Question

State any four features of each form of business organisation identified in above.

Hint:

Remember the primary difference in liability and continuity:

• Sole Proprietorship: All profits, decisions, and risks rest with a single individual.
• Partnership: Responsibilities, capital, and liabilities are shared among two or more people under the rule of Mutual Agency.

Answer 1

Step 1: Identifying the Business Organizations:
From the previous subpart, the two organizations identified are: (1) Sole Proprietorship, and (2) Partnership.

Step 2: Outlining Four Key Features of a Sole Proprietorship:

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• Single Ownership and Control: The business is owned, financed, and controlled by a single individual who has sole authority over all operational decisions.
• Individual Risk Bearing and Profits: The owner receives 100% of the business profits and bears all financial risks and operational losses alone.
• Unlimited Personal Liability: The owner's liability is unlimited. In the event of business bankruptcy, creditors can claim the owner's personal assets to satisfy outstanding debts.
• No Separate Legal Entity: The business holds no separate legal identity from its owner in the eyes of the law.

Step 3: Outlining Four Key Features of a Partnership:

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• Agreement Born (Contractual Origin): A partnership is established through a mutual agreement (known as a Partnership Deed) between two or more parties, which can be oral or written.
• Two or More Persons: A partnership requires a minimum of two partners to be formed, with the maximum membership defined by the Companies Act.
• Unlimited Joint and Several Liability: All partners have unlimited personal liability. Creditors can recover outstanding debts from any single partner or all of them jointly.
• Mutual Agency Relationship: Every partner acts as both a principal and an agent for the other partners. Their business actions bind both the firm and their fellow partners.