Question: - Discuss various types of business organization?

1. The sole trader:-

This means going it alone with a one person business you can take all the profits of the business
but suffer all the losses and have all the problems and worries.
2. The partner ship:-
You can share the losses if any and the problems and worries with a partner and partners but of
course the profit must also be share. It is normally necessary for the partners to make a contract
called a partnership agreement. Which is often in writing because it then provide a good regard
of what was agreed about the business. However writing is not necessary of verbal agreement
will do and indeed a partnership can in same cases of inferred from conduct. For example if A
acts as if were the partner of B. he may become one in law, even though there is no contract
verbal or written between them.
3. The company:-
A business may be in carbonated as a registered company this is carried by following a
registration procedure carried out to the regarded registrar of companies. He is an official of a
government department called the department of trade and industry. A registered company can
be found by two or more people who become its share holders. Directors must be appointed to
mange the company and acts as its agent. If the business is large enough an appointment as
company secretary may be made after public advertisement. No special qualification is required
for sectaries of private company but qualifications are laid down for sectaries of public
company.
Natural and juristic person:-

Natural persons:-

These are human being who are know to the law as natural persons and adult human beings has
in general term the full range of legal rights and full range of legal duties. Thus if A makes a contract with
B and B face to perform it, A has a rights to damages because B failed to perform a duty. A similar
situation would occur if A failed in his duty to perform the contract thus denying B, his right to have it
performed.

However, the laws distinguish between certain classes of human being and gives them a status
which men that they have more limited rights and duties them are given to other persons.

Some contracts of minor are not binding on them and they cannot sued for damages for breach
of contracts. If they fail to perform them persons of unusual mind can refers to perform their contracts
where the other party was aware of the mental state when the contract was made.

Non-human creatures are not legal persons and do not have those rights and duties which are
human being gets. However animals may be protected by the law for certain process.
Juristic persons:-

Legal personality is not given to only human being. Person can for a corporation, that corporation having
a legal personality with similar rights and duties to human being. As we have emended these
corporation are formed by act of parliament or by registration under the companies act. There are also
corporations which are introduced under common law.

Charter companies and those forms by act of parliament have their own legal personalities and
act through human agents. This is also true of the registered company, which is allowed by the law
through the agency of its directors to make contracts hold property and carry on business on its own
account regard less of a particular person who may happen at a particular time to hold its shares.

Question:- Discuss advantages and disadvantages of various business organizations.

Commencement of business:-

Sole trader and partnerships can commence business merely by opening the doors of the
premises. It is usual to register for to and of course the premises which are being used must under
planning and other regulations are available for business purposes.

If the organization is not using the name of its proprietors, but using the business name, then
the organization must comply with the requirement of business names act 1985. For example, a name
must not be chosen which suggests a connection with federal, provincial and local government. This is to
prevent the public getting a possibly false sense of security, because these government authorities get a
regular and safe income from taxes and rates.

Companies:-

A private company cannot trade until its application for registration has been dealt with by the
registrar of companies and he has given the company a certificate of incorporation.

The companies’ act 1985 requires public companies to be registered and have an issued share of
a certain determinable value. This is essential so that the company can trade and borrow. All business is
carried out in the name of the company.

Capital:-

a. sole trader and partnerships.

All business needs money to began trading, some kind of startup finance. Sole trades must
either put in enough of their own money, if they have it or put in what they have and try to borrow the
rest. Partners are in the same position. Certainly, a bank wills not text 100% of the finance. Usually the
best place to try for a loan is one of the large banks. The bank will want some security for its money and
this may mean giving the bank a mortgage the house of the sole trader or houses of the partners.
Interest rate can differ according to the deal given by the bank. Interest may be variable and change
with the base rate, as is the case where the bank allows the organization to overdraw a bank account up
to certain amount. The alternate is a loan at a fixed rate of interest. These are usually more expressive
but may be better than an overdraft facility if the loan is taken at low interest rates.

A partnership can of course attract more capital by donating new partners. There is, however, a
limit to this because the companies act restricts a partnership to a maximum of 20 people, but some
professions, e.g. accountants and spoliators , are exempt and can have partnerships of unlimited size.

b. Company

Here the capital structure is more complicated. If two people wishing to firm a private company
and its directors contribute each to form the company, which has what is called a nominal capital.

A company may also raise money by boring often from a bank, either by way of a loan at a fixed
interest or more commonly by the granting of an overdraft facility. The leader does not become a
member of the company and if the company falls on hard time and is word to recover the loan before
the shareholders get anything for their shares. A lending bank will take a security (called a debenture)
over the company’s assets for its loan and will usually ask the directors to give another security by
guaranteeing the loan so that if the company does not repay it, they will have to. This takes away some
of the advantages of limited liability.

There is no limited on the number of share holder which a company may have and so it can raise
as much capital as it wishes if it can sell its shares to outsides. A public company can offer its shares to
general public, but a private company must negotiate personally with outsiders who might buy its
shares.
a.

