For
ms ofBusiness Organi
zati
ons :Sol
e pr
opr
iet
orshi
ps,Par
tner
shi
p,Cor
por
ati
on,
Cooper
ati
ve,
Associ
ati
on,Franchi
seandTr
ust
Obj
ect
ives/
Lear
ningout
comes
Onsuccessf
ulcompl
eti
onoft
heuni
tyoushoul
dbeabl
eto:
•
Definebusi
nessor gani
sati
on
•
Identi
fydi
ffer
entformsofbusinessorgani
sati
ons
•
Explai
nthecharacteri
sti
csofeachofbusinessor
ganisat
ion
•
Analysetheadvantagesanddisadvant
agesofeachform ofbusi
nessor
gani
sat
ions
Intr
oduct i
on
I
fonei splanningtostartabusi
nessori si
nter
est
edi nexpandi
nganexi stingone,an
i
mpor tantdeci si
on rel
ates t
ot he choice ofthe form oforganisati
on.The most
appropriateformisdeter
minedbywei ghingt
headv antagesanddisadvantagesofeach
typeofor ganisat
ionagai
nstone’
sownr equi
rements
Busi
nessOr
gani
zat
ions
Abusi nessorgani zationisani ndivi
dualorgroupofpeoplet hatcoll
aborat
et oachi
eve
cert
aincommer cialgoal s.Somebusi nessorgani
zat
ionsaref ormedt oearnincomefor
owners.Ot herbusi ness organizati
ons,call
ed non-prof
it
s,ar ef ormed f orpubli
c
purposes.Thesebusi nessesof tenrai
semoneyandut i
lizeotherresourcestoprovi
deor
supportpubli
cpr ogr ams.
Oneoft hekeydeci sionsyou'
llmakewhenst arti
ngabusi nessiswhi chlegalstruct
ure
touse.Becausei t'
ssuchani mpor t
antdeci sion,youshoul dgetadv icefrom aqual i
fi
ed
i
ndependentbusi ness,fi
nanci
alorl egaladv i
sor.Thest ructureyouchoosewi lldepend
ont hesi zeandt ypeofbusiness,al ongwi thy ourpersonalci rcumstancesandhow
muchy ouwantt ogrowt hebusi ness.Thekeyi stoensur et hatwhat ev
erst r
uctureyou
choosei sinplacebef oreyoust artthebusi nessandt haty ou'r
eabl etocompl ywiththe
vari
ousl egalrequirementsitcarr i
es.Int hi
suni tyouwilllearnsev endiff
erentbusiness
str
ucturesandt hesear e:Solepr opr i
etorshi
ps,Par t
nershi p,Corporati
on,Cooper at
ive,
Association,FranchiseandTr ust.Letusnowl ookclosel yateachoneoft hebusiness
str
uctures.
Fact
orst
oConsi
derwhenst
art
inganewbusi
ness
I
fyou’
rest
art
inganewbusi
ness,y
ouhav
etodeci
dewhi
chl
egalf
orm ofowner
shi
pis
bestf
ory
ouandy
ourbusi
ness.Doy
ouwantt
oownt
hebusi
nessy
our
sel
fandoper
ate
,as a sol
e pr
opr
iet
orshi
p?Or
,do y
ou wantt
o shar
e owner
shi
p,oper
ati
ng as a
par
tner
shi
pora cor
por
ati
on?Bef
orewedi
scusst
hepr
osandconsoft
heset
ypesof
owner
shi
p,l
et’
saddr
esssomeoft
hequest
ionst
haty
ou’
dpr
obabl
yasky
our
sel
fin
choosi
ngt
heappr
opr
iat
elegal
for
mfory
ourbusi
ness.
1)I
nset
ti
ngupy
ourbusi
ness,
doy
ouwantt
omi
nimi
zet
hecost
sofget
ti
ngst
art
ed?Do
y
ouhopet
oav
oidcompl
exgov
ernmentr
egul
ati
onsandr
epor
ti
ngr
equi
rement
s?
