CHAPTER 2: FORMS OF BUSINESS ORGANIZATIONS

2.1 SOLE PROPRIETORSHIP (ONE-MAN BUSINESS)

• Definition: A business owned, financed, and controlled by one individual, who reaps all the profits but also bears all the losses.
• Liability: Unlimited Liability (owner’s personal assets are at risk).
• Advantages: Owner retains all profits, easy to form, quick decision-making.
• Disadvantages: Unlimited liability, limited capital, limited lifespan.

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2.2 PARTNERSHIP

• Definition: A business owned by 2 to 20 people (up to 50 for professional firms) who agree to share profits or losses according to a Deed of Partnership.
• Types of Partners: General/Active Partner (participates in management, unlimited liability); Sleeping/Dormant Partner (provides capital, does not manage, usually unlimited liability); Limited Partner (liability restricted to investment, cannot manage).
• Disadvantages: Unlimited liability for general partners, lack of continuity, potential for disagreement.

2.3 JOINT STOCK COMPANIES

• Definition: A business that is a separate legal entity from its owners (shareholders). Capital is contributed in the form of shares.
• Key Features (Mandatory for WAEC): Limited Liability (shareholders only lose the value of their shares)
  Separate Legal Entity
  Perpetual Succession (business continues despite changes in ownership/management).
• Types of Companies:
  • Private Limited Company (Ltd): Max 50 members. Cannot invite the public to buy shares. Shares are not freely transferable.
  • Public Limited Company (Plc): Min 7 members, no maximum. Can invite the public to buy shares (through the Stock Exchange). Shares are freely transferable.

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2.4 COOPERATIVE SOCIETIES

• Definition: A voluntary association of people aiming for mutual benefit rather than profit.
• Key Principles: Voluntary Membership and Democratic Control (One Man, One Vote).
• Types: Consumers’ (buy in bulk for members), Producers’ (pool resources for production/marketing).

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