A business structure is an association arising out of a cooperation agreement. Such an agreement may be categorized into a total of persons-partnership (where the personality of each partner is more important) and a total of capital or shares-companies (where the subscription of the capital is more important than the personality of shareholders). Or a similar association (of person/capital) should be for the purpose of carrying out profitable conditioning.
Types of Business structures
Business structures in Ethiopia can be principally distributed on the basis of the following two parameters; form-wise and object-wise:
- Form wise: There are two broad orders of business structures(partnerships and companies) and/ or six sub-categories of them: Ordinary partnerships, general partnerships, limited partnerships, common partnerships, share companies, and private limited companies.
- Objects wise There are two types of similar associations: marketable and non-commercial business associations.
The following are the six types of business structures in Ethiopia:
Ordinary partnerships
This can be said to be the simplest form of cooperation in Ethiopia. The law doesn’t have a conclusive description of it. Per article 228 of the law, its cooperation is created where the property is held by several persons for reasons outside their control. By this we mean in case several persons come to the common owners of a property, let’s assume due to race, the common owners agree to produce cooperation for the operation of the property concertedly possessed. A certain business association is supposed to be ordinary cooperation if it doesn’t have characteristics, which makes it a business structure covered by the com. law of Ethiopia. Eventually, similar partnerships are always non-commercial in nature.
Joint ventures
It’s a secret(discreet) or covert type of cooperation in that the joint venture agreement among the enterprise lacks the characteristics of divulgation or enrolment or translucency to third parties. It’s only one of the partners (the director) who’s only known to the public as if he’s doing his own individual business. Nonetheless, the agreement between the director and the rest of the enterprise or the adventure per se doesn’t have a legal personality. It can be considered cooperation because it’s subordinated to the general principles of partnerships, per article 271 of the law.
General partnerships
As far as partnerships are concerned, these are the typical types of partnerships, in that it’s marketable in nature and is established by partners who are concertedly and severally liable between themselves and the cooperation establishment’s undertakings. External liability of the partners(towards) third parties is unlimited but the partners can settle their internal arrears by agreement. It fulfills all the conditions anticipated from a marketable business association in that it should be registered, publicized and it’s subordinated to ruin and it’s equipped with better operation. Also, it exercises the trait features of legal personality, similar to names and the legal obligation of taxation.
Limited partnerships
This is a corporation that consists of two types of partners: general partners (active partners, who can be directors and whose liability is unlimited) and Limited partners(passive partners, who cannot be a director and whose liability is limited to the extent of their donation). Other than this all the vittles’ of general partnerships are applicable to them.
Private limited company
This is the other variety of companies in Ethiopia. But viewed under a microscope it’s a hybrid of general cooperation and a shared company. For example, partnerships cannot operate in a high-profile business. It cannot indeed issue negotiable securities, and there’s no ease of transfer of shares to a third party. On the other hand, like share companies, there’s the concept of limited liability of partners. In terms of the ceiling demand of class (which is 50) and the original capital needs to be subscribed (which is 15,000 ETB), it differs from share companies (where there’s no ceiling demand of class and original capital is,000 ETB).