2)Howmuchcont
rolwoul
dyoul
i
ke?Howmuchr
esponsi
bil
i
tyf
orr
unni
ngt
hebusi
ness
ar
eyouwi
l
li
ngt
oshar
e?Whataboutshar
ingt
hepr
ofi
ts?
3)Doy
ouwantt
oav
oidspeci
alt
axes?
4)Doy
ouhav
eal
ltheski
l
lsneededt
orunt
hebusi
ness?
5)Ar
eyoul
i
kel
ytogetal
ongwi
thy
ourco-
owner
sov
eranext
endedper
iodoft
ime?
6)I
siti
mpor
tantt
oyout
hatt
hebusi
nesssur
viv
eyou?
7)Whatar
eyourf
inanci
ngneedsandhowdoy
oupl
ant
ofi
nancey
ourcompany
?
8)Howmuchper
sonal
exposur
etol
i
abi
l
ityar
eyouwi
l
li
ngt
oaccept
?Doy
ouf
eel
uneasy
aboutaccept
ingper
sonal
li
abi
l
ityf
ort
heact
ionsoff
ell
owowner
s?
-
Nosi
ngl
efor
m ofowner
shi
pwi
l
lgi
vey
ouev
ery
thi
ngy
oudesi
re.You’
l
lhav
etomake
somet
rade-
off
s.Becauseeachopt
ionhasbot
hadv
ant
agesanddi
sadv
ant
ages,y
our
j
obi
stodeci
dewhi
choneof
fer
sthef
eat
urest
hatar
emosti
mpor
tantt
oyou.I
nthe
f
oll
owi
ng sect
ions we’
l
lcompar
ethr
ee owner
shi
p opt
ions (
sol
e pr
opr
iet
orshi
p,
par
tner
shi
p,cor
por
ati
on)ont
heseei
ghtdi
mensi
ons.
Choosi ngYourLegal Str ucture
Yourchoi ceofwhet hery ourbusinessshouldbeapr oprietorshi
p,apar tnershipora
cor por ati
on can be i mpor tant for many r easons. Each has adv ant ages and
disadv antagesdependi ngont hetypeofactivi
tyy ouar eengagedi n.Par tofkeepi ng
yourhome- based busi nessl egalinvolv
eschoosi ng t he l egalstructuref orit:sole
propr ietorship,partnershi p,orcorporat
ion.Asi
def rom bei ngnecessar yforgov ernment
repor tingandt ax pur poses,t hiscanenableyourbusi nesst ooper atemor eef fi
cient
ly.
Sinceeachl egalform hasi t
sownuni quecharacter i
stics,y ourgoalist ochooset he
formt hatwor ksbestf ory ou. Oncet heent r
epreneurhasdet erminedt hegoodsor
ser vicest hecompanywi l
lofferandwhet hert herei sa mar ketfort hepr oduct,a
deci sionmustbemadeont hetypeofbusi nessf or
mat i
on.Usual lyy ouwi l
lchoose
eitherasol epr opr
ietorshi p,apar t
nershi
poracor poration.Ther e'
snor ightorwr ong
, choi
cethatf
its ev
eryone.Yourj
obi
stounder
standt
headvant
agesanddi
sadv
ant
ages
ofeachl
egalstr
uctur
eandpi ckt
heonet
hatbestmeet
syourneeds
Sol
epr
opr
iet
orshi
p
Abusi
nessownedbyoneper
son,
whoi
sent
it
ledt
oal
lofi
tspr
ofi
tsandr
esponsi
blef
or
allofi t
sdebt s,is consi der
edasol epr opr i
etorship.Thesef i
rmsar eownedbyone
person,usuallytheindiv i
dualwhohasday -to-dayresponsi bil
it
yforr unningt hebusiness.
Soleproprietorsownal ltheassetsofthebusi nessandt hepr ofi
tsgener atedbyi t.They
alsoassumecompl eter esponsi
bil
it
yforanyofi tsliabil
it
iesordebt s.Thislegalf ormi s
the simplest,pr ovi
ding maxi mum cont roland mi nimum gov ernmenti nterference.
