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;
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 guidelines for various types of business organizations. These organizations differ in their nature, formation, management, ownership, liability, and other aspects. This assignment aims to list and discuss the types of business organizations under the new commercial code of Ethiopia, including their nature, differences, similarities, and other relevant factors.
1. Sole Proprietorship:
A sole proprietorship is a business owned and managed by a single individual. The owner is personally liable for all debts and obligations of the business. It is the simplest form of business organization and requires no formal legal documentation or registration. The sole proprietor has complete control over the business and enjoys all the profits generated.
Differences:
- The sole proprietorship is not a separate legal entity from its owner, and therefore, the owner is personally responsible for all the business's liabilities.
- There is no legal distinction between the personal assets of the owner and the business assets.
Similarities:
- The sole proprietorship is the most straightforward and easiest type of business to establish.
- It is subject to personal income tax rather than corporate tax.
2. Partnership:
A partnership is a business organization where two or more individuals agree to carry on a business together and share the profits and losses. There are two types of partnerships recognized under the commercial code of Ethiopia:
- General Partnership:
In a general partnership, all partners share equal rights and responsibilities in managing the business. Each partner is personally liable for the partnership's debts and obligations. Partners can be individuals, corporations, or other legal entities.
- Limited Partnership:
A limited partnership consists of at least one general partner and one or more limited partners. General partners have unlimited liability for the partnership's debts, while limited partners have limited liability and are not involved in the management of the business.
Differences:
- General partners in a general partnership have unlimited liability, while limited partners in a limited partnership have limited liability.
- Limited partners in a limited partnership cannot participate in the management of the business.
Similarities:
- Partnerships are not separate legal entities, and the partners are personally liable for the partnership's debts.
- Partnerships are subject to personal income tax rather than corporate tax.
3. Private Limited Company:
A private limited company is a separate legal entity from its owners. It requires a minimum of two and a maximum of fifty shareholders. The liability of the shareholders is limited to their shareholding in the company. Private limited companies are governed by the regulations laid out in the commercial code and other relevant laws.
Differences:
- The liability of the shareholders is limited to their shareholding in the company, and their personal assets are separate from the company's assets.
- Private limited companies require formal registration and compliance with various legal requirements.
Similarities:
- Private limited companies distribute profits among the shareholders in proportion to their shareholding.
- Private limited companies are subject to corporate income tax.
4. Public Limited Company:
A public limited company is similar to a private limited company but with no limit on the maximum number of shareholders. These companies can offer shares to the public and are required to issue a prospectus before offering shares for sale. Public limited companies are subject to stricter regulations and requirements compared to private limited companies.
Differences:
- Public limited companies can have an unlimited number of shareholders, while private limited companies have a maximum limit.
- Public limited companies are required to issue a prospectus before offering shares for sale.
Similarities:
- Public limited companies are separate legal entities from the shareholders.
- They are subject to corporate income tax.
Conclusion:
The new commercial code of Ethiopia recognizes various types of business organizations, including sole proprietorships, partnerships (general and limited), private limited companies, and public limited companies. Each type of organization differs in terms of liability, ownership, management, and legal requirements. It is essential for entrepreneurs and business owners to understand the nature of each organization to make informed decisions about the most suitable structure for their business.