Business Law Individual Assignment
Instructions
1. Clarity is mandatory;
2. Your work shall include introduction, conclusion and reference;
3. Minimum of 5 and maximum of 10 pages;
4. Copying the work of others will be punishable;
5. Submission date: February 10, 2024
Questions
1. List and discuss the types of business organizations under the new commercial code of Ethiopia (hint, nature, differences, similarity, etc.).
Introduction
The commercial code of Ethiopia provides a legal framework for various types of business organizations. These organizations differ in their nature, structure, ownership, and liability. This paper will discuss the different types of business organizations under the new commercial code of Ethiopia, including their features, differences, similarities, and implications.
1. Sole Proprietorship
A sole proprietorship is the simplest form of business organization in Ethiopia. It is owned and operated by a single individual who assumes all the risks, profits, and liabilities. The owner has unlimited liability, meaning their personal assets can be used to satisfy business debts. The owner has complete control and decision-making power in the business.
2. Partnership
A partnership is a business organization formed by two or more individuals called partners. Partnerships can be classified into general partnership and limited partnership. In a general partnership, all partners have equal rights and obligations, and they share profits and losses equally. In a limited partnership, there are both general partners who have unlimited liability and limited partners who have limited liability.
3. Limited Liability Company (LLC)
A limited liability company (LLC) is a type of business organization that combines the elements of a corporation and a partnership. It offers limited liability protection to its owners, known as members, who are not personally liable for the company's debts and obligations. The LLC is a separate legal entity, and its members can actively participate in the management.
4. Joint Stock Company (JSC)
A joint stock company (JSC) is a business organization where the capital is divided into shares, and the liability of its shareholders is limited to the value of their shares. The JSC can be publicly traded, allowing its shares to be bought and sold on a stock exchange. It is managed by a board of directors who are elected by the shareholders.
5. Private Limited Company
A private limited company is a form of business organization that restricts the transferability of shares and limits the number of shareholders. It offers limited liability protection to its shareholders but does not allow the general public to buy its shares. The shares can only be transferred with the consent of existing shareholders.
Differences and Similarities
The different types of business organizations under the new commercial code of Ethiopia have several differences and similarities. Some of the key differences include:
- Ownership: Sole proprietorship is owned by a single individual, while partnerships, limited liability companies, joint stock companies, and private limited companies involve multiple owners.
- Liability: In a sole proprietorship, the owner has unlimited liability, whereas in partnerships, limited liability companies, joint stock companies, and private limited companies, the owners' liability is limited to their investment.
- Transferability of Shares: Joint stock companies and private limited companies have transferable shares, while sole proprietorships, partnerships, and limited liability companies do not involve shares.
- Management: Sole proprietorships and partnerships are usually managed by the owners, while limited liability companies, joint stock companies, and private limited companies have a separate management structure.
Despite these differences, there are also some similarities among these business organizations:
- Business Operations: All types of business organizations can engage in commercial activities and provide goods or services to customers.
- Legal Entity: Limited liability companies, joint stock companies, and private limited companies are considered legal entities separate from their owners. This means that they can enter into contracts, sue or be sued, and own property.
- Registration: All these business organizations need to be registered with the appropriate government authorities to operate legally.
Implications
The choice of business organization under the new commercial code of Ethiopia has significant implications for entrepreneurs and investors. Factors such as liability, taxation, control, and capital requirements should be carefully considered when selecting the appropriate business form.
For example, sole proprietorships and partnerships offer simplicity and flexibility but expose the owners to unlimited liability. Limited liability companies, joint stock companies, and private limited companies provide limited liability protection but may be subject to more regulations and formalities.
Conclusion
In conclusion, the new commercial code of Ethiopia provides a range of options for business organizations. Each type of organization has its own characteristics, advantages, and disadvantages. Entrepreneurs and investors need to carefully evaluate their objectives, risks, and resources before choosing the most appropriate form of business organization. Understanding the differences, similarities, and implications of these organizations is crucial for effectively and legally operating businesses in Ethiopia.
References:
- Commercial Code of Ethiopia, Ethiopian Legal Brief.
- "Doing Business 2020 - Ethiopia," World Bank.
- Demissie, G./Gebeyehu, Z. (2013). Business Organizations Laws of Ethiopia. May, 2013.