4.

Joint venture

It is a secret (discreet) or clandestine type of partnership in that the joint venture agreement as among
the venturers lacks the characteristics of divulgation or publicity or registration or transparency to third
parties. It is only one of the partners (the manager) who is only known to the public as if he is doing his
own individual business.Otherwise, the agreement between the manager and the rest of the venturers
or the venture per se does not have legal personality. It can be considered as a partnership because it is
subjected to the general principles of partnerships per Article 271 of the code.

A joint venture is a business organization established by an agreement among two or more persons. It
has no legal personality and its existence is unknown to third parties. Registration formalities required of
other business organizations do not apply to a joint venture. Where a joint venture is made known to
third parties (divulgence to third parties), it shall, as of such date, be regarded, insofar as such parties
are concerned, as a general partnership. Additionally, a joint venture shall be managed by one or more
managers who need not be partners. Where no manager is appointed, all the partners shall have the
powers of managers.

A joint venture is often a type of general partnership that remains valid until the completion of a project
or a certain period passes. All partners have an equal right to control the business and share in any
profits or losses. They also have a fiduciary responsibility to act in the best interests of other members
as well as the venture.

What makes Joint venture from other types of business is its relation with third parties. Only the
manager of a joint venture is known to third parties. He shall alone be liable for the debts and liabilities
of the joint venture. A partner who is not a manager of a joint venture shall meet liabilities towards the
manager of such joint venture only to the extent fixed in the agreement between the partners. Where a
partner who is not a manager takes part in the management of a joint venture, he shall be jointly and
severally liable with the manager to third parties. Every partner of a joint venture shall deal with third
parties in his own name only.

5. Share company (S.c)

Share Company is form of company used especially for commercial purpose to distribute profit to
shareholders, owned by shareholders, distributing the profit proportional to shareholders‘ shares. 9

A share company is a company whose capital is fixed in advance and divided into shares and whose
liabilities are met only by the assets of the company. The obligation of the shareholders shall be limited
to making the contribution they pledged to make to the company.

Compared to the rest of business organizations in Ethiopia, this is the most modern and well organized
corporate form. Per Article 304 of the com. code, a share company is a company whose capital is fixed in
advance and divided into shares and whose liabilities are met only by the assets of the company. The
concept of limited liability of shareholders is well practiced here than the rest of the business
organizations in that shareholder are liable only to the extent of their contribution or shareholding. They
are always (by their very form) commercial in nature.

It is only such companies in Ethiopia that can participate in a high profile business such as banking and
insurance. They have professional management, such as Board of directors, General Managers,
Secretaries, and Auditors, which is different from ownership (shareholders). Unlike partnerships, their
existence is perpetual than contingent. They are guided by their own statutes (the memorandum of
association and articles of association) in addition to the law and the general meeting of the
shareholders. It is only share companies in Ethiopia that can issue negotiable securities, such as equity
instruments (shares) or debt instruments (debentures)

6. Private limited Company (PLC)

A private limited company is a business organization whose capital is fully paid in advance, divided into
shares and whose members are not liable for the debts of the company provided that they have paid up
their contributions. Unlike Share Company, the shares of the private limited company shall not be open
for subscription by the public. The company is characterized by may not having less than two or more
than fifty members, and it may not issue transferable securities.

PLC is the other variety of company in Ethiopia. But viewed under a microscope it is a hybrid of a general
partnership and a share company. For instance, on the one hand, like partnerships it cannot operate in a
high-profile business; it cannot even issue negotiable securities, and there is no ease of transfer of
shares to a third party.

On the other hand, like share companies there is the concept of limited liability of partners. In terms of
the ceiling requirement of membership (which is 50) and the initial capital in need to be subscribed
(which is 15,000 ETB), it differs from share companies (where there is no ceiling requirement of
membership and initial capital is 50,000 ETB). 10

A private limited company is instituted when its capital is paid-up fully and the memorandum of
association is entered in the commercial register. The par value of shares sold in cash shall be deposited
before the registration of the company in a blocked bank account opened in the name of the company
under formation.

7. One person private limited company (OPLC)

A one member private limited company is a business organization incorporated by the unilateral
declaration of a single person. A one-person company as a company has only one person as to its
member. Furthermore, members of a company are nothing but subscribers to its memorandum of
association, or its shareholders. So, an OPC is effectively a company that has only one shareholder as its
member. An OPLC is a hybrid structure. It combines most of the benefits of a sole proprietorship and a
company from of business. Such companies are generally created when there is only one
founder/promoter for the business. Entrepreneurs whose businesses lie in early stages prefer to create
OPCs instead of sole proprietorship business because of the several advantages that OPCs offer.

The Company has its own legal personality separate and distinct from that of the member. The member
shall not be personally liable for debts due by the company in so far as he has fully made his
contribution. Such company can be formulated by one member private limited company with the capital
shall not be less than 15,000 (fifteen thousand) Ethiopian Birr.

Difference between OPLC and Sole Proprietorship

A sole proprietorship form of business might seem very similar to one-person companies because they
both involve a single person owning the business, but they‘re actually exist some differences between
them.

The main difference between the two is the nature of the liabilities they carry. Since an OPC is a
separate legal entity distinguished from its promoter, it has its own assets and liabilities. The promoter is
not personally liable to repay the debts of the company.

On the other hand, sole proprietorships and their proprietors are the same persons. So, the law allows
attachment and sale of promoter‘s own assets in case of non-fulfillment of the business‘ liabilities.

Some major advantages of One Person Company:

 For incorporating an OPC only one person is required and that is the most predominant feature of an
OPC. Hence, we can say that it is a registered form of sole proprietorship. One person is responsible for
decision-making, controlling, and managing the affairs.

11

 As it is a registered form of business entity it enjoys the same privileges as a Private Limited Company.
The legality of this type of business form makes it popular among banks and financial institutions

 An OPC can avail various benefits enjoyed by small scale industries like loans are available at a lower
interest rate.

 Any remuneration made to the director will be allowed under deduction under Income Tax Law, unlike
Proprietorship. Also, the benefits of Presumptive Taxation are available subject to Income Tax Law.

 An entrepreneur can take more risks without stressing over the loss of assets as an OPC has limited
liability. This is a sort of encouragement to new, young, and innovative business start-ups.
 All Companies are required to hold annual general meetings in addition to other meetings but One
Person Company is exempt from this. The Resolution signed by the Director and entered in the minutes
book is sufficient, instead of the annual general meeting.

Every Company is required to prepare and file statements that include the balance sheets, Profit and
loss account, cash flow statement, statement of changes in equity, and explanatory notes. In the case of
an OPC, a cash flow statement is not required.

1.3. The role of accounting in business

We live in the information age-a time of communication, and a time when information is a vital
resource. In this information era, how we live, whom we associate with, and the opportunities we have
all depend on our access to and understanding of information.

The same is true for businesses (businesses are one or more individuals selling products or services for
profit). Businesses that