Forms of ownership

Habari Mwanafunzi! Welcome to the World of Business!

Ever wondered who owns the duka at the corner where you buy your bread? What about the matatu you use to get to town? Or even a giant company like Safaricom? All of them are businesses, but they are "owned" in very different ways. Today, we're going to become detectives and uncover the different Forms of Business Ownership. This is one of the most important first steps in understanding business. Let's get started!

1. The Sole Proprietorship: The One-Person Army!

This is the simplest and most common form of business in Kenya. Think of a sole proprietorship as a one-person show. The business is owned and run by one single individual. The business and the owner are legally the same thing.

Good examples you see every day are the mama mboga at the market, your local tailor, a boda-boda rider who owns his own motorcycle, or a freelance graphic designer.

        Owner
          |
     (One Person)
          |
    +-------------+
    |   BUSINESS  |
    | (e.g. Duka) |
    +-------------+

• Advantages:
  • Easy to Start: Very few legal requirements. You can start one today!
  • You are the Boss: You make all the decisions quickly.
  • All Profits are Yours: You don't have to share your hard-earned money with anyone.
• Disadvantages:
  • Unlimited Liability: This is a big one! If the business has debts, your personal belongings (like your car or TV) can be taken to pay them. The law doesn't see a difference between you and the business.
  • Difficult to Raise Money: Banks are often hesitant to lend large amounts of money to a one-person business.
  • The Business "Dies" with You: If the owner stops working, the business usually stops too.

Image Suggestion: A vibrant, colourful photo of a Kenyan 'mama mboga' at her market stall in Nairobi, smiling warmly at a customer. The stall is overflowing with fresh, green sukuma wiki, ripe tomatoes, and onions. The style should be realistic, bright, and full of life.

2. The Partnership: Two Heads are Better Than One!

A partnership is a business owned by two or more people (usually between 2 and 20 partners) who come together to make a profit. They usually sign a legal document called a Partnership Deed which outlines how they will share profits, losses, and responsibilities.

Think of a small law firm like "Kariuki & Njoroge Advocates," or two friends who pool their money to start a car repair garage.

    Partner 1 <-----> Partner 2
        \             /
         \           /
        +-------------+
        |   BUSINESS  |
        | (e.g. Garage)|
        +-------------+

• Advantages:
  • More Capital: More owners mean more money to start and grow the business.
  • Shared Skills: One partner might be good at marketing, while the other is an expert accountant.
  • Shared Workload: You don't have to do everything by yourself!
• Disadvantages:
  • Disagreements: Partners can disagree on how to run the business, which can lead to problems.
  • Unlimited Liability (for most): Just like a sole proprietorship, partners are usually personally responsible for the business's debts.
  • Profits are Shared: You have to divide the profits according to the partnership agreement.

Real-World Scenario: Juma and Akinyi's Tech Hub
Juma is a great computer programmer and his friend Akinyi is excellent at sales and marketing. They decide to form a partnership to create and sell mobile apps. They agree to share profits based on the capital they contributed: Juma (60%) and Akinyi (40%). This allows them to combine their skills and money to build a stronger business than either could alone.

Let's see how they would share a profit of KSh 200,000.

Juma and Akinyi's Profit Sharing
--------------------------------
Total Profit: KSh 200,000

Juma's Share (60%):
0.60 * 200,000 = KSh 120,000

Akinyi's Share (40%):
0.40 * 200,000 = KSh 80,000

3. Limited Companies: Playing in the Big Leagues!

This is where things get really interesting! A company is a separate legal entity from its owners. This means the company can own property, sue someone, and be sued in its own name. The biggest advantage here is limited liability. If the company fails, the owners (called shareholders) will only lose the money they invested in the company. Their personal property is safe!

There are two main types:

A. Private Limited Company (Ltd)

This type of company is owned by between 2 to 50 shareholders. The shares are not sold to the general public; they are sold privately to friends, family, or investors. Many successful family businesses in Kenya are Private Limited Companies. You can spot them by the word "Limited" or "Ltd" at the end of their name.

• Examples: Many large supermarkets like Naivas, or manufacturing companies like Bidco Africa Ltd.

B. Public Limited Company (PLC)

These are the giants! A PLC can sell its shares to the general public on a stock exchange, like the Nairobi Securities Exchange (NSE). This allows them to raise huge amounts of capital for expansion. They must have at least seven members and there is no maximum limit. You can identify them by the "PLC" at the end of their name.

• Examples: Safaricom PLC, KCB Group PLC, East African Breweries Limited (EABL).

Image Suggestion: An energetic, modern shot of the trading floor of the Nairobi Securities Exchange (NSE). Digital screens in the background show stock tickers with company names like 'SCOM' and 'KCB' with green and red numbers. Diverse Kenyan traders are seen in discussion, looking at screens. The mood is professional and fast-paced.

If you buy shares in a PLC, you become a part-owner! Let's calculate the cost of buying shares.

Calculating the Cost of Shares
------------------------------
You decide to buy 200 shares in KCB Group PLC.
The price per share on the NSE today is KSh 45.

Calculation:
Total Cost = Number of Shares * Price per Share
Total Cost = 200 * 45
Total Cost = KSh 9,000

You are now a part-owner of KCB Group!

4. Co-operative Societies: Umoja ni Nguvu! (Unity is Strength)

Co-operatives are a very special and important form of ownership in Kenya. A co-operative is a business owned and run by its members, who use its services. The goal is not just to make a profit for investors, but to provide a benefit to the members themselves. They operate on the principle of "one member, one vote."

Think of farmers in a particular area who pool their coffee beans together to sell them at a better price, or a group of teachers who save money together and give each other loans.

    Member  Member  Member
       \      |      /
      (All are owners)
             |
    +-------------------+
    | CO-OPERATIVE (SACCO)|
    +-------------------+
             |
    (Benefits for Members)

• Advantages:
  • Democratic Control: Every member gets a say in how the co-op is run.
  • Better Bargaining Power: A group has more power than an individual.
  • Shared Profits: Profits (called dividends) are shared among the members.
• Disadvantages:
  • Slow Decision-Making: Since everyone has to be consulted, making decisions can take a long time.
  • Less Capital: It can be hard to raise large amounts of capital compared to a PLC.

Kenyan Context: The Dairy Farmers' Co-op
Imagine a group of dairy farmers in Kiambu. Individually, they get a low price for their milk from middlemen. They decide to form a co-operative. Together, they can afford a cooling plant, a truck for transport, and can negotiate directly with a large milk processor like Brookside. They get better prices for their milk, and the profits are shared among all the farmer members. This is the power of a co-operative!

So, Which One is Best?

There is no single "best" form of ownership. The right choice depends on many factors:

• How much money do you have to start? (Capital)
• How much personal financial risk are you willing to take? (Liability)
- Do you want to be the only boss or share control? (Control) - How big do you want the business to grow? (Scale)

Now that you know the basics, you can look at any business in Kenya—from a small kiosk to a huge bank—and have a good idea of how it's owned and structured. Well done!

Keep asking questions, stay curious, and you'll be a business guru in no time!