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  • 7/27/2019 Entrepreneur Business Law.pptx


    Ghulam Murtaza Korai


  • 7/27/2019 Entrepreneur Business Law.pptx


    Sole Proprietorship


    Company/ Joint Stock Company/ Incorporated

  • 7/27/2019 Entrepreneur Business Law.pptx


    Definition of 'Sole Proprietorship' The sole proprietor is an unincorporated business with one

    owner who pays personal income tax on profits from thebusiness. With little government regulation, they are the

    simplest business to set up or take apart, making thempopular among individual self contractors or businessowners.

    Many sole proprietors do business under their own names

    because creating a separate business or trade name isn'tnecessary.

    Sole proprietorship is also known as "proprietorship".

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    There is no separate legal entity created by a soleproprietorship, unlike corporations and limitedpartnerships. Consequently, the sole proprietor is not safefrom liabilities incurred by the entity. The debts of the soleproprietorship are also the debts of the owner. However, allprofits flow directly to the owner of a sole proprietorship.

    The benefit of the sole proprietorship is the tax advantage.The disadvantage of a sole proprietorship is obtaining

    capital funding, specifically through established channels,such as equity (selling shares) and obtaining bank loans orlines of credit. As a business grows it often transitions to alimited liability company (LLC)

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    '"Partnership" is the relation between persons whohave agreed to share the profits of a business carriedon by all or any of them acting for all.

    Persons who have entered into partnership with oneanother are called individually "partners" andcollectively "a firm", and the name under which theirbusiness is carried on is called the "firm name".

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    Association of persons


    Profit Sharing

    Mutual agency

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    Partnership at will:Where no provision is made by contract between thepartners for the duration of their partnership, or forthe determination of their partnership, thepartnership is "partnership at will".

    Particular Partnership:A person may become a partner with another personin particular adventures or undertakings.

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    Particular partnership duration of.- PartnershipDeed clearly stating formation of Partnership, to runagency acquired by plaintiff at a particular stationfrom a particular company. Partnership, held formedfor a single venture and could continue only as long asagency lasted. Partners if wishing to carry onpartnership on expiry of agency for running someother business, could do so only by a fresh agreement.

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    Disadvantages of Unregistered Partnership Firm:

    Partners can not sue each other

    The firm can not sue third party Third Party can sue partnership firm

    The firm can sue the third party for the recovery of Rs.100

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    Need of Joint Stock Company The Limitations of sole-proprietorship and partnership forms of

    business organizations gave birth to joint stock company. TheIndustrial Revolution coupled with the revolution in the fields ofTransport and Communication brought about radical changes inthe field of production and communication brought about radicalchanges in the field of production and distribution, therebynecessitating large capital investments, better managerial skills andfurther, increased risks.

    Sole proprietorship and partnership having the disadvantages oflimited resources, unlimited liability, limited managerial skills, etc

    were not suitable for large scale business.

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    It denotes joint stock enterprise in which the capital is contributed by a large

    number of people. In popular parlance, company denotes an association of

    like minded people formed for the purpose of carrying of same business.


    By a company is meant an association of many persons who

    contribute money or moneys worth to the common stock and

    employ it for a common purpose. The common stock so contributed

    is denoted in money and is capital of the company. The persons who

    contribute it or to whom it belongs are members. The proportion of

    each member is entitled is his share. Shares are always transferable,

    although the right to transfer them is often restricted. Lord Justice


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    Association of Persons: A company is an association of persons and comes into existence only after its registration under

    the companys ordinance 1984.

    Separate Legal Entity: Artificial Person:

    A company can be said to be an artificial person as it is created by law and law only can dissolveit.

    Common Seal: Perpetual Succession: Members may come and members may go but

    the company goes on forever. Separation of Ownership and Management: Limited Liability: Transferability of Shares: Separate Property Power to Sue and to be Sued:

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    The main points of difference between a partnership and a company



    1. A partnership is not a distinct legal person, but is made of the

    persons composing it. 1. A company is a distinct legal person.

    2. Creation of Partnership is purely a matter of agreement between theparties such an agreement need not even be in writing.

    2. Creation of Company involves elaborate legal formalities.

    3. In a firm partner can not transfer his interest with the consent of theother partners.

    3. Shares in a Company (especially, in a public Company) are generallyfreely transferable.

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    4. Each partner is prima facie the agent of others, and can bind themby his contract made in the course of business of the partnership.

    4. Shareholders in a Company are not the agents of one another.

    5. Each partner is liable in full for the debts of the firm.

    5. The liability of Companys shareholders is limited by shams or byguarantee.

    6. A partner can not contract with his firm.

    6. A share holder in a company can contract with the company.

    7. Partners may make any private arrangements among themselves. For

    instance a partner may buy his partners share.

    7. Arrangements in regard to Companies are regulated by law andstatute for instance a company cannot buy its member's shares, but apartner can.

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    8. The Maximum number of partners can be twenty. But in banking

    business it is ten.

    8. There is no maximum number of share holders laid down by the lawin a public company though the minimum is seven. In a privateCompany, the minimum is two, and the maximum is fifty.

    9. The death or retirement of a partner dissolves a firm. 9. Death or retirement of a share holder does not dissolve the company.

    10. Property may be the common property of partners.

    10. Property belongs to the company and not to its members.

    11. Restrictions contained in a partnership deed will not affect third

    parties, who are not aware of such restrictions.

    11. On the other hand restrictions in the Articles of a Company affectthird parties also.

    12. A firm cannot sue and be sued in its own name.

    12. A company can sue and be sued in its own name.

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    13. Decree against a firm can be executed against the partners.

    13. A Decree against a company cannot be executed against itsshareholders.

    14. Registration is optional.

    14. Registration is compulsory.

    15. A firm having no separate legal existence, cannot be shareholder ofcompany.

    15. A company on the other hand can be a shareholder of anothercompany.

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    For the convenience of general public, promoters anddirectors of companies, SECP has established its eightCROs at Islamabad, Karachi, Lahore, Peshawar,Faisalabad, Multan, Sukkur and Quetta. Online

    facilities for incorporation of companies and filing ofreturns have been made available. Besides registrationof companies and monitoring of their workingaccording to law, functions of CROs include providingservices and guidance and also to ensure that thecompanies and their directors comply with thestatutory requirements as provided under theCompanies Ordinance, 1984 (the Ordinance).

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    The record of companies maintained by the CROs ispublic record and the investors, shareholders,creditors and general public, may inspect the record ofany company whenever they need and they may also

    obtain certified copy of any specific document onpayment of nominal amount of fee.

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    Following are the requirements for registration of anew company under the Companies Ordinance, 1984:-

    (a)The first step with regard to incorporation of acompany is to seek the availability of the proposedname for the company from the registrar