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John

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UNIT V

BUSINESS ORGANIZATIONS

INTRODUCTION
This unit introduces students to the most common forms of business organizations, namely sole proprietorship, partnership and limited liability companies. However, emphasis is placed here on partnership and the legal consequences which flow from the formation of such a method. The main advantages and disadvantages of these forms of business organizations are also discussed.

Important Concepts in Business Organizations

The following are some important concepts in business organizations:

Incorporation
The law permits the creation of artificial or legal persons. An example of such is an incorporated company. This means that such an organization has a legal personality separate from its members.

Legal Personality
Under The English Law, all human beings have a legal personality. A legal personality is made up of a person’s legal rights and duties. However, the extent of these rights and duties is dependent on whether the person is an adult or a minor. A minor has limited rights and few duties. By operation of the law, an incorporated company has a legal personality

Limited/unlimited Liability
As a result of an incorporated organization having its own legal personality, its members are not generally liable for the debts of the organization. This however is in contrast to a partnership which does not have a legal personality separate from the partners. Here, partners have unlimited liability for partnership’s debts. Also, a sole proprietor has unlimited liability for his business.

Forms of Business Organizations

Sole Proprietorship/ Trader (One-man business)
This is usually a natural person engaged in business without being associated with others. If he engages in business and use a name other than his name then he must register the name of the business under the Registration

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