Partnership

1. **Sole Proprietorship**: One person runs the business on their own. They are personally
responsible for all aspects of the business and its debts.

2. **Partnership**: Two or more people work together to run a business. They share profits,
losses, and responsibilities. Partnerships can be general (everyone shares liability) or limited
(some partners have limited liability).

3. **Limited Company**: A company where the owners' liability is limited to the amount they
invested. It's a separate legal entity from its owners, offering them protection against personal
liability.

4. **Limited Liability Partnership (LLP)**: A partnership where all partners have limited liability,
similar to shareholders in a company. They also have the flexibility of managing the business
like in a partnership.

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EMERGENCE OF CORPORATE BUSINESS:

Fewer businesses leading to fewer opportunities of wealth creation, employment and taxation.

Need for a method of separating the entrepreneur from his business.

Hence the creation of a new legal entity – corporation having its own legal existence, separate
from the Owners and Managers.

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DRAWBACKS OF LIMITED LIABILITY:

1. **Creditors Bear Risk**: If a company goes bankrupt, creditors, not entrepreneurs, bear the
risk of losses.

2. **Entrepreneur's Limited Risk**: Entrepreneurs, facing little personal risk, might be tempted to
act dishonestly.

3. **Result**: To prevent fraud and ensure accountability, there's a need for regulations and
oversight.

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Corporations

1. **Corporation Sole**:
- A legal entity held by a single individual in a specific office or position.
 - Continues despite changes in personnel.

2. **Statutory Corporations**:
- Created by government statutes or laws.
- Function to carry out specific public or governmental tasks.

3. **Joint Stock Companies**:

- Formed by individuals buying shares.
- Have separate legal identity from owners.
- Shareholders' liability limited to their investment.

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Effects of incorporation

1. **Incorporation Benefits**: Gives the company a proper legal identity.

2. **Consequences**:
- **Perpetual Succession**: The company continues to exist regardless of changes in
ownership.
- **Limited Liability**: Members are only liable for debts up to the amount unpaid on their
shares.

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CONSEQUENCES OF LIMITED LIABILITY

- **Legal Identity**: The company can sue and be sued, and own property in its own name.
- **Capital Flexibility**: It has easier ways to raise money.
- **Separation of Ownership and Management**: Owners don't have to manage the company.
- **Regulated by Company Law**: It follows rules set by company law.
- **Common Seal**: It might use a common seal to validate documents.

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Corporate veil

A registered company is legally separate from its owners, managers, and employees. This is
known as "the corporate veil."

- **Instances Where the Corporate Veil Might Be Lifted**:

1. **Group of Companies**: When dealing with a group of related companies, courts may lift
the corporate veil to reveal the true nature of their relationships.
2. **Owned by the Enemy**: If the company is owned by an enemy during a time of conflict or
war, the corporate veil may be lifted.
3. **Sham or Fraudulent Entity**: If the company is set up as a sham or is involved in
fraudulent activities, the courts may disregard the corporate veil.
 4. **Unlawful Purpose**: If the company is incorporated for an unlawful purpose, the corporate
veil may be lifted.
5. **Violating Law**: When the company violates specific provisions of the law, the corporate
veil may be lifted to hold individuals accountable.
6. **Agency Relationship**: If the company is acting as an agent of another entity, the
corporate veil may be pierced to reveal the true principal behind its actions.

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Company/Partnership:

**Company**:

1. **Legal Structure**:
- A company is a separate legal entity from its owners (shareholders).
- It is formed by registering with the government and operates under company law regulations.

2. **Liability**:
- Shareholders' liability is limited to the amount unpaid on their shares.
- Personal assets of shareholders are generally protected.

3. **Management**:
- Managed by directors and officers appointed by the shareholders.
- Shareholders typically have limited involvement in day-to-day management.

4. **Ownership**:
- Owned by shareholders who purchase shares in the company.

5. **Transferability of Ownership**:
- Ownership interests (shares) can typically be bought, sold, or transferred freely, subject to
certain restrictions and regulations.

