In the last edition of this magazine, we dedicated this column to explaining how best to institute financial discipline in the family and the need to work towards achieving and maintaining healthy financial state for the family.
In this month’s edition, we want to focus on the challenges in business and career – the geese that lay the golden eggs. Business is defined as an organization involved in the trading of goods, services or both to customers in exchange for other goods, services or money. There are different categories of businesses such as sole proprietorships, partnerships and corporations.
A sole proprietor is called a sole trader in common parlance. A sole trade is a one-man business. There is no legal distinction between the owner and the business. As a sole proprietor, you do not share profits and losses with anybody.
You are responsible for all the obligations arising from the operations of the business. You alone bear the risks and earn the rewards from that enterprise alone. Partnerships are associations of two or more entrepreneurs who decide to pool resources together with the sole purpose of sharing risks and rewards.
Partnerships are governed by partnership agreements which may be written or unwritten. Where there are no written agreements, such partnerships are governed by Partnership Act, 1890.
In some cases, profit sharing is the motivation for the arrangements. Profit sharing may be based on capital contribution ratio, business introduced by each partner, or any other specific understanding between the partners. There are general partnerships, limited partnerships and limited liability partnerships (LLP).
A general partnership is the most common form of association of two or more persons, created by agreements, proof of existence or estoppel, and the members are personally liable for any legal obligations or debts that the partnership may incur.
Limited partnership is similar to general partnership in that it is a partnership where in addition to general partners, there is one or more limited partners. While a limited partner may be liable to the obligations and debts incurred by the partnership, a limited partner in most cases has no management control function. He has no powers to commit the partnership and does not in any way act as its agent.
The general partners in a limited partnership are jointly and severally liable to the obligations and debts incurred by the firm, have management control functions and are agents of the partnership. In some texts, limited partners are referred to as “sleeping partners”.
Limited Liability Partnerships (LLP) are partnerships in which some or all the partners have limited liabilities. In such partnerships, the concept of “several and joint” liability does not exist. Limited liability partners are not responsible for the misconduct of other partners. This is a striking difference between LLPs and general partnerships.
Partnership associations are found largely among professional services firms such as Accountants, Lawyers, Estate Surveyors, Architects, and Medical Doctors, among others. It is not uncommon to find partnerships in other economic ventures like agric business, merchandizing and manufacturing concerns.
Sole proprietorships and partnerships are essential vehicles for economic development and social empowerment in a large economy like Nigeria. They serve as media for the trickling down of the benefits of economic growth and development. This advantage can only be realized in a balanced economy where there is an unquenchable commitment of the political leadership to achieve equitable income distribution.
Limited Liability companies or corporations are more complex set of business structures that dot the economic landscape. In simple language, limited liability means that the financial obligation of the members of that company is limited to a fixed amount. This amount may be the amount of investment made or allotted to each member whether paid for or not. It may be limited to the amount each stakeholder may have guaranteed in the event of difficulties.
Limited liability companies are considered as legal persons in their own right. This means that they separate entities from their owners. They have a right to sue and be sued. They have rights to acquire assets and incur liabilities. Consequently, they have legal powers to protect their rights to their assets and a duty to obey the laws of the land.
Apart from the provisions of the Companies Act, companies are also governed internally by the Article and memorandum of association. This document describes the business and the powers the business has to engage in specific economic activities. It details the powers of its directors to commit the company as well as the distribution of the ownership stake among its owners.
Most businesses (irrespective of their structures) are registered by the Corporate Affairs Commission (CAC) and issued registration certificates and number. A limited liability company is required to file annual returns yearly, maintain a registered office which may or may not be the same with its operational office, and appoint and retain a company secretary.
Official communications and legal documents emanating from the company are expected to emanate from the registered office, and any legal notice to the company will be addressed to the registered office. Filing of annual returns requires that the business accounts of the reporting entity will be audited by a firm of Chartered Accountants. The annual return is the only evidence that the business is still in operation.
Nigeria is full of entrepreneurial spirit. This is to say that many Nigerians have enterprise DNA. This may or may not be a response to the absence of paid job opportunities in the country due to our history of poor and corrupt leadership.
The poverty level in Nigeria is alarming. At the same time, this poverty level is not reflected on market prices of goods and services. The very few rich people brandish their wealth so loudly that the market reacts to the detriment of the largely poor…Get A Copy Of Our Magazine To Continue Reading.
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