BUSINESS TYPES IN

UGANDA
INTRODUCTION
• Before you decide what type of business organization to choose,
one has to assess and determine its general business type.
Depending on what you sell, there are typically three different
types of businesses.
SERVICE BUSINESSES
• These businesses do not sell tangible products. Instead, they
offer their professional expertise in various matters, such as
providing advice and performing specialized tasks for their
customers. For example, schools, law firms and nail salons are
all service businesses.
MERCHANDISING BUSINESSES
• Merchandising businesses purchase large quantities of products
at reduced prices and sell them individually at retail prices
without changing their initial form. These companies make a
profit if the amount of money they receive from reselling
purchased products exceeds the purchase price and business
operating costs. Some examples of merchandising businesses
are grocery stores and clothing stores.
MANUFACTURING BUSINESSES
• These businesses purchase various raw products and then
manipulate them to create a new product to sell. The process
involves combining raw materials, technology, human labour
and overhead costs to create a manufactured good that can be
sold to customers. If the price of the sold manufactured goods
exceeds the combined costs of production, the company turns a
profit. For example, automotive companies and bakeries are
both manufacturing businesses.
BUSINESS STRUCTURES
INTRODUCTION
• A business structure describes the legal structure of a company
that influences the day-to-day operations of a business.
• There are basically two categories of business structures.
UNINCORPORATED STRUCTURES
• Unincorporated structures are business entities without distinct
legal standing from the owners who remain individually
accountable for the debts and obligations of the enterprise. They
include sole proprietorship and partnerships
SOLE PROPRIETORSHIP
• This is a one individual entity. The individual is referred to
as the sole proprietor or sole trader.
• There’s no separate legal entity created between the
business and the owner and as such, the business owner is
not exempt from liabilities created by the entity. For
example, the debts of the entity are debts of the owner.
However, the profits of the business are also profits of the
owner, as all profits flow directly to the business owner.
• Sole proprietorships are easy to establish and dismantle,
due to lack of government involvement, making them
popular with small business owners and contractors.
PARTNERSHIPS
• This allows like-minded individuals not exceeding 20 in
number to jointly raise capital and undertake a business
together.
• Partnerships are governed by a partnership deed selling out the
rights and obligations of the partners and its registration is
mandatory if the names does not consist of the true surnames of
all the partners.
• In the case of a for-profit venture, partnerships can be of three
categories; general partnership, limited partnership and limited
liability partnership.
PARTNERSHIPS cont’d
1. GENERAL PARTNERSHIP
• In a general partnership, all parties share legal and
financial liability equally. The individuals are personally
responsible for the debts of the business. The specifications
for profit sharing are laid out in the partnership deed
• In a general partnership, every partner is an agent of the
business and binds the other partners, thus all partners are
jointly and severally liable for the partnership debts and the
partnership can dissolve because of death or bankruptcy or
retirement of one of the partners unless the partnership
deed prescribes otherwise which is not the same case with
LLPs
PARTNERSHIPS cont’d
2. LIMITED LIABILITY PARTNERSHIPS
• In LLPs, the liability of the limited partners for any debts or
obligations of the partnership dos not exceed the amount of
their capital contribution.
• LLPs limits partner’s personal liability so that for example if
one of the partners is sued for malpractice, the assets of other
partners are not at risk. This is a common structure for lawyers,
accountants and architects.
PARTNERSHIPS cont’d
3. LIMITED LIABILITY
• Limited partnership is a hybrid of the general partnership and
LLPs. At least one partner is a general partner with full personal
liability for the partnership’s debts and at least one other is a
silent partner whose liability is limited to the amount invested.
This silent partner generally does not participate in the day-to-
day operation of the partnership.
CORPORATE STRUCTURES
INTRODUCTION
• Corporate business entities have a distinct legal standing from
the owners who are generally protected from the liabilities of
the enterprise. These include locally incorporated companies,
statutory corporations and branches of foreign legal entities.
 LOCALLY INCORPORATED COMPANIES
• According to the Uganda’s Companies Act, these can have
limited or unlimited liabilities.
• Private companies limited by shares are those entities
whose membership by law is limited to 100 persons.
Members’ liability for company obligations is limited to
their shareholding
• A private company limited by guarantee predominates
non-profit organisations such as charities, sports clubs and
professional bodies. The purest form of a guarantee
company is one having the liability of its members limited
by the memorandum to the amount that the members
undertake to contribute to the assets of the company if it is
wound up.
LOCALLY INCORPORATED COMPANIES
cont’d
• Public limited companies are entities that can offer their shares
to the general public but also have limited liability. The shares
can be acquired during an initial public offering or through
trading on the stock exchange.
• Unlimited companies are private companies where the
shareholders have unlimited liability. Each member is jointly
and severally liable for the debts of the company in the event of
winding up. It is fairly easy to return capital to shareholders as
the restrictions on the reduction of the capital in the Companies’
Act 2012 only apply to limited companies.
STATUTORY CORPORATIONS
• They are also referred to as public corporations and are public
bodies created by stature and owned in parts or in whole by
government e.g. NIC, NWSC, UBC.
• Statutory corporations are managed by a Board of Directors
appointed by the government through the line minister or the
President and are accountable to the public and Parliament.
FOREIGN COMPANIES OR BRANCHES
• They can be an extension of the head office in their mother
countries and to be registered by Uganda Registration Service
Bureau (URSB), the branches must present the constitutional
documents of their head office. Examples in Uganda include
DHL and International Schools.