Liability of the proprietors:-

Sole traders:-

A sole trader is liable for the debt of the business r=to the extent of every thing he owns even
his private possessions. May be ordered to be sold to pay the debts of the business. There is no such
thing as limited liability. A sole trader can make of free transfer of personal assets to a husband or wife
or other relatives, but the transfer can be satisfied and the assets return to the sole trader and then
used to pay the business reverts, if the court is satisfied the transfer was to deafest credits.

Partnerships:-

Partner is gently and severally liable for the debts of the firm. They can be used together by
creditors who have not been paid. They can also be used individually or severally. If they are insolvent
then they are resole for the debts as they have the liability extent to the private assets of the partners.
Even of the estate of a decides partner is liable for the debts of the firm incurred while he was the
partner. If there is any think left in his estate after paying his private debts there is also liability for the
debts of the firm incurred of there retirement . Unless the firm’s existing customers are informed of the
retirement and public notice of retirement is given.

There may be a limited partnership and those who want to put a limit on their liability for the
deaths of a partnership firm may become limited partners .however, at least one partner must have
unlimited liability for all the debts of the. A limited partner is not liable for the debts of the firm, though
the firms fails and is dissolved his capital may be used to pay its debts as far as required limited partner
has no right to take part in the management liable with the other partners for the debts and liabilities of
the firms during the period for which he was involved in management.

Company:-

The rule of limited liability which says that the shareholder in a company who has one paid for
his share in full cannot be required to pay anymore money into the company even if it cannot pay its
debts, does allow the share holders in a company to leave the company creditor, however directors and
in same causes member may have personal liability if they have continued to trade and incur debts
when the company was unable to pay its existing debts. Also company directors often asked to give their
personal garnets of certain debts of the company.

Continuity

Sole traders:-

The debts of a sole trader bring the organization to an end and the executive who are in charge
of a sole trader affairs will either have to sell a business as a going concern to some one else or sell the
assets one by one to other business. Of course, if the assets of the business have left to a person as part
of the winding of the estate, unless it is necessary to sell them to pay the deceased’s debts. If a sole
trader becomes bankrupt there is no way in which he can legally continue the business.

Partnerships;-

The debt, bankruptcy or retirement of partner can lead to the firm closing down business but it
is unusual for the partnership agreement to provide that the business shell continue under the
remaining partner or partners.

Companies:-

A company has wanted is called perpetual succession.

Question: - discuses types of partners and their authority?

1. General partner:-

This is a usual type of partner who has the right to take part in the management of the
business unless there is an agreement between himself and other partner that he should not.
For example, the partnership agreement may say that some junior partners or not to order
goods or sign checks. We shell, however, that inspire of restrictions of this kind. If a junior
partner orders goods on behalf of the firm though he had no authority to do so, the contract
would be good and the dealer could sue the partners for the price if they did not take. However
by ignoring the partnership agreement and making the unauthorized contracts in this way, the
joiner partners could give his copartners grounds to dissolve the firm, on the grounds that he
was in breach of the partnership agreement and exclude him form their feature business
operations.

2. Dormant partner:-

The 1980 act does not mention this type of partner but infract he is a partner who puts
money (capital) into the firm but take no actor part in the management of the business. If he
does take part in management he would cease to be a dormant partner and become a general
partner.

3. The salaried partners:-

It is quite common today, at least in professional, for example solicitors and accounts, to
offer a young assistant a salaried partnership without the assistant putting any money into the
firm as the general partners do. Normally these salaried partner a paid a salary just as an
employee. They are not partners for the purpose of dissolving the firm. If they want to leave
they do so by serving out their notice or gritting paid instead.

However they usually appear on the firm’s letter handing as partners and according to
the dictions of courts, be liable to pay the debts of the firm as a partner by stopped.

Partner’s powers

A partner’s authority to enter into transaction on behalf of the firm and his copartners may be
set out under the following handing

Actual authority:-

If a partner is asked by his copartners to do ascertain act, the firm is bound. For example, if a
copartner is directed to buy a new van for the firm’s use and make the contract to purchase one the firm
is bound. Section 6 deals with authorized acts and says that the firm will be liable for the authorized acts
of partners and also employees of the firm.
Apparent authority:-

If a partner enter into a transaction on behalf of the firm without authority. The person he deals
with may, he does not know of the lack of authority held the firm bound under the provisions of section
5, which gives partner some apparent authority.

However section 5 says that the transaction must be connected with the business. If there is a
dispute about this the court will decide what can be said to be connected, regarded of what the
partnership agreement make say.

Situations of no apparent authority

No partner weather in a trading firm or not has apparent authority in the following situations.

1. He cannot make the firm liable on a deed. He needs the authority of the other partners. This
authority must be given by deed. In English law an agent who is to make contracts must be
appointed as an agent by a written document.
2. He cannot give a guaranty , e.g. of an other person’s debt on which the firm will be liable
3. Pounds instead of Him cannot accept payment of a debt at a discount for example, accepting
pounds. Nor can he take something for the debt which is not money. He cannot therefore take
shares in a company in payment of the debt owed to the firm.
4. He cannot buy the firm by agreeing to go arbitration with a dispute. Going to arbitration is
illegally. A partner compromises the legal rights of the firm.
5. A partner has no apparent authority to convey or enter into a contract for the sale of
partnership land.

