Business Law 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 new commercial code of Ethiopia, enacted in 1960, provides a comprehensive legal framework for business organizations in the country. This code recognizes various types of business organizations that individuals or groups can establish to conduct commercial activities. These organizations differ in their nature, formation requirements, liability, ownership, and management structure. In this paper, we will discuss the different types of business organizations under the new commercial code of Ethiopia.
1. Sole Proprietorship
A sole proprietorship is the simplest and most common form of business organization. It is owned by a single individual who is solely responsible for all aspects of the business. The proprietor manages and controls the business and assumes all the risks and liabilities associated with it. There is no legal distinction between the owner and the business, which means the owner's personal assets are at risk in case of any legal claims or debts. Although easy to establish and dissolve, a sole proprietorship lacks perpetual succession and limited liability.
2. General Partnership
A general partnership is formed when two or more individuals or entities come together to engage in a business activity. Each partner contributes capital, skills, or labor to the business, and they share profits and losses according to the agreed terms. In Ethiopia, a partnership can be formed orally or in writing, but it is advisable to have a written partnership agreement to avoid potential conflicts in the future. The partners have joint and several liability, meaning each partner can be held fully responsible for the partnership's obligations. Each partner also has the authority to bind the partnership in contracts and other legal matters.
3. Limited Partnership
A limited partnership is similar to a general partnership, but it includes two types of partners: general partners and limited partners. General partners have unlimited liability and manage the partnership, while limited partners have limited liability and do not participate in the management. Limited partners contribute capital to the business and share in the profits, but they cannot be held personally liable for the partnership's obligations beyond their capital contributions. In Ethiopia, the establishment of a limited partnership requires registration with the relevant authorities.
4. Joint Stock Company
A joint stock company, also known as a share company, is a legal entity in which the capital is divided into shares and owned by shareholders. The liability of shareholders is limited to the amount of their share capital. A joint stock company has a separate legal personality from its shareholders, allowing it to enter into contracts, own property, and sue or be sued. The management of the company is usually carried out by a board of directors elected by the shareholders. Joint stock companies are required to prepare and publish audited financial statements.
5. Private Limited Company
A private limited company is a separate legal entity with limited liability. It is formed by two or more individuals or entities who contribute capital and become shareholders. The liability of shareholders is limited to the amount of their share capital, and they are not personally responsible for the company's debts or other obligations. The ownership is transferable, and the company enjoys perpetual succession. A private limited company is governed by its articles of association and is required to hold regular general meetings.
Conclusion
The new commercial code of Ethiopia recognizes various forms of business organizations, each with its own characteristics and legal requirements. These types include sole proprietorships, partnerships (general and limited), joint stock companies, and private limited companies. The choice of the appropriate form of business organization depends on factors such as the number of owners, availability of resources, liability concerns, and the desired management structure. It is essential for entrepreneurs to carefully consider their options and seek legal advice before establishing a business in Ethiopia.
References:
- Ethiopian Civil Code Proclamation No. 165/1960 (Federal it Gazeta Extraordinary Issue No. 1 of 1960)
- Ethiopian Commercial Code Proclamation No. 166/1960 (Federal it Gazeta Extraordinary Issue No. 1 of 1960)