Business StudiesCBSE Class 11 · Forms of Business Organisation

Company, One Person Company and Cooperative Society Class 11: Features, Comparison and Choice of Form

Updated 17 October 2026 · Fact-checked

A company is an artificial person with a legal status separate from its members, perpetual succession, limited liability and control by a board of directors. A private company has 2 to 200 members, a public company at least 7, and a One Person Company exactly one. A cooperative society is a voluntary association of at least 10 members with one-member-one-vote and a service motive. The choice of form depends on cost, liability, continuity, capital, control and the nature of business.

Notice that members rise from 1 to 2–200 to 7 or more, and minimum directors rise from 1 to 2 to 3.

Illustration drawn for QuestionBuddy.

Understand Joint Stock Company, Private, Public and One Person Company, Cooperative Society and Choice of Form (CBSE 11)

Joint stock company. An association of persons formed for business, with a legal status independent of its members. Capital is divided into shares; shareholders are members. Governed by the Companies Act, 2013.

Features: artificial person (can own property, contract, sue and be sued); separate legal entity; formation is time-consuming and costly; perpetual succession (unaffected by death, insolvency or transfer of shares; ends only by winding up); control by an elected board of directors; liability limited to the unpaid amount on shares; common seal (optional since the 2015 amendment); risk borne by all shareholders in proportion to their shares.
Merits: limited liability, transferability of interest, perpetual existence, scope for expansion, professional management.
Limitations: complex formation, lack of secrecy, impersonal environment, many regulations, delay in decisions, control by few directors, conflict of interest among stakeholders.

Kinds of company.

Basis	Private company	Public company	One Person Company
Members	Minimum 2, maximum 200 (excluding present and past employees)	Minimum 7, no maximum	Exactly 1 member
Directors	Minimum 2	Minimum 3	Minimum 1
Transfer of shares	Restricted by articles	Freely transferable	One member, with a nominee named
Invitation to public	Cannot invite	Can invite	Cannot invite
Name ends with	Private Limited	Limited	(OPC) Private Limited

A private company can start business on incorporation. An OPC (introduced by the Companies Act, 2013) lets a single entrepreneur have limited liability and a separate legal entity; the member names a nominee who becomes the member on his death or incapacity.

Cooperative society. A voluntary association of persons who join to protect and promote their common economic interests through mutual help, registered under the Cooperative Societies Act, 1912 (or a state act); minimum 10 members. Features: voluntary membership; legal status as a separate entity; limited liability; control by an elected managing committee with one member, one vote; service motive. Merits: equal voting, limited liability, stable existence, economy through elimination of middlemen, government support, ease of formation. Limitations: limited resources, inefficient management, lack of secrecy, government control, differences among members. Types: consumer, producer, marketing, farmers', credit and housing cooperatives.

Choice of form.
1. Cost and ease of setting up: sole proprietorship cheapest, company costliest.
2. Liability: unlimited in sole proprietorship and partnership; limited in cooperatives and companies.
3. Continuity: uncertain in sole proprietorship and partnership; stable in cooperatives and companies.
4. Management ability: partnerships and companies bring more skills.
5. Capital: small capital suits sole proprietorship or partnership; large capital suits a company.
6. Degree of control: full in sole proprietorship; shared in partnership; separated from ownership in a company.
7. Nature of business: direct personal contact suits a sole proprietorship; large manufacturing suits a company.

Joint Stock Company, Private, Public and One Person Company, Cooperative Society and Choice of Form (CBSE 11): key facts

Company: separate legal entity
perpetual succession
limited liability
control by board of directors; Companies Act, 2013.
Members and directors: private 2 to 200 members and 2 directors
public at least 7 members and 3 directors
OPC 1 member and 1 director; Employees are excluded from the private company limit.
Limited liability: liability = unpaid amount per share x number of shares held | fully paid shares leave no further liability; Fixed whatever the debts of the company.
Cooperative society: minimum 10 members
voluntary
one member one vote
service motive; Cooperative Societies Act, 1912.

How to answer Joint Stock Company, Private, Public and One Person Company, Cooperative Society and Choice of Form (CBSE 11) questions

To choose or compare forms, list the facts of the case against the factors.

