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CBSE Class 11 Business Studies Exam 2020: Important Questions & Answers of Chapter 2 – Forms of Business Organisation

Business Studies Chapter 2

Go through the important set of questions and answers of CBSE class 11 Business Studies (Chapter 2- Forms of Business Organisation). The provided long and short answer questions are from the NCERT textbook as well as from the syllabus of Business Studies 2020. Prepare yourself well with these important questions of class 11 Business Studies Exam 2020.

CBSE Class 11 Business Studies Chapter 2 Forms of Business Organisation- Important Questions and Answers


Q 1- Mention some of the important privileges available to a private company.

Ans- As compared to a public company, the private company enjoys certain privileges or exemptions. Few of them are mentioned below:

Commencement of Business- Once the Private company receives the Certificate of Incorporation, they can start their operation right away. While for the public company it is important to obtain a certificate of commencement along with the Certificate of Incorporation.

Fewer members required- A private company needs to have just two people for the business to start. On the other hand, only seven members are required for the public company.

 Absence of restrictions for giving a loan to the directors- For the directors of the private company, there is no restriction on loan amount that can be granted. No permission is required for advancing loans. While the public company needs to take the permission of the government before granting the loan to its director.

Q 2- Compare the status of minor in a Joint Hindu Family Business to that in a partnership firm.

Ans- Any person below the age of 18 is considered minor as per the Indian law. In Joint Hindu Family Business, birth is the only factor for membership in the family business. As soon as the boy child is born, he becomes entitled to the share in the family business and has equal ownership right on the inherited property.

But as per the Partnership Act, 1923, no minor can be a part of the partnership firm. Minor is not legally allowed to enter into any legal contract. However, with all the partner’s consent, the minor can be admitted to share the profits of the firm but he cannot contribute to capital or bear any losses of the firm.

Q3- Why do partnership firms register themselves, even if it is optional? Discuss.

Ans- The registration of partnership firms is optional but still many firms go through this legal formality. The reason is that are a certain number of disadvantages with not getting registered. Few of them are mentioned below:

  • The non-registered partnership firms can be sued by any other firm. While the members of the non-registered firm can not legally file a suit against a third party
  • The non-registered firm cannot file a case against any of the partners. In the same way, a partner cannot file a case against co-partners or the firm
  • A partnership firm without any registration cannot enforce its claim against the third party.

Q 4- Who elect the Board of Directors in the Joint Stock Company?

Ans- Shareholders elect The Board of Directors in the Joint Stock Company.

Q5- What is a Joint Stock Company?

Ans- Joint-stock companies are formed with the purpose to finance efforts which are valuable for an individual or even a government. Joint-Stock company owners demand a profit share.

A joint-stock company is a business controlled by its investors. Each of the investors enjoys the share of profit. The amount of share depends on the amount of acquired stock.

Q 6- In what ways does the cooperative society exemplifies secularism and democracy? Describe in brief points.

Ans- The number of ways through which cooperative society exemplifies secularism and democracy is mentioned in points below:

  • In a democracy, a cooperative society gives equal treatment to all its members and also provides equal rights to all its members.
  • The members of the managing committee are elected by the members of the society which shows the secularist system.
  • ‘one member, one vote’ principle prevents the domination of the richer members in the decision-making process of the society.

Q 7– What is unlimited liability?

Ans: Unlimited liability is the involvement of general partners and sole proprietors effective for debt and liabilities collected by the business. The liability cannot be capped and can be easily paid off within the seizure of owners’ own personal assets, which makes it distinct from the limited liability ventures.

Q 8– Who is a secret partner?

Ans- The partner whose membership is hidden from the public and is maintained as a secret is known as a secret partner.

Q 9- What is ‘partner by estoppel’? Explain

A person can be regarded as a ‘partner by estoppel’, if he or she through his/her actions or behavior, leaves an impression on third parties that he or she is a partner in a particular firm. They can also be held liable for the debts of the firm owes any of them to third parties.

Q 10- Which company has no restrictions on the transfer of shares?

AnsPublic company is the one that has no restrictions on the share transfer.


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