A business (sole proprietorship) is a trading tittle for the business owner/proprietor. A business may have more than one proprietors. The day to day running and management of the business affairs the sole responsibility of the proprietor(s). The proprietor gets to enjoy all profits as well as settle business liabilities by using personal owned assets.

Incorporation however, is the process by which a new or existing business registers as a company. A business cannot be registered as a company unless it has been incorporated and registered at the Companies Registry under the Companies Act, 2015.

The effect of incorporation is that it differentiates between the shareholders and the business. Hence the corporation becomes a legal person who can own property, sue or be sued, enter into contracts and others.

The general types of companies are:

1. 1. Private company limited by shares:

This type of company has share capital and the liability of each member is limited to the amount, if any, unpaid on their shares. A private company cannot offer its shares for sale to the general public and may not have more than fifty (50) members.

2. 2. Public limited company:

A public company has share capital and limits the liability of each member to the amount unpaid on their shares. It may offer its shares for sale to the general public and may be listed at the securities.

3. 3. Company limited by guarantee:

This type of company does not have share capital and its members are guarantors rather than shareholders. The liability of members is limited to the amount they agree to contribute to the company’s assets if it is liquidated.

Sole proprietorships

Refers to the business unit owned and run by one person. It can be either the head of a family or a person that individual operates the business by themselves. The person is responsible for the business decisions they make hence the growth of the business relies on the decision made by the person.

Partnerships

It comprises of a group of people that come together with an intention of doing business together to make more profit. A partnership is restricted to a maximum of 20 persons, each of whom is jointly and separately liable for all debts incurred. If these numbers are exceeded, the partnership must be registered under the Companies Act.

Cooperatives

They include business units that involve members coming together openly and voluntary to carry out business together and make more profit or money to gathering. Cooperatives are established under the co-operatives Societies Act. A cooperative may only be registered if it is geared towards;

(a) the promotion of the welfare and economic interests of it’s members or adherence to the principles of Islamic law; and

(b) has incorporated in its by-laws the following co-operative principles—

(i) voluntary and open membership;

(ii) democratic member control;

(iii) economic participation by members;

(iv) autonomy and independence;

(v) education, training and information;

(vi) co-operation among co-operatives; and

(vii) concern for community in general,

may be registered by the Commissioner as a co-operative society under this Act with or without limited liability provided that a co-operative union or an apex society shall not be registered except with limited liability.

Limited liability Partnerships

Limited Liability Partnership (LLP) may be formed under the Limited Liability Partnership Act, No. 42 of 2011. Upon registration, a limited liability partnership becomes a body corporate with perpetual succession with a legal personality separate from that of its partners.

A change in the partners of a limited liability partnership does not affect the existence, rights or obligations of the limited liability partnership

The partners in an LLP have limited liability but the provisions of the Partnership Act apply in all other respects

Companies

Referred to in the Business and incorporation article.

A branch is where a new location, division, department, or office is set up, still under the original company’s name and is still part of that legal entity. It is a part of a company that is organized so as to conduct business on behalf of a company, as opposed to carrying on business that is merely supplementary or incidental to the company’s business as a whole. The branch liabilities extend to the main/parent company.

Is where a company sets up a new company and registers the legal entity with the local authority as a stand-alone company. A subsidiary is a separate legal entity from the parent, although owned by the parent corporation. A company may form a subsidiary either by purchasing a controlling interest in an existing company or creating the company itself through a new registration. The liabilities of the subsidiary are limited to subsidiary though may extend to parent company if the parent has a tangible and active role on the liability. The suit however addresses both separately.