There are basically seven types of businesses in Uganda broadly falling under unincorporated

and corporate structures. In legal terminologies, sole proprietorship and partnerships are
categorized as unincorporated entities while private companies limited by shares or guarantee,
public limited companies, unlimited companies, statutory corporations and branches of foreign
legal entities are classified as corporate entities.

UNINCORPORATED STRUCTURES

Unincorporated structures are business entities without distinct legal standing from the owners
who remain individually accountable for the debts and obligations of the enterprise. They include
sole proprietorship and partnerships (Monitor, 2020).

1. Sole proprietorship

This is a one individual entity. The individual is referred to as the sole proprietor or sole trader.

There’s no separate legal entity created between the business and the owner and as such, the
business owner is not exempt from liabilities created by the entity. For example, the debts of the
entity are debts of the owner. However, the profits of the business are also profits of the owner,
as all profits flow directly to the business owner (Twin, 2021).

Sole proprietorships are easy to establish and dismantle, due to lack of government involvement,
making them popular with small business owners and contractors (Twin, 2021).

Advantages of sole trade

 It is easy to create
 Low fees for creation and maintenance.
 It has a pass-through tax advantage. The tax process is simpler one does not need to
obtain an Employer Identification Number (EIN). Also, because one is not required to
register with the state, there’s no need to pay any fees associated with registration or any
other fees associated with the process. This saves a lot of money which can be ploughed
back in the business.
 It does not require a lot of paper work. Paper works associated with state registration are
eliminated but the sole trader may need to obtain a license or permit depending on the
 state and type of business. The less paper works allows the business to get off the ground
faster.
 With sole trade, business checking accounts may not be necessary like it is the case with
other business forms. The sole trader can simply conduct all finances through the
personal checking account.

Disadvantages of sole trade

 Difficulty in getting capital funding specifically through established channels like the
banks. Banks prefer to work with businesses that have good track financial records.
Being an individual starting with a small balance sheet, it is risky of the banks to lend a
sole trader money for business.
 The sole trader suffers the losses in the businesses alone.
 No state protection. When a business is registered, it has some protection and support
from the state when it comes to liability. An LLC has protection against creditors from
seizing personal assets of the business owner like homes which may not be the case with
sole trade.
2. Partnerships

This allows like-minded individuals not exceeding 20 in number to jointly raise capital and
undertake a business together.

Partnerships are governed by a partnership deed selling out the rights and obligations of the
partners and its registration is mandatory if the names does not consist of the true surnames of all
the partners.

In the case of a for-profit venture, partnerships can be of three categories; general partnership,
limited partnership and limited liability partnership.

In a general partnership, all parties share legal and financial liability equally. The individuals are
personally responsible for the debts of the business. The specifications for profit sharing are laid
out in the partnership deed (Kopp, 2021).

In a general partnership, every partner is an agent of the business and binds the other partners,
thus all partners are jointly and severally liable for the partnership debts and the partnership can
dissolve because of death or bankruptcy or retirement of one of the partners unless the
partnership deed prescribes otherwise which is not the same case with LLPs (Monitor, 2020).

In LLPs, the liability of the limited partners for any debts or obligations of the partnership dos
not exceed the amount of their capital contribution (Monitor, 2020).

LLPs limits partner’s personal liability so that for example if one of the partners is sued for
malpractice, the assets of other partners are not at risk. This is a common structure for lawyers,
accountants and architects (Kopp, 2021).

Limited partnership is a hybrid of the general partnership and LLPs. At least one partner is a
general partner with full personal liability for the partnership’s debts and at least one other is a
silent partner whose liability is limited to the amount invested. This silent partner generally does
not participate in the day-to-day operation of the partnership (Kopp, 2021).

CORPORATE STRUCTURES

Corporate business entities have a distinct legal standing from the owners who are generally
protected from the liabilities of the enterprise. These include locally incorporated companies,
statutory corporations and branches of foreign legal entities.

1. Locally incorporated companies

According to the Uganda’s Companies Act, these can have limited or unlimited liabilities.

Private companies limited by shares are those entities whose membership by law is limited to
100 persons. Members’ liability for company obligations is limited to their shareholding
(Monitor, 2020).

The right to transfer shares is restricted for private companies so is the subscription for company
shares and debentures by the public.

A private company limited by guarantee predominates non-profit organisations such as charities,

sports clubs and professional bodies. The purest form of a guarantee company is one having the
liability of its members limited by the memorandum to the amount that the members undertake
to contribute to the assets of the company if it is wound up.
Public limited companies are entities that can offer their shares to the general public but also
have limited liability. The shares can be acquired during an initial public offering or through
trading on the stock exchange (Monitor, 2020).

Unlimited companies are private companies where the shareholders have unlimited liability.
Each member is jointly and severally liable for the debts of the company in the event of winding
up. It is fairly easy to return capital to shareholders as the restrictions on the reduction of the
capital in the Companies’ Act 2012 only apply to limited companies (Monitor, 2020).

2. Statutory corporations

They are also referred to as public corporations and are public bodies established by respective
Acts of Parliament for example the District Land Board (DLB), District Public Account
Committee (DPAC) and District Service Commission (DSC) (Monitor, 2020).

Statutory corporations are managed by a Board of Directors appointed by the government

through the line minister or the President and are accountable to the public and Parliament
(Monitor, 2020).

3. Foreign companies or branches

They can be an extension of the head office in their mother countries and to be registered by
Uganda Registration Service Bureau (URSB), the branches must present the constitutional
documents of their head office. Examples in Uganda include DHL and International Schools
(Monitor, 2020).

References
Kopp, C. M. (2021, September 7). Partnership. Retrieved from Investopedia:
https://www.investopedia.com

Monitor. (2020, July 13). Forms of business entities in Uganda. Retrieved from Monitor:
https://www.monitor.co.ug

Twin, A. (2021, September 10). Sole Proprietorship. Retrieved from Investopedia:

https://www.investopedia.com