Types of business

organisations
 Partnerships

• Partnerships may be established for purposes of pooling of skills,

experiences, knowledge, contacts, finances, assets or a combination of any
two or more factors. At individual levels, people may realize that they did not
have adequate skills, knowledge or finance to run a business on their own,
but as a team, they could achieve more
• Between two and twenty people can come together and form a partnership
by drawing up a legal document called partnership deed. This document
gives details of the way the firm will be organized and managed.
•
 Partnership deed

i. The objectives of a partnership,

ii.The financial contribution of each partner,
iii.The sharing of profits and losses,
iv.The rights and obligations of each partner,
v. The amount of money to be paid as salary to each partner,
vi.The name of the partnership and
vii.The treatment of capital invested.
 Features
i. Can be formed by between two and twenty people but professional partnerships like that of
lawyers, doctors, engineers etc can be formed by more than twenty people.
ii. The capital of the partnership is raised by contribution of each partner and does not need to be
equal. Partners can lend capital to a partnership with interest payment depending on the
provisions in the partnership deed.
In a partnership, ownership and control are not separated, thus partners own and control the
partnership.

no separate legal entity. Unlimited liability of partners

.
Each and every partner is entitled to be involved in the running of a business. A decision of any one
partner binds the partnership.

Partnerships are common among professions such as estate agents, insurance brokers, lawyers,
doctors, accountants.
 Limited Companies

• Private limited companies

• Public limited companies
 Private limited companies
• According to the Company’s Act of Zambia, the two documents
namely the Memorandum of Understanding
• Articles of Association
• The two have been combined to create the Articles of Association.
• Promoters of the company should submit the articles of
association to the Registrar of Companies.
• The Registrar of Companies shall issue a certificate of
incorporation once the application complies with the Company’s
Act.
 Articles of Association

• Name of the company with the last word being limited.

• Objectives of the Company.
• The statement of limited liability for its shareholders.
• The authorized capital thus the amount of capital to be
raised by the shareholders.
• The number of shares issued to each Director.
• The rights, obligations and powers of the directors.
Contd.
.

•The procedure for calling annual general meetings.

•The rights and power of each type of shareholder.
•The procedure for electing directors.
•The issue, transfer and forfeiture of shares.
•Procedure for dealing with any alterations in the amount
of capital.
•Procedure for distributing profits and carrying out
auditing.
• A limited liability company is controlled and governed by a
board of directors, which is elected by the shareholders at
annual general meetings
 Features

• a separate legal entity meaning the company has its own

legal existence separate from that of its shareholders.
• not allowed to sell its shares to the general public unless by
approaching people individually.
• Shares are not transferable without the agreement of the
other shareholders.
• Shareholders in a private limited company have control over
the company.
Contd..

• not required by law to publicise its accounts annually.

• limited liability
• least two people and not more than fifty
• The capital and ownership of a private limited company is
divided into shares.
• Profits earned are usually shared in proportion to the number
and value of shares held.
 Advantages
• It is a legally separate entity or personality from the owners.
• The liability of shareholders is limited, so their personal
assets are not at risk.
• It can easily raise more capital by selling shares though not
publicly.
• The company has sure continuity, as it does not depend on
one person.
• Shareholders have direct control over the company's affairs.
They present their views at the annual general meeting.
• The founders can retain control over the company by holding
the majority of its shares.
 Disadvantages
• There are too many legal formalities to comply with.
• Lack of capital can restrict the growth of a private limited
company.
• The shares are not freely transferable, as the existing
shareholders should approve such
• Accounts should be audited annually, hence the need to engage
services of an Auditors.
• The company is less flexible when compared to a sole
proprietorship.
• It is a costly exercise to form a limited liability than that of a
sole Proprietorship
• Not easy for such a company to borrow money from the banks,
etc.
 Public Limited Companies (Plc)

• A public limited company is a corporate association

of at least two persons,
• registered with the Registrar of companies and
• owned by the shareholders who have limited
liabilities.
• Public Limited companies are generally quoted at
the Lusaka Stock Exchange where members of the
public can freely trade in shares for such companies.
 Features
• formed by at least two persons without a maximum number.
• separate legal entity and is registered with the Registrar of
Companies.
• The Board of Directors are elected by the shareholders controlling it.
• Shares of the public company are freely bought and sold on the
stock exchange.
• There are no restrictions on the transfer of shares to third parties.
• limited liability
• The day to day running of the business is in the hands of the
Managing Director.
• The Board of Directors deal with the Managing Director on policy
issues.
 Advantages of Public Limited Companies
• separate legal entity
• liability of shareholders is limited to the amount of shares they hold in the
company.
• shares are freely transferable on the Lusaka Stock Exchange.
• It has assured continuity.
• It can raise more capital by the sale of shares and debentures to the public
through the Lusaka Stock Exchange.
• can easily borrow money from banks and other financial institutions.
• can employ specialists in such fields as marketing, accounting and human
resource management, which is more efficient.
• Its sheer size makes it possible for the company to buy modern equipment
and technology
• buys in bulk and therefore enjoys economies of scale and possible
discounts.
 Disadvantages of Public Limited
Company
• difficult and expensive to form.
• many regulations set to protect employer, employee and other
stakeholders.
• Raising capital tends to be very expensive
• It may grow and become too large and difficult to manage.
• Original owners usually lose control over it as it has become too big.
• little secrecy, as its accounts must be published annually. This is a
legal requirement.
• Decisions tend to be delayed
• The risk of takeover bids
 Activity 0ne

• Briefly discuss the various types of businesses clearly pointing out the
characteristics, pros and cons of each.
• A friend of yours wishes to set up a Kantemba business to sell fitumbuwa to
industrial workers. Advise your friend the advantages of and disadvantages of
being a sole trader.
• You have been asked to give a talk on the features of, advantages and
disadvantages of partnership type of business. What would include in your paper.
• A group of men in your neighbourhood have come together to form a private
limited company and they have come to you for advice. Explain to them the
features of the private limited company by outlining advantages and disadvantages
of this type of business.