Business Organizations Overview

Study Notes

Business organizations can be classified as incorporated and unincorporated.
Incorporated organizations, such as companies, own property in their name once formed. Members have no rights over the property. The company incurs debts, and the members aren't liable.
Unincorporated organizations, like sole proprietorships and partnerships, don't have separate legal existence from those conducting the business.

Sole Proprietorship: A one-person business; the owner's liability is unlimited (personally liable for business debts). Easy to create, minimal documentation, low start-up costs. However, total control is with a single person, there's lack of structure, difficulties in raising funds, and unlimited liability.
Partnership: A voluntary association of two or more people to do business for profit. Partners share profits and losses proportionally, though joint and individual liability for the partnership's debts exists. Ease of set-up, varied participation levels are possible, but unlimited liability still applies, along with difficulties in raising funds, and lack of structure.
Limited Liability Partnership (LLP): A business organization that combines features of corporations and traditional partnerships, offering limited liability to the owners but flexibility in management.

Defines partnership as a relationship between persons carrying on business in common with a view to profit.
Requires a relation between two or more persons, a business relationship with a view to profit-sharing, and mutual agreement.
Partners are agents of the partnership, and their actions bind the entire partnership.
Partnerships are not separate legal entities from their partners.

Partners owe fiduciary duties to each other - act in good faith.
Partners may be liable jointly for debts and separately for some debts.
Partnerships liabilities arise in the usual business course, or when acted upon by authority.
Dissolution can result from agreement, operation of law (e.g., death, bankruptcy), or court order.

Companies have a separate legal personality from their owners.
Owners' liability is generally limited to their investment.
Companies are subject to more regulations than other business structures, and more reporting.
Common types of Companies are public and private companies. Minimum legal requirements vary depending on the entity type.

Requires procedures like choosing a name, obtaining approval from relevant authorities (like the Registrar of Companies), preparing the memorandum and articles of association, paying necessary fees, and potentially other steps depending on specific contexts.