Topic 4, The business set up: Presentation Topic 4, The business set up: Presentation GROUP ONE Shem Charo Chiti: Peninnah Naisiae: Myran Tigana:

Definition of a sole proprietorship A sole proprietorship is a business set up of one without corporation or limited liability status. It is owned by an individual who represents the company legally and fully. It has a business set up only suitable for small and medium size companies. For new start-ups the sole proprietorship is the simplest of all the business forms. Advantages Quicker decision making processes. Lower start-up costs. Disadvantages Personal liability for all debts & actions. Loose structure resulting to loose financial control. High level of risks on owner. Difficulty in financing.

Definition of a partnership A partnership is a relationship between 2-20 persons carrying on a business with a common purpose to realise profits. It is a form of business set up for joint ownership of a company. Advantages Simple & cheap to set up and dissolve. Combines skills, knowledge & experience for synergy. Shared managerial responsibility. Easier access to capital. Capacity for support and motivation. Disadvantages Volatile to disputes i.e profit sharing ratios, administrative control & direction. Permanent ownership. Shared profits. In a general partnership, partners are jointly and individually liable for the business actions of each other by law.

Advantages Exist as a separate legal entity from its owners. Able to own property and assets under its name. Limited liability. Thus attracts investors. Ease of raising capital. Disadvantages Complicated and expensive to establish and administer. The input of shareholders is unequal, dictated by holdings. Excessive bureaucratic and legalistic in operation.

Definition of cooperatives A cooperative is an autonomous association of persons who voluntarily mobilize for their mutual social, economic & cultural benefit. It is legally and democratically owned by its members, people like you whether customers, employees or residents. Due to its democratic nature, cooperatives characteristics vary with the purpose & intentions of its members. In business cooperatives, some members have a greater share of the control through share ownership, likewise some investors to have a return on their capital that exceed the fixed interest. Though cooperatives may vary by types, still they are all typically based on the values of self help, self responsibility, democracy & equality and solidarity. All cooperatives therefore balance on a mix of self help and mutual aid.

Advantages Flexibility. They are set up in different ways using different structures. Support community development as well as individual empowerment. Ease in raising capital. Disadvantages Slow decision making processes. Profit sharing criteria. Low skilled or incompetent management. END

Types of partnerships General partnership - governed by the partnership act of the laws of Kenya (1981) using default rules. Limited partnership - governed by the limited partnership act of the partnership laws of Kenya which states that partners’ liability is limited to the extent of contribution. Limited liability partnerships - governed by the limited liability act of the partnership laws of Kenya which states that that, partners are not liable to the entity and also separate persons from the entity.

Definition of a company A company is a business organization formed by an association of persons whose existence is legally separate from that of the entity. It is owned through shareholdings by its members of whom some own majority shares and others minority shares respectively. Companies fall under two categories: Limited by shares - limits liability of shareholders to the value of their shares. Limited by guarantee – limits liability of shareholders to the value they have guaranteed. Under these two categories there are two types of companies: Public companies - these are companies whose shares are registered to trade freely in the stock exchange. Private companies - either nongovernmental or under a small number of shareholders or members who do not offer the shares to register on the stock exchange.