Development (NABARD) was established by an Act of
the Parliament on 12 July1982 to facilitate credit flow for agriculture , rural infra structure and
development.

6. The Industrial Investment Bank of India (IIBI)

The Industrial Investment Bank of India is a 100% Government of India-owned financial
investment institution which offers assistance for project finance
State level

1.Kerala Financial Corporation (KFC)

KFC has been incorporated under the SFC Act 1951 with its headquarters at
Thiruvananthapuram to accelerate industrial growth. KFC provides assistance to the new industrial
units and for expansion, diversification and modernisation of existing units.

2.State Industrial Development Corporation (SIDCs)

Incorporated under the Companies Act 1956. SIDCs were setup in different states as wholly
owned companies for promoting industrial development in their respective states. The main aim is
prove term finance to all small, medium, and large industrial enterprises set up in the state.

Supporting Institutions

1 National Skill Development Corporation (NSDC)

The National Skill Development Corporation(NSDC) is a one of its kind, Public Private
Partnership in India, under the Ministry of Skill Development and Entrepreneurship. It aims at
promoting skill development by catalysing creation of large quality for promote vocational institutions.
NSDC provides funding to build scalable for promote vocational training initiatives. Its mandate is to
enable support systems quality assurance, information systems and to train the trainer academies either
directly or through partnerships. NSDC acts as a catalyst in skill development by providing funding to
enterprises, companies and organizations that provide skill training.

By Krishnanunni.T, GVHSS Karakurissi, Palakkad

2. Kaushal Kendra
Kaushal Kendra are being set up as community centre focused on rural population .It is being set
up in all Districts with the objectives of enhancing global level competency to the rural youth, career
path and orientation.

3.Mudra Bank (Micro Units Development and Refinancing Agency)

Mudra Bank is a new institution being set up by Government of India for development and
refinancing activities relating to micro units. Micro Units Development and Refinance Agency Ltd
were launched on 8 April,2015.
Objectives of Mudra Bank
1. Extend finance and credit support to Micro-finance Institutions (MFI) and agencies.
2. Offer a Credit Guarantee scheme for providing guarantees to loans being offered to micro business.
3. Register all MFIs and introduce a system of performance rating.
4. Provide structural guidelines for the borrowers.

4. Kerala Academy for Skills Excellence (KASE)

With he objective of skilling the young workforce of Kerala and elevating their skills to global
standards for employment in India and abroad, the Government of Kerala has set up Kerala Academy
for Skills Excellence(KASE), a non-profit public company as the nodal agency for all skill
development activities of the state.

5. Kerala State Entrepreneur Development Mission (KSEDM)

KSEDM is an ambitious scheme of the Government of Kerala, aims at inculcating entrepreneurial
confidence among youth of the State through the process of selecting persons with aptitude and
earnestness, training them meticulously and enabling them avail finance on easy terms from Banks/
Financial Institutions.
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By Krishnanunni.T, GVHSS Karakurissi, Palakkad