Learning Unit 1: Introduction to Business Enterprise
Structures
Sole Trader:
- A sole trader is the business itself.
- It involves just one person as the owner.
- The owner reaps all profits and assumes all risks.
- Business success relies entirely on this single individual.
- No distinction exists between the business's and owner's assets.
- The owner has unlimited liability, responsible for all debts.
- Tax implications are often unfavourable.
Partnership:
- Formed by two or more people, a partnership is a contractual legal relationship.
- As per the 2008 Companies Act, there must be at least two partners, with no
maximum limit.
- Partners contribute to a common business aimed at generating profit to be shared.
- Typically lacks a separate legal entity status.
- Does not have perpetual succession.
- Partners have unlimited liability.
Company:
- A company is registered under the Companies Act of 2008.
- It is a separate legal entity distinct from its shareholders.
- Enjoys perpetual succession.
- Shareholders have limited liability, capped at their share value.
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, - Directors can be personally liable in specific scenarios.
- Companies can be either for-profit or non-profit.
Types of Profit Companies:
- **Public Company:** Not a state-owned, private, or personal liability company.
Shares are publicly offered and transferable. Can be listed or unlisted and governed
by the company's Memorandum of Incorporation (MOI). Identified by "Ltd."
- **State-Owned Company:** Listed as a public entity or municipality-owned. Provides
goods or services under business principles. Juristic person under national
government control, financed outside the National Revenue Fund. Identified by "SOC."
- **Personal Liability Company:** Private company used by professional associations.
MOI indicates personal liability, and directors share liability for debts incurred during
their tenure.
- **Private Company:** MOI restricts public share offering and transferability. No limit
on the number of shareholders.
Non-Profit Company:
- Has a public benefit or social/cultural objectives.
- Assets and income must advance the company's objective.
- Incorporators, members, or directors cannot gain financially except for reasonable
remuneration or expenses.
- On dissolution, remaining assets must go to similar non-profit entities.
- Can have voting and non-voting members as specified by the MOI.
Close Corporation (CC):
- Similar to a company but with simpler registration and administration.
- New CCs cannot be formed post-2008, but existing ones continue.
- Members can actively manage, and liability is limited to the corporation.
- Minimum of one, maximum of ten members.
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Structures
Sole Trader:
- A sole trader is the business itself.
- It involves just one person as the owner.
- The owner reaps all profits and assumes all risks.
- Business success relies entirely on this single individual.
- No distinction exists between the business's and owner's assets.
- The owner has unlimited liability, responsible for all debts.
- Tax implications are often unfavourable.
Partnership:
- Formed by two or more people, a partnership is a contractual legal relationship.
- As per the 2008 Companies Act, there must be at least two partners, with no
maximum limit.
- Partners contribute to a common business aimed at generating profit to be shared.
- Typically lacks a separate legal entity status.
- Does not have perpetual succession.
- Partners have unlimited liability.
Company:
- A company is registered under the Companies Act of 2008.
- It is a separate legal entity distinct from its shareholders.
- Enjoys perpetual succession.
- Shareholders have limited liability, capped at their share value.
1
, - Directors can be personally liable in specific scenarios.
- Companies can be either for-profit or non-profit.
Types of Profit Companies:
- **Public Company:** Not a state-owned, private, or personal liability company.
Shares are publicly offered and transferable. Can be listed or unlisted and governed
by the company's Memorandum of Incorporation (MOI). Identified by "Ltd."
- **State-Owned Company:** Listed as a public entity or municipality-owned. Provides
goods or services under business principles. Juristic person under national
government control, financed outside the National Revenue Fund. Identified by "SOC."
- **Personal Liability Company:** Private company used by professional associations.
MOI indicates personal liability, and directors share liability for debts incurred during
their tenure.
- **Private Company:** MOI restricts public share offering and transferability. No limit
on the number of shareholders.
Non-Profit Company:
- Has a public benefit or social/cultural objectives.
- Assets and income must advance the company's objective.
- Incorporators, members, or directors cannot gain financially except for reasonable
remuneration or expenses.
- On dissolution, remaining assets must go to similar non-profit entities.
- Can have voting and non-voting members as specified by the MOI.
Close Corporation (CC):
- Similar to a company but with simpler registration and administration.
- New CCs cannot be formed post-2008, but existing ones continue.
- Members can actively manage, and liability is limited to the corporation.
- Minimum of one, maximum of ten members.
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