BEGINNERS GUIDE TO COMPANY LAW: CORPORATE STRUCTURES
Company law is the set of rules regarding businesses or companies, making sure they operate ethically and legally. It is worthy of note that different business can come under different structures like sole proprietorships, partnerships, and corporations, these are used to describe different ways which they are set up and run.
Sole proprietorships are owned by one person, easy to start, but the owner has unlimited liability. It is common in small businesses, free lancers e.t.c.
Partnerships refer to business owned collectively by two or more individuals who share profits and liabilities. It has advantages like shared responsibility, diverse skills, and easier access to capital. Its disadvantages are that members will have to share profits, there are potential conflicts, and personal liability. This is common in firms like law firms and also in small business
Corporations are a legal entity separate from its owners, who in this case, are shareholders. Its advantages are that the owners have limited liability because the company is s different entity, there is easier access to capital, and it has perpetual existence, that is, a serperate entity; even after its shareholders die, it can still exist. Its disadvantages are: complex setup, double taxation, more regulations.
The Corporate Structure
The corporate structure of an organization refers to how the organization is set up.
Corporate structure refers to how a business is organized to accomplish its objectives. The corporate structure of a business is important because it determines the ownership, control, and authority of the organization. In a corporation, these characteristics are represented by three groups: shareholders, directors, and officers. Ownership belongs to the shareholders. Control is exercised by the board of directors on behalf of the shareholders, while authority over the day-to-day operations is vested in the officers.
Companies generally have a board of directors and shareholders.
The shareholders own the company by owning shares in it. They however are not in charge of making decisions to run it. This is the work of the board of directors. They are appointed to manage the company.
There are three widely recognised corporate structure models in the world:
Japanese Model: Focuses on long-term relationships, consensus decision-making, and stakeholder interests.
- Network Model:Emphasizes cooperation between firms, flexible structures, and strategic alliances.
- Anglo Model:Prioritizes shareholder value, independent board oversight, and market-driven strategies.
These models and structures shape how businesses are run, who makes decisions, and how profits and risks are distributed. Each one reflects different cultural, economic, and legal influences in the business world.