6. **Continuity**:
- Continuity is ensured even if shareholders change. The company exists independently of its
members.

**Partnership**:

1. **Legal Structure**:
- A partnership is not a separate legal entity.
- It's an agreement between two or more individuals to carry on a business together and share
profits and losses.

2. **Liability**:
- Partners have unlimited liability for the debts and obligations of the partnership.
- Personal assets of partners can be used to satisfy business debts.

3. **Management**:
 - Managed by the partners themselves.
- Each partner may have a say in decision-making and the day-to-day operations of the
business.

4. **Ownership**:
- Owned by the partners who contribute capital and share profits and losses based on their
agreement.

5. **Transferability of Ownership**:
- Ownership interests are not freely transferable.
- A partner cannot transfer their interest without the consent of the other partners, unless
otherwise specified in the partnership agreement.

6. **Continuity**:
- Continuity may be affected by changes in the composition of the partnership.
- The partnership may dissolve upon the withdrawal, death, or bankruptcy of a partner, unless
otherwise specified in the partnership agreement.

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Types of companies:

**Limited Liability Companies**:

**Company Limited By Shares**:

- Shares are owned by shareholders with limited liability.

a. **Public Limited Company (PLC)**:

- Can offer shares to the public.
- Can be listed (traded on a stock exchange) or non-listed.

b. **Private Limited Company (Ltd.)**:

- Cannot offer shares to the public.

**Company Limited By Guarantee**:

- Members guarantee to contribute a certain amount if the company is wound up.

**Unlimited Companies**:
- Members have unlimited liability for the company's debts.

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Public(at least members)/private(2)

**Public Limited Company (PLC)**:

1. **Ownership**:
- Shares can be owned by the public.
 - Can have numerous shareholders.

2. **Offering Shares**:
- Can offer shares to the general public.

3. **Listing**:
- Shares can be listed on a stock exchange for public trading.

4. **Disclosure**:
- Required to disclose financial information and other details to the public and regulatory
authorities.

5. **Minimum Capital**:
- Requires a minimum share capital as per regulations.

**Private Limited Company (Ltd.)**:

1. **Ownership**:
- Shares are usually owned by a small group of people, often family, friends, or employees.

2. **Offering Shares**:
- Cannot offer shares to the public.

3. **Listing**:
- Shares are not traded on a stock exchange.

4. **Disclosure**:
- Has fewer disclosure requirements compared to a PLC. Financial information is typically
shared only with shareholders and relevant authorities.

5. **Minimum Capital**:
- Requires a minimum share capital, but usually lower than that of a PLC.

In summary, while both PLCs and Ltd. companies offer limited liability to their shareholders,
PLCs have the ability to offer shares to the public, are listed on stock exchanges, and have
stricter regulatory requirements compared to private limited companies, which are often smaller,
closely held businesses with fewer regulatory obligations.

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Incorporation of a company

Promoters
Memorandum of Association
Articles of Association
Registration by Registrar of Companies
Certificate of Incorporation
Certificate of Commencement of Business
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MEMORANDUM OF ASSOCIATION

The Name Clause

The Registered Office Clause
The Object Clause
The Limited Liability Clause
The Share Capital Clause (if applicable)
The Public Limited Clause (if applicable)

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ARTICLES OF ASSOCIATION

REGISTERED OFFICE

SHARES:
-Authorized Share capital
-No partly paid shares to be issued
-Issue of shares at Premium and Discount
-Allotment of shares
-Joint Shareholders
-Transfer of Shares

ALTERATION OF CAPITAL - By special resolution

GENERAL MEETING

-Statutory General Meeting

-Annual General Meeting
-Extra Ordinary General Meeting

DIRECTORS

-Directors to be elected
-Number of Directors
-Government Director
-Period of Officer of elected Directors
-Removal of Director
-Qualification of Directors

CHIEF EXECUTIVE
SECRETARY
COMPANY SEAL
DIVIDENDS AND RESERVES
ACCOUNTS
CAPITALISATION OF PROFITS
AUDIT

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