Question:- What do you know dissolution of a firm?

A partnership is usually dissolved with the help of the cost, though some times the court is not brought
in.

Non-judicial dissolution:-

Any of the following events normally bring about dissolution of partnership.

1. The ending of the period for which the partnership was to exist. Section 32(a) states that a
partnership for a fixed term is dissolved when the term is expired. A partnership for the joint
lives A,B and C ends on the death of A,B or C.
2. The achievement of the purpose for which the partnership was formed. By reason of section 32
B a partnership for a single undertaking is dissolved at the end of it.
3. By the given of notice under section 32c. a partnership which is not entered into for a period of
time or for particular purpose can be dissolved by notice given by any partner, but not a limited
 partner(junior partner). The notice must be in writing if the partnership agreement in the form a
deed. If not, oral notice will do. The notice takes effect when all the partner know of it or from
later date which the person giving the notice states at date of dissolution. No particular period
of notice is required. With drawl of the notice requires the consent of all the partner otherwise
the dissolution goes a head and the court will ,if asked by a partner, ,order the other partners to
windup the firm with him. Dissolution by notice depends upon what the partnership agreement
says that dissolution is only to be by mutual consent of the partners, section 32c does not apply.
4. Death of a partner:-
Under section 33 c the death of the partner dissolves of the firm. The share of the
partner who had died goes to his legal representative. They have the rights of the
partner in dissolution. Partnership agreement usually provide that the shall continue
after the death of a partner so that the dissolution is only technical.
5. Bankruptcy of a partner:-
By reason of 33(1) the bankruptcy of a partner dissolves the firm. The partner ship
agreement usually provides that the business shell continue under the known bankrupt
partners which means that the dissolution is again only a technical one and the
bankrupt partner’s shares is paid out to his trustee in bankruptcy. The agreement to
continue the business must be made before the partners bankrupt.
6. Illegality;-
Under section 34 a partnership is every case dissolve by illegality. There can be no
contracting out of the partnership agreement there are two types of illegality.
a. Where the business is unlawful
b. Where the partners cannot legally for a partnership to carry on what is otherwise a
legal business.
7. Charge:-
Section 33(2) says that if a partner shares in a partners hare is charge to pay a private
debt, the firm may be dissolved, not automatically but at the option of others partners.
There is no indication in the act whether the option is exercisable by any partner or by a
majority or all unanimously. Since it seams similar to expulsion it may require it may
require the unimus consent of the other partner.

Judicial dissolution;-

Dissolution by the court is necessary if there is a partnership for a fixed time or purpose and a
partner wants to dissolve the firm before the time has expired or the purpose been achieved and there
is nothing in the partnership agreement which allows this to be done. There must be grounds for
dissolution these are given bellow:

1. Partners’ mental incapability :-

This is a ground under the mental health act. The petition for dissolution is in this case
heard by the court of protection. Which sits to look after the property of people who are
unsound mind. The partner concerned must be unable because of mental disorder, of
 managing his property and affair. A petition may be presented on behalf of the partner
who is under the disability or by nay of the other partners.

2. Partner physical incapacity:-

This is a ground under section 32B. The incapacity must be permanent. In a case a partner was
paralyzed for some month. He had recovered when the court hared the petition and it would not grant
dissolution. Partner ship agreement often contains express clauses which allow dissolution after a
started period of incapacity. Section 32 b states that the incapable partner cannot file a petition. It is up
to his copartners to do so other wise he continuous as a partner.

3. Conduct prejudicial to the business:-

Section 35 c provides for this the conduct may relate to the business. It may, of course, be
outside conduct. This will usually justified dissolution if it results in a criminal conviction for fraud or
dishonesty. Moral misconduct is not enough unless in the view of the court it is affect the business.
Section 35 c for bids a petition by thee partner in default.

4. Willful or persistent breach of the agreement or conduct effecting the relationship this covered by
section 35 d. it includes refusal to meet on business or keep accounts, continued quarrelling and very
serious internal disagreement. “Willful” means a serious breach inflicting damage on the firm less
serious breaches are enough if “persistent’. The court will dissolution if the essential trust between the
partners had gone. Again section 35d forbids a petition by the partner in be fault. No partner can force
dissolution his own default.

5. The business can be carried at a loss. This is provided for by section 35 e. it is hardly surprising as a
ground for dissolution. In view of the fact that partners are in business together with a view of profit.
Therefore they must have means to release them selves from lose. Section 35e is not available if the
loses are temporary. In a case where a sound business was losing money because a senior managing
partner will ill. He asked a court for dissolution. The court would not grand it. The other partner could
mange the firm back to finical prosperity. The court will not however expect the partners to putting in
more capital. Any partner may file a petition.