ENTERPENEURSHIP

BIT

GS180289BSIT

MERCY NUNGARI MUKURU

ASSIGNMENT

"Describe in details three form of Business organizations and with the help of examples,show
their impact on an economy like Kenya"

INTRODUCTION

Business Organization is an entity that is formed for the purpose of carrying on the commercial
enterprise of selling and buying. These organizations are based on the systems of law that
governs contract and this exchange, property rights, and incorporation.

Business Organization system is concerned with the management and planning of different
activities. This is an accumulation and coordinating the resources such as men, material, money,
machine to produce the goods and services, the business organization works coordinate and
control all these factors of production.

Forms of business organizations.

The 3 main forms of business organizations in Kenya are:

 Sole proprietorship
 Partnership firm
 Limited liability partnership
SOLE PROPRIETORSIP

This type of business is known for its simplicity and ease of setup. It is the easiest form in which
one can operate. The owner and the business are regarded as one and therefore the owner
assumes all the risks of the business and is personally liable to the extent of all his or her assets
that are used in the business and those that are not.

Advantages

 One of the advantages of a sole proprietorship is that an owner can make decisions
quickly and decisively without having to consult others. And an individual proprietor, by
law, pays fewer taxes and at a lower rate than does a corporation.

Disadvantages

 A sole proprietorship ends with the incapacity or death of the owner

 . The assets can be inherited by a person who may then become the operator, but legally
the business dies with its owner.
 Also, since it is dependent upon the amount of money the owner has saved or can borrow,
usually it does not develop into a large-scale enterprise.

Impact on Kenyan Economy

Examples of a sole proprietorship is a bakery, kiosk, barber shop, salon and boutique.

Some economic contributions of such small business are:

 A small business is often the starting point for developing a new product or service. One
person tries out an idea. If it is successful, the business grows, or the product may be
bought by a larger firm.
 The small business can give an individual a chance to gain experience, which the person
may use later on a larger scale eg.in a bakery, one may use the skills and experience to
open a bread company.
 Small businesses are particularly well suited for meeting specialized local needs eg
.kiosks in rural areas sell products that are familiar and useful to their locals.
 Artisans can provide individualized products for customers who have grown weary of
mass-produced goods.
 Small businesses provide a service where knowing one's customers is important.
 Sole proprietors are reassuring to customers who believe an individual who is
accountable will do a good job.
PARTNERSHIP FIRMS

A partnership is a single business where two or more people share ownership. It is owned by a
minimum of 2 and a maximum of 20 except for partnership who provide professional services
e.g. medicine and law which have a maximum of 50 persons. Each partner contributes their
expertise or other skills, money or property to have a share in the business so that they can share
in the profits and losses of the business. Each partner includes his or her share of the
partnership’s income or loss on his or her tax return.

Advantages

Partnerships between private companies and the government provide advantages to both parties.
Private-sector technology and innovation, for example, can help provide better public services
through improved operational efficiency. The public sector, for its part, provides incentives for
the private sector to deliver projects on time and within budget. In addition, creating economic
diversification makes the country more competitive in facilitating its infrastructure base and
boosting associated construction, equipment, support services, and other businesses.

Disadvantages

Some analysts contend that by diverting resources (money and labor) from market-driven ends to
politically driven ends, PPPs harm growth. Proponents counter that the effective provision of
public goods, such as education and roads, helps promote economic growth. In turn, critics of
public-private alliances say that public goods could be provided much more effectively by the
private sector alone if it weren't for the crowding-out effect of public distortions in the capital
markets.

Impact on Kenyan economy

Public-private partnerships are typically found in transport infrastructures such as highways,

airports, railroads, bridges and tunnels. Examples of municipal and environmental infrastructure
include water and wastewater facilities. Public service accommodations include school buildings,
prisons, student dormitories, and entertainment or sports facilities. PPPs also do the following:

 Allow large-scale government projects such as roads, bridges, or hospitals to be

completed with private funding.
 Work well when private sector technology and innovation combine with public sector
incentives to complete work on time and within budget
LIMITED LIABILITY PARTERSHIPS

Limited liability partnerships commonly referred to as LLPs are unique forms of business
association that combines elements of a company with those of a partnership.