Currentl
yusedbymor et han75percentofal lbusinesses, itisoftent hesuggest edway
foranewbusi nessthatdoesnotcar rygreatper sonal li
abili
tythreats.Theownersi mpl y
needst osecur ethenecessar yl
i
censes,taxi dentif
icati
onnumber s,andcer tif
icati
onsi n
hisorhername,andy ouar enowi nbusiness!Sol epr opri
etorshipi sapopul arfor m of
businessor ganisati
onandi sthemostsui tablef ormf orsmal lbusinesses, especiallyin
thei
rinit
ialyearsofoper ati
on
Themai
nadv
ant
agest
hatdi
ff
erent
iat
ethesol
epr
opr
iet
orshi
pfr
om t
heot
herl
egal
f
ormsar
e(1)t
heeasewi
thwhi
chi
tcanbest
art
ed,
(2)t
heowner
'sf
reedom t
omake
deci
si
ons,
and(
3)t
hedi
str
ibut
ionofpr
ofi
ts(
ownert
akesal
l
)
Asolepropr
iet
orshi
pisthesi
mplestform ofbusinessstr
uctureandrel
ati
velyeasyand
i
nexpensi
vetostartandmaint
ain.Manysol etr
ader schoosetotradeundertheirown
name-f orexample,SamsonBanda-whi l
eot hersopttor egi
sterabusinessname
whichmustbedonewi t
htheRegist
rarofCompani es.
Feat
uresofSol
ePropr
iet
orshi
p:
Theimport
antf
eat
uresofasole-
propr
iet
aryor
gani
zat
ioni
ncl
udet
hef
oll
owi
ng:
I
ndi
vi
dual
Ini
ti
ati
ve:
Oneper
soni
stheowneri
nasol
epr
opr
iet
aryf
orm ofor
gani
sat
ion.
RiskBearing:Thepr
opri
etori
sthesol
ebenefi
ciaryofprof
it
sinthisfor
m or
ganisat
ion.I
f
ther
ei sal osshealonehast obearit
.Thust herisksofbusinessarebornebyt he
propr
ietorhimsel
f.
ms ofBusiness Organi
zati
ons :Sol
e pr
opr
iet
orshi
ps,Par
tner
shi
p,Cor
por
ati
on,
Cooper
ati
ve,
Associ
ati
on,Franchi
seandTr
ust
Obj
ect
ives/
Lear
ningout
comes
Onsuccessf
ulcompl
eti
onoft
heuni
tyoushoul
dbeabl
eto:
•
Definebusi
nessor gani
sati
on
•
Identi
fydi
ffer
entformsofbusinessorgani
sati
ons
•
Explai
nthecharacteri
sti
csofeachofbusinessor
ganisat
ion
•
Analysetheadvantagesanddisadvant
agesofeachform ofbusi
nessor
gani
sat
ions
Intr
oduct i
on
I
fonei splanningtostartabusi
nessori si
nter
est
edi nexpandi
nganexi stingone,an
i
mpor tantdeci si
on rel
ates t
ot he choice ofthe form oforganisati
on.The most
appropriateformisdeter
minedbywei ghingt
headv antagesanddisadvantagesofeach
typeofor ganisat
ionagai
nstone’
sownr equi
rements
Busi
nessOr
gani
zat
ions
Abusi nessorgani zationisani ndivi
dualorgroupofpeoplet hatcoll
aborat
et oachi
eve
cert
aincommer cialgoal s.Somebusi nessorgani
zat
ionsaref ormedt oearnincomefor
owners.Ot herbusi ness organizati
ons,call
ed non-prof
it
s,ar ef ormed f orpubli
c
purposes.Thesebusi nessesof tenrai
semoneyandut i
lizeotherresourcestoprovi
deor
supportpubli
cpr ogr ams.