1Write down the capital needed, the risk, the number of owners and the need for continuity.
2Match small capital and personal contact with a sole proprietorship or partnership; large capital and limited liability with a company.
3If a group wants mutual help and equal voting, think of a cooperative society.
4For company types check members, directors, transfer of shares and invitation to the public.
5For liability numericals multiply the unpaid amount per share by the shares held.

Joint Stock Company, Private, Public and One Person Company, Cooperative Society and Choice of Form (CBSE 11) in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Thirty farmers selling milk together

Suppose 30 neighbouring farmers want to sell milk together to avoid middlemen, each with one equal say.

Which form suits them and why?

Try it first, then show the solutionSolution

They want mutual help and elimination of middlemen, with equal voting.
A cooperative society (minimum 10 members, one member one vote) suits this.

Answer: A cooperative society.

Memory hook: Common economic interest and equal voice means cooperative.

Tricks to remember Joint Stock Company, Private, Public and One Person Company, Cooperative Society and Choice of Form (CBSE 11)

Short memory aids. Say each one aloud once, then use it on a question the same day.

2-200, 7+, 1
Private 2 to 200, public at least 7, OPC exactly 1.
Use it when: Members.
2, 3, 1 directors
Private 2, public 3, OPC 1 director minimum.
Use it when: Directors.
One person, one vote
In a cooperative every member has one vote whatever his money.
Use it when: Cooperative control.

Joint Stock Company, Private, Public and One Person Company, Cooperative Society and Choice of Form (CBSE 11): solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: One Person Company · 1 mark · MCQBoard level

How many members does a One Person Company have?
(a) At least 2
(b) At least 7
(c) Exactly 1
(d) Up to 200

Try it first, then show the solutionSolution

An OPC has a single member who names a nominee.

Answer: (c) Exactly 1

Example 2: Merits of a company · 3 marks · Short answerBoard level

State any three merits of a joint stock company. (3 marks)

Try it first, then show the solutionSolution

Limited liability: shareholders lose at most the unpaid amount on their shares.
Perpetual existence: it is not affected by the death or insolvency of members.
Scope for expansion: large funds can be raised from many shareholders (also transferability and professional management).

Answer: Limited liability, perpetual existence and scope for expansion

Example 3: Liability compared · 4 marks · Short answerHarder board level

Shobha holds 500 shares of 10 each in a company, on which she has paid 7 per share. The company later owes 10,00,000 more than it can pay. Rakesh, a sole proprietor, owes 1,50,000 against business assets of 90,000. Find the maximum amount each can be asked to pay from personal property. (4 marks)

Try it first, then show the solutionSolution

Shobha: unpaid amount per share = 10 - 7 = 3; liability = 3 x 500 = 1,500.
Her liability is limited to this amount whatever the company owes.
Rakesh has unlimited liability: shortfall = 1,50,000 - 90,000 = 60,000, which can be recovered from his personal property.

Answer: Shobha 1,500; Rakesh 60,000 (and more if the shortfall rises)

Example 4: Choosing the form · 5 marks · Case-basedHOTS / competency

Case: (i) A tailor with a small shop wants direct contact with customers and 50,000 capital. (ii) Thirty farmers want to sell milk together without middlemen. (iii) A solo software developer wants limited liability. (iv) A group plans a steel plant needing very large capital and public funds. Suggest the most suitable form for each with a reason. (5 marks)

Try it first, then show the solutionSolution

(i) Sole proprietorship: direct personal contact, small capital, easy and cheap to set up.
(ii) Cooperative society: a voluntary association with mutual help, a service motive and one member one vote; minimum 10 members.
(iii) One Person Company: a single entrepreneur gets limited liability and a separate legal entity.
(iv) Public company: large capital from the public, limited liability and perpetual succession.

Answer: (i) Sole proprietorship (ii) Cooperative society (iii) One Person Company (iv) Public company

Example 5: OPC and sole proprietorship · 4 marks · Short answerHarder board level

Compare a One Person Company with a sole proprietorship on legal status, liability, continuity and name. (4 marks)

Try it first, then show the solutionSolution

Legal status: an OPC is a separate legal entity; a sole proprietorship has no separate legal entity.
Liability: the member of an OPC has limited liability; a sole proprietor has unlimited liability.
Continuity: an OPC continues through the nominee named by the member; a sole proprietorship may end on the owner's death, illness or insolvency.
Name: an OPC ends with (OPC) Private Limited; a sole proprietorship has no such requirement.

