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Choosing a legal structure: Free Course.

The unregistered business established as informal business. They haven’t register in IPA ( Investment Promotion Authority). They are illegal to operate. If business established on supplying good or services more/less permanent basis, then are certain formalities that must be followed. The types of formalities depends on legal structure chosen for the business.

  • Sole Trader: It is own by single person who registered its business name in (IPA) Investment Promotion Authority. The owner can use his/her name or another name to his business  according to business Name Act. The sole trader can have employ other people to work in his business, if it expend.
  • Partnership: It is operated by two or more people & registered its business name with IPA (Investment Promotion Authority). The people who formed that partnership signed a document called partnership agreement. This is the partnership agreement that contain the share % of partners & liabilities of each partners. ( liabilities means % of the business debt each partner would responsible to pay back).
  • Company- The shareholders invested shares into the business to form company. It has more rules and regulations Under Company’s Act. The share holders are people who set up the company. The  shareholders have different share % invested. They share profit according to number of shares they invest. It is possible to have only one shareholder. The director of the company is appointed by shareholders to run a company, they manage & run day-to-day business.
  • For large companies, the director appoint non-share holder which is (CEO) Chief Executive Officer to manage the company. In every year they held Annual General Meetings (AGM’s). It is the time when director report back to shareholders of how the company is running. It is possible to vote for new director in AGM.

There are two (2) types of companies, private & public companies. The public companies list its share on PNG Stock Exchange this is the main difference between private & public. The both private and public companies have limited liability and Ltd (limited) form part of the business name.

It is easier to set up private companies. However, if more money is needed, a public company set up can make it easier to raise money as shares can be sold to many different people. The company have big advantages of limited liability- it means the liability of each shareholders for the debt of the company is limited to the value of his/her shares.

The share holders cannot be ask to put in more money to pay for any debt owned by the company. This is not the case for sole trader or partners. If they encountered trouble, court will order business to sell its assets to pay its debt & also, if they owned the private assets, that also will be sell too.

Partnership Business

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