Page 3 - Lesson Note 9

4. Statement is Lieu of Prospectus:

A public company having a share capital may sometimes decide not to raise funds from the public
because it may be confident of obtaining the required capital privately. In such case it will have to tile a
statement in lieu of prospectus with the Registrar of companies. It Contains information much similar to
that of a prospectus.

CHOICE OF FORM OF BUSINESS ORGANISATION

The following factors are important for taking decision about form of organization:

1. Cost and ease in setting up the organization: Sole proprietorship is least expensive and can be formed
without any legal formalities to be fulfilled. Company is also expensive with lot of legal formalities.

2. Capital consideration: Business requiring less amount of finance prefers sole proprietorship &
partnership form, where as business activities requiring huge financial resonances prefer company form.

3. Nature of business: If the work requires personal attention such as tailoring unit, cutting saloon, it is
generally setup as a sole proprietorship. Unit engaged in large scale manufacturing are more likely to be
organized in company form.

4. Degree of control desired: A person who desires full and exclusive control over business prefers
proprietorship rather than partnership or company because control has to be shared in these cases.

5. Liability or Degree of Risk: Projects which are not very risky can be organized in the form of sole
proprietorship partnership whereas the risky ventures should be done in company form of organization
because the liability of shareholders is limited.