Answer: Separate entity versus none; limited versus unlimited liability; nominee continuity versus lack of continuity; OPC name.

Where students lose marks in Joint Stock Company, Private, Public and One Person Company, Cooperative Society and Choice of Form (CBSE 11)

The slips examiners see most often, and what to write instead.

Mistake: Mixing up the members for private and public companies
Reversing the limits.
Wrong working
Public company: 2 to 200 members
Right working
Private company: 2 to 200; public company: at least 7 with no maximum
Do this: Private has the cap.
Usually costs: 1 mark
Mistake: Counting shares not votes in a cooperative
Applying the company rule.
Wrong working
A member with more money has more votes
Right working
One member, one vote in a cooperative
Do this: Votes are equal.
Usually costs: 1 mark
Mistake: Giving shareholders unlimited liability
Confusing with a sole proprietor.
Wrong working
A shareholder is liable for all the debts of the company
Right working
Liability is limited to the unpaid amount on his shares
Do this: Calculate unpaid amount x shares.
Usually costs: 1 to 2 marks

Exam tips

Use a table for private, public and OPC with five bases.
Quote the Companies Act, 2013 and the Cooperative Societies Act, 1912.
In choice questions justify using cost, liability, continuity, capital and control.
State that a private company cannot invite the public to subscribe.

Practice questions on Joint Stock Company, Private, Public and One Person Company, Cooperative Society and Choice of Form (CBSE 11)

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
The minimum number of directors in a public company is
(a) 1
(b) 2
(c) 3
(d) 7
Hint
Private has 2.
Answer
(c) 3
Q2 · 1 mark · Assertion-reasonHarder board level
Assertion (A): A company has perpetual succession.
Reason (R): Its existence is not affected by the death or insolvency of its members and ends only by law.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Winding up.
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q3 · 4 marks · Short answerHarder board level
Compare a cooperative society and a joint stock company on motive, voting, minimum members and liability. (4 marks)
Hint
Service versus profit, one vote versus shares.
Answer
Motive: a cooperative has a service motive; a company aims at profit. Voting: one member one vote in a cooperative; control by a board of directors elected by shareholders in a company. Minimum members: 10 for a cooperative society; 2 for a private company and 7 for a public company. Liability: limited in both, to the capital contributed in a cooperative and to the unpaid amount on shares in a company.
Q4 · 4 marks · Short answerHarder board level
A private company has 190 members who are not employees. The promoters want to add 15 more non-employee members and 30 employee members. Can it do so? Also, can a group of 5 persons form a public company? (4 marks)
Hint
Employees are excluded from the maximum of 200.
Answer
190 + 15 = 205 non-employee members exceeds the maximum of 200, so all 15 cannot be added (only 10 can be); the 30 employee members are not counted in the limit. A public company needs at least 7 members, so a group of 5 cannot form it (it could form a private company with minimum 2).
Q5 · 5 marks · Case-basedHOTS / competency
Case: Sunita starts a bakery with 80,000 capital and her brother advises forming a company. Three years later she wants to expand and needs 3 crore. (5 marks)
(i) Compare a sole proprietorship and a company for the bakery on cost of setting up, liability and control. (3)
(ii) Which form suits the expansion and why? (2)
Hint
Match capital with form.
Answer
(i) Cost: a sole proprietorship is cheapest and easiest; a company is costliest with the most formalities. Liability: unlimited in a sole proprietorship, limited in a company. Control: full with Sunita in a sole proprietorship; separated from ownership in a company. (ii) A company, because large capital can be raised from many shareholders, with limited liability and perpetual succession.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.How many members does a private company allow?Show answer
Minimum 2 and maximum 200, excluding employees.
2.How many members make a cooperative society?Show answer
Minimum 10.
3.What is the liability of a shareholder?Show answer
Limited to the unpaid amount on the shares held.
4.What does an OPC name?Show answer
A nominee who becomes the member on his death or incapacity.
5.Which form is cheapest to set up?Show answer
The sole proprietorship.

Joint Stock Company, Private, Public and One Person Company, Cooperative Society and Choice of Form (CBSE 11): frequently asked questions

Is the common seal compulsory?

No; it has been optional since the 2015 amendment.

Can a public company invite the public?

Yes, it can invite the public to subscribe to its shares.

Which form is best?

None is best for every business; the choice balances cost, liability, continuity, capital, control and nature of business.