Oneoft hekeydeci sionsyou'
llmakewhenst arti
ngabusi nessiswhi chlegalstruct
ure
touse.Becausei t'
ssuchani mpor t
antdeci sion,youshoul dgetadv icefrom aqual i
fi
ed
i
ndependentbusi ness,fi
nanci
alorl egaladv i
sor.Thest ructureyouchoosewi lldepend
ont hesi zeandt ypeofbusiness,al ongwi thy ourpersonalci rcumstancesandhow
muchy ouwantt ogrowt hebusi ness.Thekeyi stoensur et hatwhat ev
erst r
uctureyou
choosei sinplacebef oreyoust artthebusi nessandt haty ou'r
eabl etocompl ywiththe
vari
ousl egalrequirementsitcarr i
es.Int hi
suni tyouwilllearnsev endiff
erentbusiness
str
ucturesandt hesear e:Solepr opr i
etorshi
ps,Par t
nershi p,Corporati
on,Cooper at
ive,
Association,FranchiseandTr ust.Letusnowl ookclosel yateachoneoft hebusiness
str
uctures.
Fact
orst
oConsi
derwhenst
art
inganewbusi
ness
I
fyou’
rest
art
inganewbusi
ness,y
ouhav
etodeci
dewhi
chl
egalf
orm ofowner
shi
pis
bestf
ory
ouandy
ourbusi
ness.Doy
ouwantt
oownt
hebusi
nessy
our
sel
fandoper
ate
,as a sol
e pr
opr
iet
orshi
p?Or
,do y
ou wantt
o shar
e owner
shi
p,oper
ati
ng as a
par
tner
shi
pora cor
por
ati
on?Bef
orewedi
scusst
hepr
osandconsoft
heset
ypesof
owner
shi
p,l
et’
saddr
esssomeoft
hequest
ionst
haty
ou’
dpr
obabl
yasky
our
sel
fin
choosi
ngt
heappr
opr
iat
elegal
for
mfory
ourbusi
ness.
1)I
nset
ti
ngupy
ourbusi
ness,
doy
ouwantt
omi
nimi
zet
hecost
sofget
ti
ngst
art
ed?Do
y
ouhopet
oav
oidcompl
exgov
ernmentr
egul
ati
onsandr
epor
ti
ngr
equi
rement
s?
2)Howmuchcont
rolwoul
dyoul
i
ke?Howmuchr
esponsi
bil
i
tyf
orr
unni
ngt
hebusi
ness
ar
eyouwi
l
li
ngt
oshar
e?Whataboutshar
ingt
hepr
ofi
ts?
3)Doy
ouwantt
oav
oidspeci
alt
axes?
4)Doy
ouhav
eal
ltheski
l
lsneededt
orunt
hebusi
ness?
5)Ar
eyoul
i
kel
ytogetal
ongwi
thy
ourco-
owner
sov
eranext
endedper
iodoft
ime?
6)I
siti
mpor
tantt
oyout
hatt
hebusi
nesssur
viv
eyou?
7)Whatar
eyourf
inanci
ngneedsandhowdoy
oupl
ant
ofi
nancey
ourcompany
?
8)Howmuchper
sonal
exposur
etol
i
abi
l
ityar
eyouwi
l
li
ngt
oaccept
?Doy
ouf
eel
uneasy
aboutaccept
ingper
sonal
li
abi
l
ityf
ort
heact
ionsoff
ell
owowner
s?
-
Nosi
ngl
efor
m ofowner
shi
pwi
l
lgi
vey
ouev
ery
thi
ngy
oudesi
re.You’
l
lhav
etomake
somet
rade-
off
s.Becauseeachopt
ionhasbot
hadv
ant
agesanddi
sadv
ant
ages,y
our
j
obi
stodeci
dewhi
choneof
fer
sthef
eat
urest
hatar
emosti
mpor
tantt
oyou.I
nthe
f
oll
owi
ng sect
ions we’
l
lcompar
ethr
ee owner
shi
p opt
ions (
sol
e pr
opr
iet
orshi
p,
par
tner
shi
p,cor
por
ati
on)ont
heseei
ghtdi
mensi
ons.
