Question

Easy in formation is

• A. Sole trading
• B. Partnership firm
• C. Joint stock company
• D. None of these

Hint:

The complexity of formation increases with the separation of ownership and management and the extent of legal liability protection: Sole Trader (Easiest) $\rightarrow$ Partnership $\rightarrow$ Company (Most Complex).

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
The question asks to identify which form of business organization is the easiest to establish or form.
Step 2: Key Concept:
Different business structures have varying levels of legal and procedural formalities for their formation. "Ease of formation" refers to minimal legal requirements, low cost, and speed of setup.
Step 3: Detailed Explanation:
Let's compare the formation process of the given options:

(A) Sole trading (Sole Proprietorship): This is the simplest business form. It has the least number of legal formalities. An individual can start the business without any formal registration process in many cases, although local business licenses may be required. There is no separate legal entity to create.

(B) Partnership firm: Formation requires an agreement between two or more partners, known as a Partnership Deed. While registration of the firm is not always compulsory, it is highly advisable to secure legal benefits. This involves more steps than a sole proprietorship.

(C) Joint stock company: This is the most complex and expensive form to set up. It requires compulsory incorporation under the Companies Act, which involves a lengthy process of filing documents like the Memorandum of Association and Articles of Association with the Registrar of Companies.

Comparing the complexity, cost, and time involved, the sole proprietorship is by far the easiest to form.
Step 4: Final Answer:
Sole trading is the easiest form of business to establish. Therefore, option (A) is correct.