Instructions
1. Clarity is mandatory;
2. Your work shall include introduction, conclusion and reference;
3. Copying the work of others will be punishable;
Questions
1. List and discuss the types of business organizations under the new commercial code of Ethiopia (hint, nature, differences, similarity, etc.).
1. Sole proprietorship
2.General proprietorship
3.share proprietorship
4.Limited Company
5.public Enterprise
Introduction:
The new commercial code of Ethiopia recognizes various types of business organizations. Each type of organization has its own characteristics, advantages, and disadvantages. In this discussion, we will list and discuss the five types of business organizations under the new commercial code of Ethiopia, namely, sole proprietorship, general partnership, share partnership, limited company, and public enterprise.
1. Sole Proprietorship:
A sole proprietorship is a business organization that is owned and operated by a single individual. The owner has full control and responsibility for all aspects of the business. The business and the owner are considered as one entity, making the owner personally liable for any debts or legal issues of the business. The main advantage of sole proprietorship is its simplicity and ease of formation, while the major disadvantage is the unlimited liability for the owner.
2. General Partnership:
A general partnership is a business organization formed by two or more individuals who agree to share the profits and losses of the business. Each partner has equal rights and responsibilities in managing the business, and each partner can be held personally liable for the debts and obligations of the partnership. General partnerships are relatively easy to establish, and the partners can bring in different skills and expertise. However, the main disadvantage is the unlimited personal liability for each partner.
3. Share Partnership:
A share partnership is a type of business organization where the partners contribute capital and share the profits based on the value of their capital contribution. Unlike a general partnership, the personal liability of the partners is limited to the amount of their capital contribution. Share partnerships are commonly formed by professionals like doctors, lawyers, and accountants. The advantage of a share partnership is the limited liability for the partners, while the disadvantage is the complexity of establishing and managing the partnership.
4. Limited Company:
A limited company, also known as a joint-stock company, is a legal entity that has its own rights and liabilities distinct from its shareholders. It is formed by a group of shareholders who contribute capital and are liable only up to the amount of their shareholdings. The liability of the shareholders is limited, and the management and control of the company are entrusted to a board of directors. Limited companies offer various advantages such as limited liability, ease of transfer of shares, and continuity of existence. However, the formation and operation of a limited company require compliance with legal formalities.
5. Public Enterprise:
A public enterprise is a type of business organization where the government owns and controls the majority of the shares. It is established to undertake commercial activities and provide services on behalf of the government. Public enterprises are usually formed in strategic sectors such as telecommunications, energy, and transportation. The main advantage of public enterprises is the government's ability to provide essential services to the public. However, they may face challenges such as political interference and lack of efficiency.
Conclusion:
The new commercial code of Ethiopia recognizes different types of business organizations, each with its own characteristics and legal requirements. Sole proprietorship, general partnership, share partnership, limited company, and public enterprise are the five major types of business organizations under the new commercial code. It is important for entrepreneurs and business owners to carefully consider the nature, differences, similarities, advantages, and disadvantages of each type before choosing the most suitable form for their business venture.
References:
- Ethiopian Commercial Code, Council of Ministers Regulation No. 193/2011.
- Habtamu, A. (2020). Ethiopian Law of Business Organizations. Addis Ababa University.
- CSA Group. (2017). Business Register Establishment in Ethiopia. Central Statistical Agency.
- Ethiopia - World Bank Group. (n.d.). Retrieved from https://www.worldbank.org/en/country/ethiopia