This article discusses the seven most common types of business entities in Uganda, which are divided into two categories: unincorporated and corporate structures.
Unincorporated enterprises include sole proprietorships and partnerships, while corporate entities include private limited businesses limited by shares or guarantees, public limited companies, unlimited companies, statutory corporations, and branches of foreign legal entities.
Unincorporated Structures
Unincorporated structures are businesses that have no separate legal status from their owners, who are nevertheless personally liable for the company’s debts and responsibilities.
Sole proprietorships and partnerships are examples.
Sole proprietorship
A sole proprietorship is a one-person business. A person conducting business under a business name other than his or her genuine name must register the name with the Uganda Registration Services Bureau (URSB).
A sole proprietorship is simple to set up, and the owner reaps all of the benefits of the business. The owner, on the other hand, is not separate from the firm and is personally liable for all business liabilities, including taxes.
Partnership
Partnerships allow a group of like-minded people (no more than 20) to acquire funds and do business together. Professional service providers such as lawyers and accountants frequently employ them.
A partnership deed lays out the rights and responsibilities of the partners.
If the partnership business name does not include the true surnames of all partners, it must be registered. The two categories of partnerships are general and limited liability partnerships (LLPs).
Limited liability partnerships (LLPs) differ from general partnerships in that limited partners’ liability for the partnership’s debts and obligations is limited to their capital contribution.
Every partner in a general partnership acts as the firm’s agent and binds the other partners. As a result, all partners share responsibility for the partnership’s debts.
Unless the partnership agreement specifies otherwise, a general partnership is also dissolved by the death, bankruptcy, or retirement of one of the partners, which is not the case with LLPs.
Corporate Structures
Corporate business entities have a unique legal status from the owners who are often sheltered from the obligations of the enterprise. Locally incorporated businesses, statutory corporations, and branches of foreign legal entities are examples.
Local firms registered under Uganda’s Companies Act might have either restricted or unlimited liability. Private businesses limited by shares are legal entities with a maximum membership of 100 people. Members’ liability for corporate commitments is restricted to the amount of stock they own.
The right to transfer shares, as well as public subscriptions for business shares and debentures, is restricted for private firms.
Private companies limited by guarantee
Non-profit organizations, such as charities, sports clubs, and professional bodies, are most commonly formed as private corporations limited by guarantee. The purest form of a guarantee company is one in which the members’ liability is restricted by the memorandum to the amount they agree to contribute to the business’s assets if it is wound up.
Public limited companies
Public limited companies are entities that are not private limited companies. They can sell their shares to the general public, but their liability is limited. The shares can be purchased through an initial public offering (IPO) or stock market trading.
Unlimited corporations
Unlimited corporations are private companies with unlimited liability for their shareholders.
In the event of the company’s bankruptcy, each member is jointly and severally accountable for the company’s debts. Because the Firms Act 2012 only applies to limited companies, returning capital to shareholders is rather simple.
Statutory Corporations
Statutory corporations, sometimes known as public corporations, are government entities formed by legislation. 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.
Foreign companies or branches
Foreign companies or branches registered in Uganda are a branch of their parent company. URSB requires branches to show their head office’s constitutional documents to be registered.
