Unincorporated Business Incorporated Business

No legal identity. Separate legal identity.

No financial protection. No personal liability.
Personal assets are liable and at risk. Created by a legal process.
Operate informally. Regulation and disclosure agreements.
Sole Trader, Partnership Private Limited Company, Public Limited
Company, Limited Liability Partnership

Sole Trader (Sole Proprietorship)

• Individual entrepreneur supplies entire capital and organizes and manages business himself.
• Owned by one individual.
• No regulation, disclosure or accountability or any rules.
• A: Simplest way, less paperwork, owner has control, all profits to owner, and no taxes.
• D: Owner is fully responsible, limited life, personal liability.
• Application: Small capital businesses, manual skills businesses, small scale businesses.

Partnership

• Association of persons who conduct business and share profits.

• Partnership is a legal relationship.
• Individually called partners. Collectively called firm.
• Minimum two persons.
• Business is a partnership formed for purpose of carrying business, must be lawful, running and
goal to earn profits.
• Sharing of losses dependent on agreement.
• A: Formed easily without formalities, no registration, either oral or writing, more resources than
sole proprietorship. Better decision as partners can sit together and find solution. Flexible
operations. All partners share businesses risk.
• Every partner has an equal say in decision making. If unsatisfied, a partner may withdraw by
using a partnership deed.
• D: Unlimited liability as all partners are jointly liable fot everything. Uncertain life as no separate
legal existence. No transfer of shares to outside without consent of all. Possibility of discontent
between partners. Total number of partners cannot exceed 20 so capital is limited.
• Partnership Deed: This contains the terms of partnerships. Stamped and signed.
• Types of Partner:
a) Active: Actively participates in business.
b) Sleeping: Doesn’t take active part.
c) Nominal: Only lends name, doesn’t take part.
d) Sub-Partner: Gets a share of profit from partner.
Types of Partnership

General Limited Limited Liability Partnerships

Equal rights and
responsibilities.
Partnership begins when
partners begin business
activity, not when agreement
made.
- Partners with full liability are
- Limited partners don’t take
Transfer upon consent of all
other partners.
Restricted liability to amount
of investment.
At least one partners has full
liability, rest have limited.
known as general partners
(minimum one). General
partners have control over
business.
part in decisions and not liable
for debts beyond their sums
contributed as capital. If
limited partner takes part in
management, he will be liable
for all debts and obligation.
- -
Limited to amount which each
partner contributed.
Involved are called members,
not partners.
LLP is liable up to extent of
assets.
Atlhough similar to limited
company, LLP has
organizational flexibility of
partnership and is taxed as a
partnership. LLP’s are taxed on
their share of profits whereas
company must pay
corporation tax plus income
tax on dividends.

Registration:

• Registration Act 1932

• Name, Place, Date, Date Partner Joined, Names and Addresses of Partners, Duration
• Registration effective from when registrar files the statement.
• If non registered, partners cannot sue each other or a third party or claim a set off (debt).

Liability:

• Every partner is liable, jointly with all the other partners for all acts of firm while his partners.
• Firm can also be held liable for wrongful acts of partner.
• A new partner is liable from date he is admitted as partner.
• A retiring partner may be discharged from liability by an agreement known as novation.
• A person cannot be introduced as partner without consent of all partners and is not liable for
any act of firm before he became partner.
Outgoing Partners:

• Retirement with consent, express agreement or notice.

• Expulsion with proper justification and legitimate reason.
• If insolvent, person ceases to be a partner.
• Death

Dissolution:

• Dissolution of partnership between all partners is dissolution of firm.

• If only one partner leaves, partnership is dissolved but firm continues.
• Dissolution of partnership is only reconstruction of firm while dissolution of firm is firm no
longer existing.
• By agreement, automatic, notice, compulsory (all become insolvent, unlawful) or dissolution by
court (insanity, misconducts, breach of agreement)
• Contingencies: Death, insolvency.
• Expiry of fixed term: Firm is for a limited time and expires at end of time.
• Expiry of purpose: Firm is for a purpose and expires when undertaking completed.