Types of Business Formation-How to Register a Business Venture

Company Structure
Between one man business and limited liability companies
Limited Liability Company
A limited liability company is just one of two major sub sectors of company formation. There is the one Man Company /sole proprietorship and Limited Liability Company.
The limited liability company is a public company while the one man business is a private owned establishment. The public companies are usually large conglomerates, or businesses that operate huge budgets and high net worth business deals.
They are limited in company terms which mean that they are only liable to the extent of their financial input. The liability not extending beyond companies cash deposit debts, property or equipment.
The debt profile does not include director’s personal assets or wealth except during embezzlement and legal court rulings. Privately owned companies do not enjoy this and are liable even to the extent of their personal saving and wealth.
How Public Companies Work
Public companies are formed through the initial offer of share to the general public.  The shares are called ordinary shares.
A private company that has outperformed expectation and fulfill government laws governing limited liability may go public. They offer some of their shares to the general public.
 If the private company can meet the financial requirements to go public it is given accreditation and allowed to go public. The ordinary shares offered by public companies carry monetary value of that share price subject to fluctuations and price appreciation or depreciation.
The share value can not exceed its worth. The company can also issue debenture shares.  Debenture share holders may not enjoy price appreciation the way ordinary share holders do.
However investors get back their full investment in the case of the limited liability company’s liquidation.  The ordinary share holders have to wait to get any sort of payback.
Public Company Investors
The public company may also seek core investors who may have company shares up to 45% of the public enterprise. Core investors are not limited to individual investors but could be bought by other companies, cooperatives group or the company staff.
The company may seek funding from public offers where shares are strictly governed by stock exchange rules and government guide lines. The shares are usually ordinary and are worth only the quoted price.
 Financial responsibility to the company does not extend beyond the stock held or value of share bought. For example $50 shares can not exceed its monetary value of liability to the holder during liquidation.
Management Board of Limited Liability Companies
The board is usually constituted by the share holders during annual share holders meeting. They use ballots to cast votes and count.
 The ordinary shareholder is limited during voting to the number and value of the shares he holds. Top managerial positions like accountants, company secretary, managing directors are hired by the board.
 Such positions are left to professional to run the company. The share holder don’t have a say in company policies and core business decisions although at times they make them think they do.
The chief executive is usually a political position and could be imposed on the company.  An investor with very high number of share close to 50% of the total companies share holding has such powers.
The executive arm takes care of the hiring and firing.
Business Type
What is your preferred business format?
Top of Form
  • One Man Business
  • Partnership
  • Limited Liability Company

Bottom of Form

Both public and private companies have to incorporate the business.  The public company needs to have a memorandum of association and article of association.
This shows the management structure and business type including location and financial strength. This document makes the company a limited liability company.
The company is also issued a corporate charter and a certificate of incorporation. The certificate shows the companies liabilities and allows government regulations, penalties and incentives.
Types of Business Format
one man business
Limited liability company
Unlimited liability
Unlimited liability
Limited liability
poor funding
moderate funding
Excellent Funding
lack of access to bank loans
access to loans
Access to Loans

Government subventions
Advantages of a Limited Liability Company
    1 The ability to rise adequate funding through sale of shares, bank loans and   government subventions.
    2 Easy transfer of ownership between share holders
    3 They have financial might and can hire experience and professional staff.
    4 A company registered as a limited liability entity is not subject to easy liquidation.
    5 The huge funds allow them diversify their portfolio and buy into other companies.
Disadvantages of a Limited Liability Company
    1 There is separation between owners and management of the company since business decisions are taken by the management alone.
    2 The interpersonal relationship found in small businesses is non existent
    3 The require stringent laws to operate
    4 Government regulates the activity to ensure compliance

Sole Proprietorship
The basic form of business is trade enterprise, operated run and financed by an individual. The major set back for this kind of business is finance.
 Finance limits its growth potential and hiring of less experienced staff may contribute poorly to the growth of the company. Registration for a sole enterprise is easy all you need is a business name that is not already incorporated.
Advantages of Sole Proprietorship
   1 the man is boss
   2 easy registration processes
   3 success and failure rest squarely on his shoulders
   4 share none of the profit
Disadvantages of Partnership
What are the Disadvantages of partnership?
* Unlimited liability
* The owners may have disagreements
*Compatibility issue
* Inadequate staffing
*Are unable to compete with limited liability companies
Another business format is partnership which basically is business registered by two consenting partners. They both contribute their resources to the formation of the company and lend their expertise towards the companies successful.
The management structure may involve direct participation of two of them or only one.  They share in the success profit or failure of the business Enterprise.
There are also supper partnerships that could range from ten to one hundred. Once there is cohesion between partners it could work. They also draw up remunerations and earn sharing formulas.
There are several kinds of partnership but only three will be featured
Active partnership
Active partnership is when the daily decision, ruining and finance are borne by both partners. They take shared risks and enjoy shared profit and loss.
Sleeping partnership
This type of partnership was explained earlier where only one member takes part in the running of the organization
Nominal partnership
A nominal partner puts his money into the business and expects returns for his investment. He does not contribute to the ruining of the business enterprise
Partners regulate their agreement through many processes to protect both parties.  Most times a lawyer prepares the deed of agreement which is binding on all the people involved.
In the event of default legal action can be taken on one or more partners. An advantage of this form of business arrangement is more funds for the business.
They can hire better professionals but one of their biggest drawbacks is unlimited liability like the one man business owner. If you want to start a business or join others you should consider all the advantages and disadvantages before taking the leap of faith.
 Consider your exit and entry plans if you want to invest in limited liability companies. Take advantage of initial public offers where share prices are usually lower than the listed price at the stock exchange.
 If you want to go it alone plan adequately, draw up a budget and hire professionals.
How to Identify a Business Opportunity
Starting out in business requires careful planning and strategy. Have you identified a business opportunity?
Answering this question might direct the kind of business you decide to do. If you fill a void and satisfy the shopping needs you are in business.
*Poor service delivery
If you noticed very poor service delivery you have found a good business opportunity. Having a good customer base is the core reason business survives or fails. Meeting the demand is another thing entirely.
*Advancement in technology
 New technological break through may guarantee success. Technology is dynamic using it in the production process might give a budding entrepreneur an edge over his competitors.
 New establishment have grown by using cutting edge technology over their competitors
*price deferential
Pricing is important to the success of an enterprise. The same applies to service delivery and management structure.
 *Availability of cheap labor
If you have the advantage of cheap and experienced labor you will become competitive. More cash allows better stocking of goods and better location.
*Proximity to raw materials
Locating your business close to raw materials guarantees better deals and lower costs. You save on labor, transportation and warehousing. Proximity to raw materials is one of the biggest advantages a business owner may have over his competitors.
Starting a business is challenging you need to determine between sole proprietorship and limited liability. Any business with strong management structure has a chance for success.


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