Choosi ngYourLegal Str ucture
Yourchoi ceofwhet hery ourbusinessshouldbeapr oprietorshi
p,apar tnershipora
cor por ati
on can be i mpor tant for many r easons. Each has adv ant ages and
disadv antagesdependi ngont hetypeofactivi
tyy ouar eengagedi n.Par tofkeepi ng
yourhome- based busi nessl egalinvolv
eschoosi ng t he l egalstructuref orit:sole
propr ietorship,partnershi p,orcorporat
ion.Asi
def rom bei ngnecessar yforgov ernment
repor tingandt ax pur poses,t hiscanenableyourbusi nesst ooper atemor eef fi
cient
ly.
Sinceeachl egalform hasi t
sownuni quecharacter i
stics,y ourgoalist ochooset he
formt hatwor ksbestf ory ou. Oncet heent r
epreneurhasdet erminedt hegoodsor
ser vicest hecompanywi l
lofferandwhet hert herei sa mar ketfort hepr oduct,a
deci sionmustbemadeont hetypeofbusi nessf or
mat i
on.Usual lyy ouwi l
lchoose
eitherasol epr opr
ietorshi p,apar t
nershi
poracor poration.Ther e'
snor ightorwr ong
, choi
cethatf
its ev
eryone.Yourj
obi
stounder
standt
headvant
agesanddi
sadv
ant
ages
ofeachl
egalstr
uctur
eandpi ckt
heonet
hatbestmeet
syourneeds
Sol
epr
opr
iet
orshi
p
Abusi
nessownedbyoneper
son,
whoi
sent
it
ledt
oal
lofi
tspr
ofi
tsandr
esponsi
blef
or
allofi t
sdebt s,is consi der
edasol epr opr i
etorship.Thesef i
rmsar eownedbyone
person,usuallytheindiv i
dualwhohasday -to-dayresponsi bil
it
yforr unningt hebusiness.
Soleproprietorsownal ltheassetsofthebusi nessandt hepr ofi
tsgener atedbyi t.They
alsoassumecompl eter esponsi
bil
it
yforanyofi tsliabil
it
iesordebt s.Thislegalf ormi s
the simplest,pr ovi
ding maxi mum cont roland mi nimum gov ernmenti nterference.
Currentl
yusedbymor et han75percentofal lbusinesses, itisoftent hesuggest edway
foranewbusi nessthatdoesnotcar rygreatper sonal li
abili
tythreats.Theownersi mpl y
needst osecur ethenecessar yl
i
censes,taxi dentif
icati
onnumber s,andcer tif
icati
onsi n
hisorhername,andy ouar enowi nbusiness!Sol epr opri
etorshipi sapopul arfor m of
businessor ganisati
onandi sthemostsui tablef ormf orsmal lbusinesses, especiallyin
thei
rinit
ialyearsofoper ati
on
Themai
nadv
ant
agest
hatdi
ff
erent
iat
ethesol
epr
opr
iet
orshi
pfr
om t
heot
herl
egal
f
ormsar
e(1)t
heeasewi
thwhi
chi
tcanbest
art
ed,
(2)t
heowner
'sf
reedom t
omake
deci
si
ons,
and(
3)t
hedi
str
ibut
ionofpr
ofi
ts(
ownert
akesal
l
)
Asolepropr
iet
orshi
pisthesi
mplestform ofbusinessstr
uctureandrel
ati
velyeasyand
i
nexpensi
vetostartandmaint
ain.Manysol etr
ader schoosetotradeundertheirown
name-f orexample,SamsonBanda-whi l
eot hersopttor egi
sterabusinessname
whichmustbedonewi t
htheRegist
rarofCompani es.
Feat
uresofSol
ePropr
iet
orshi
p:
Theimport
antf
eat
uresofasole-
propr
iet
aryor
gani
zat
ioni
ncl
udet
hef
oll
owi
ng:
I
ndi
vi
dual
Ini
ti
ati
ve:
Oneper
soni
stheowneri
nasol
epr
opr
iet
aryf
orm ofor
gani
sat
ion.
RiskBearing:Thepr
opri
etori
sthesol
ebenefi
ciaryofprof
it
sinthisfor
m or
ganisat
ion.I
f
ther
ei sal osshealonehast obearit
.Thust herisksofbusinessarebornebyt he
propr
ietorhimsel
f.
