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Legal Aspects of Business in Jamaica Lecture 2

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12 views15 pages

Legal Aspects of Business in Jamaica Lecture 2

Uploaded by

neymarmargon44
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Legal Aspects of

Business in
Jamaica
Unit 1 – Module 1 – Lecture 2
BUSINESS AND ITS ENVIRONMENT
Economic Sectors and Legal Structures
• LEGAL ASPECTS OF A
BUSINESS
o Legal Forms of Business
ownership

OVERVIEW o Issues in Choosing a Form of


Business
In launching a new
business, an entrepreneur
needs to consider the
alternatives regarding the
Legal legal form of the
Forms of organization. The most
Business common options
Private Sector Organisations:
are:
• sole-trader;
• partnership;
• private limited company;
• public limited company;
• co-operative enterprise;
• franchise; and,
• joint venture.
A Form of business with single owner who has unlimited liability, controls
all decisions, and receives all profits. Owner has full responsibility for
operations.

The Sole
Proprietors Low-cost
Income is
Advantages
Owner reaps
Freedom to Quick
Disadvantag

hip Option
personal make all decision
start-up all rewards es
income. decisions making

Unlimited personal liability Owner is legally liable for all aspects of the
business. i.e. Unlimited responsibility - all personal assets at risk for the
debts of the business.
Unless there are employees,
death/incapacity of owner terminates Sole responsibility for raising capital
business
Simple Partnership - A legal entity
formed by two or more co-owners to
carry on a business for profit. Each
partner is responsible for the
operation of the venture.

PARTNERSHI
P
Owners may have general or limited
ownership.
General partners share the
amount of personal
Partnership agreement is
liability equally, regardless
recommended.
of their capital
contribution.
Limited Partnership - This form of
ownership consists of at least one
general partner and one or more
limited partners

PARTNERSHI General partner - a partner in a


limited partnership who has
P unlimited personal liability

Limited partner - a partner in a


limited partnership who is not active
in its management and has limited
personal liability
Advantages of Partnership

• Sharing workload and time saving


• Shared risks and responsibilities
• A range of experience, knowledge
and competence available
• Cost sharing
PARTNERSHI
P Disadvantages of
Partnership
• Limited freedom to make decisions
• All partners are responsible for the
mistakes of one
• Decisions tend to take longer
• Conflicts can arise
PARTNERSHIP
• What to look for in a partner
• Sound finances and stable background
• Aptitude for business or business sense
• Skills in the business you will be undertaking
Example
Corporate/Limited
Liability Company
• A business organization that exists as a legal entity and
provides limited liability for its owners / stockholders
• Legal Entity - A business organization that is recognized
by the law as having a separate legal existence
• Ownership is reflected by possession of shares of
stock.
• Owners are liable only for the amount of their
investment.
• Can be created only by statute and requires legal
advice.
• The Corporation is the most attractive form for
raising capital.
Corporate/Limited
Liability Company
• Rights and Legal Status of Shareholders
• Share Certificate - A document specifying the
number of shares owned by a shareholder
• Pre-emptive Right - The right of shareholders
to buy new shares before they are offered to
the public.
• Legal Status
• Ownership provides control over the firm.
• Ownership limits liability to investment in the
firm.
• Ownership can be transferred without
affecting the firm’s operations
Corporate/Limited
Liability Company

• Limited Liability of Shareholders


- For most shareholders, their
limited liability is a major
advantage of the corporate form
of organization. Their financial
liability is limited to the amount
of money they invest in the
business.
TYPES OF BUSINESS MATRIX
Factors Proprietorship Partnership Corporation

Number of shareholders; private


2 – 20 partners comprising
Ownership Individual company – max 20, public company
individuals / corporations
– unlimited

General partners have unlimited


Shareholders liability is limited to the
Liability of Owner personally liable liability. Limited partners liability
amount of capital contributed to the
Owner for business liabilities is limited to amount of capital
business
contribution

Least costly to start. Less costly than for a


Costs of Most costly to start. Created by
None; other than corporation. Could incur
starting Statute. Article of Incorporation,
filing fees for trade lawyer fees for partnership
business filing fees; taxes, Lawyer fees.
name. deed.
Capital raised only by
Capital loan or increased Capital can be brought in by Most flexible. Stockholders can sell or
Requirements contribution by additional partners buy stocks at will.
proprietor.
Factors that affect the choice of the
firm’s structure:
Initial organizational costs and requirements
Limited versus unlimited liability for the owners
Continuity of business
Transferability of ownership
Management control
Attractiveness for raising equity capital
Income taxes
Complete this Matrix
TYPE PRIMARY SECONDARY TERTIARY
SOLE TRADER
PARTNERSHIP
CORPORATION

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