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;
1. List and explain discuss the types of business organizations under the new commercial code of Ethiopia (hint, nature, differences, similarity, etc.).
Introduction:
The new commercial code of Ethiopia has introduced several types of business organizations that individuals and entities can choose from to conduct their business activities. These business organizations differ in terms of their nature, governance structure, liability, and ownership. In this paper, we will discuss and explain the various types of business organizations under the new commercial code of Ethiopia, including partnerships, limited liability companies, joint ventures, and sole proprietorships.
Partnerships:
A partnership is a type of business organization that involves two or more individuals who agree to carry on a business together and share its profits and losses. Under the new commercial code of Ethiopia, partnerships can be classified into two types: general partnerships and limited partnerships.
1. General Partnerships:
In a general partnership, all the partners have unlimited liability for the debts and obligations of the partnership. Each partner is personally liable for the partnership's debts and can be held responsible for the actions of other partners. General partnerships are relatively easy to form and dissolve, and the partners have equal rights and responsibilities in managing the business.
2. Limited Partnerships:
In a limited partnership, there are two types of partners: general partners and limited partners. General partners have unlimited liability, similar to the general partnership, and they are responsible for managing the business. On the other hand, limited partners have limited liability, and their liability is limited to the amount of capital they contribute to the partnership. Limited partners are not involved in the day-to-day management of the business and have no personal liability for the partnership's debts.
Limited Liability Companies (LLCs):
Limited liability companies are becoming increasingly popular in Ethiopia due to their flexible structure and limited liability protection. Under the new commercial code, LLCs are separate legal entities that provide their owners with limited liability protection, similar to corporations, but with the flexibility of a partnership.
LLCs have the following characteristics:
- Limited liability: The owners (known as members) are not personally liable for the debts and obligations of the LLC.
- Flexible management: LLCs can be managed by the members themselves or by appointed managers.
- Pass-through taxation: LLCs are not subject to double taxation. Instead, the profits and losses are reported on the members' individual tax returns.
- Flexible ownership: LLCs can have an unlimited number of members, and the ownership interests can be easily transferred or sold.
Joint Ventures:
A joint venture is a business arrangement where two or more individuals or entities agree to combine their resources and expertise for a specific project or period. Under the new commercial code, joint ventures are governed by the provisions relating to partnerships.
Joint ventures can be established as either general partnerships or limited partnerships, depending on the preferences and agreements of the parties involved. The partners in a joint venture share the profits, losses, and management responsibilities according to the terms of their agreement.
Sole Proprietorships:
A sole proprietorship is the simplest form of business organization, where an individual owns and operates the business. Under the new commercial code, sole proprietorships are not considered separate legal entities, and the owner is personally liable for all the debts and obligations of the business.
Sole proprietorships have the following characteristics:
- Easy formation: Sole proprietorships can be formed without any formal registration requirements, although certain permits and licenses may be necessary to operate legally.
- Unlimited liability: The owner is personally liable for the debts and obligations of the business.
- Single ownership: The business is owned and operated by a single individual.
- Taxation: The business income and expenses are reported on the owner's individual tax return.
Conclusion:
In conclusion, the new commercial code of Ethiopia has introduced various types of business organizations to cater to different needs and preferences. Partnerships, limited liability companies, joint ventures, and sole proprietorships offer different levels of liability protection, ownership structures, and management flexibility. It is essential for individuals and entities to carefully consider their specific requirements and consult with experts to choose the most suitable type of business organization for their operations.
Reference:
Ethiopia Ministry of Trade. (2020). Commercial Code of Ethiopia.