Limited Liability Partnerships (LLPs) in Kenya are governed by the Limited Liability
Partnership Act, 2012 (“the Act”). They are defined as “Any part registered in the LLP Act”. An
LLP is a form of a business organization hybrid between a traditional general partnership and a
limited liability company.

Once it is registered, it gains a corporate legal entity different from its members and is able to
own property in its own name. In addition, it is effective from a tax perspective as the
partnership income is taxed in the hands of each partner.

Establishment and Registration of LLPs

1. The establishment can either be by express agreement or implied. Any person who
wishes to register an LLP must:
2. File a statement with the Registrar in the prescribed form LLP11 and should include the
proposed name of the LLP,
3. The objectives/ mandate of the partnership must be clearly stipulated,
4. Required documentation: Copy of ID, Notarized Passport Bio Data section (Foreign
directors), recent coloured passport photo, Pin Certificate, P.O Box, Email, Mobile
Number, Residential address for directors, the company’s physical address (Registered
Address).
5. The statement is then filed at the Companies Registry and the Registrar of Companies, at
their discretion, then registers the LLP upon paying the prescribed fees of Ksh. 25,000
6. An LLP must be registered by two or more persons, one of whom must be the General
Partner and at least one of the partners must have the mandatory requirements in line with
the firm’s main objectives.
7. Additionally, an LLP can be registered by natural persons and body corporates except for
trade unions. At least one General Partner must be a natural person.
Management and Control of LLPs

1. An LLP must have at least a General Partner and at least one General Partner must be a
natural person.
2. An LLP Agreement is used in the management of LLPs. This is an Agreement between
the partners themselves and the partnership.
3. Where there is no LLP agreement, the management and control are governed by the
provisions of the First Schedule of the Act. Partners in an LLP are advised to have an
LLP Agreement so that they can clearly stipulate the details on the management of the
LLP.
4. Section 29 of the Act requires an LLP to lodge with the Registrar a declaration by one of
its managers that in the opinion of the manager, the partnership either appears at that date
to be solvent or does not appear as at that date to be solvent. Such declaration shall be
lodged no later than fifteen (15) months after the date of registration of the LLP and
subsequently, once in every calendar year.

Termination of Membership in an LLP

1. A person can cease to be a member if he gives ninety (90) days’ notice to cease or
terminate membership, by an order of the court and where the requisite majority in a
Partnership Agreement vote to remove him from the partnership.
2. Where a member dies, their rights are exercised by the executor of his estate or trustee.
However, a partner can transfer his interest to another person with the concurrence of all
General Partners.
3. Bankruptcy does not make one lose partnership unlike in general partnerships. The rights
of such a bankrupt are subject to the provision of the Limited Liability Partnership Act.
Examples of Limited Liability patnerships

Common businesses that become LLPs are law firms, accounting firms, and doctor offices
because multiple partners are involved in the business

Advantages and Disadvantages

Advantages

1. All Partners have limited liability

2. No limit to the number of Partners
3. No need for a Memorandum of Articles of Association so Partners can agree their own
structure & regulations
4. They are also very easy to dissolve when compared to companies. They are therefore
very appropriate when it comes to transactional deals.
5. An additional attractive feature of an LLP is the fact that body corporates and individuals
can form it. This means an individual can partner with a company and form an LLP.
6. A partnership doesn’t have perpetual succession meaning that in the event of exits, then it
may affect the existing partnership. When it comes to an LLP there is perpetual
succession meaning that property is held perpetually in the name of the LLP partnerships
changes notwithstanding.

Disadvantages

1. A Partner in an LLP is personally liable for his or her own negligence

2. A Partner in an LLP is liable for the negligence of any employee working under that
Partner’s direct supervision
3. There is liability for debts incurred by the Partnership
4. Public disclosure is the main disadvantage of an LLP. Financial accounts have to be
submitted to Companies House for the public record. The accounts may declare income
of the members which they may not wish to be made public.
5. Income is personal income and is taxed accordingly. There may be tax advantages in
registering as a company, but this will depend on your personal circumstances.
6. Profit cannot be retained in the same way as a company limited by shares. This means all
earned profit is effectively distributed with no flexibility to hold over profit to a future tax
year.
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