UNIT 2

FORMS OF BUSINESS ORGANIZATION

Business organizations can take various forms, each with its distinct legal and operational characteristics. In Nigeria, the primary forms of business organization include Sole Proprietorship, Partnership, and Incorporated Companies.

1. Sole proprietorship: A sole proprietorship is the simplest form of business organization. It is owned and managed by a single individual who is responsible for all aspects of the business. The owner has full control over business decisions and a sole proprietorship must be registered under the Business Names Act.
2. Partnership: A partnership involves two or more individuals who agree to share the profits and losses of a business. Partnerships are governed by the Partnership Act. Partnership is typically based on a partnership agreement detailing the terms and conditions and must be registered under the Business Names Act. See the case of Bello v. Osayemi (2015) LPELR-25989(CA), which discusses the obligations and rights of partners.
3. Incorporated companies: Incorporated companies are legal entities separate from their owners. They can own property, incur debt, sue, and be sued in their own name. The Companies and Allied Matters Act (CAMA) governs the formation and regulation of companies in Nigeria. The company continues to exist despite changes in ownership. See the case of Salomon v. Salomon & Co Ltd (1897) AC 22 which emphasizes the principle of a company's separate legal entity.

TYPES OF COMPANY

Companies can be classified based on various criteria, including liability, public or private status, and whether they are limited by shares or guarantee. They include the following;

1. Companies limited by shares: this is where shareholders' liability is limited to their shareholding and it is the most common type of company in Nigeria. See sections 21-22 of CAMA 2020.
2. Companies limited by guarantee: this is where members' liability is limited to the amount they agree to contribute in the event of winding up and they are typically formed for non-profit activities. See sections 26-28 of CAMA 2020.
3. Unlimited companies: this is where members have unlimited liability for company debts. It is less common due to the high risk involved. See section 27 CAMA 2020.
4. Private and public companies: where private companies cannot invite the public to subscribe to its shares and it is limited to a maximum of 50 members, public companies can invite the public to subscribe to its shares and has no limit on the number of members. See sections 22 and 24 of CAMA 2020.

COMPANY INCORPORATION

Incorporating a company involves several steps and requirements as stipulated by the Companies and Allied Matters Act (CAMA).The steps for incorporation includes the following;

1. Name reservation: this is done by applying to the Corporate Affairs Commission (CAC) for name availability. See section 30 CAMA 2020.
2. Document preparation: this includes the memorandum and Articles of Association, Notice of registered address and Statement of compliance by a legal practitioner.
3. Submission to CAC: this is done by submitting all required documents to the CAC. See sections 36-40 CAMA 2020.
4. Payment of fees: this is done by paying the prescribed registration fees.
5. Issuance of certificate: this is when the CAC issues a Certificate of Incorporation upon approval.

PRELIMINARY REQUIREMENTS FOR COMPANY INCORPORATION

Before incorporating a company, certain preliminary requirements must be met. See the case of Incorporated Trustees of the Nigerian Bar Association v. African Continental Bank Ltd (2000) 13 NWLR (Pt. 684) 129, which highlights the importance of compliance with statutory requirements for incorporation. The preliminary requirements include the following;

1. Minimum share capital: this is where the minimum share capital must be in line with CAMA requirements. See section 27 CAMA 2020.
2. Directors: this is where at least two directors are required for incorporation. See section 271 of CAMA 2020.
3. Company secretary: this is where every company must appoint a company secretary. See section 330 CAMA 2020.
4. Statutory declaration: this is where a statutory declaration of compliance by a legal practitioner is also required. See section 40 CAMA 2020.

CONCLUSION

These notes provide a comprehensive overview of the forms of business organization, types of companies, the process of company incorporation, and the preliminary requirements for incorporation in Nigeria.