Forms of Enterprises

Lessons

Senior 3 · Entrepreneurship

Forms of Enterprises

4 lessons

Lesson 3 of 4

Companies, Cooperatives and Public Enterprises

25 min

Three ways to own a milk business

Imagine three milk businesses in the same district. Umuhore Dairy Ltd is owned by four shareholders who have never milked a cow; they appointed a manager. Abahuje Dairy Cooperative is owned by 45 farmers who each bought a share and each have one vote, however many cows they own. A third milk plant belongs entirely to the government. All three collect and sell milk, but they differ in who owns them, who decides, who risks what, and who gets the surplus. All three businesses are illustrative.

Definition

Company: a business registered under company law as a separate legal person, owned by shareholders and run by directors. Share: one equal unit of ownership of a company. Dividend: the part of a company’s profit paid to shareholders.

Example: a shareholder who owns 1,500 of a company’s 10,000 shares owns 15% of it and receives 15% of any dividend paid.

Companies

Companies are governed by Law N° 007 of 2021 governing companies and registered by the Office of the Registrar General at the Rwanda Development Board (RDB). RDB explains that a company exists as a separate legal “person” from its shareholders and directors: it can own property and is responsible for its own debts, so the liability of its owners extends only to their stake in it. RDB lists these types:

Private company limited by shares (name ending “Ltd”): no minimum initial share capital, and from 1 to 100 shareholders. This is the usual form for a profit-making business.
Company limited by guarantee: its owners, called guarantors, hold no shares; each agrees to pay a fixed sum if the company cannot pay its debts. Most are non-profit bodies such as clubs.
Unlimited company: like a company limited by shares, except that if it is wound up unable to pay, creditors can claim the personal property of its shareholders and directors.

A public company may offer its shares to the public, for example through the Rwanda Stock Exchange; a private company cannot.

Advantages of a company	Disadvantages
limited liability attracts investors	more rules, records and reports than a sole trader
can raise large capital by selling shares	profits shared among many shareholders
continues when owners change or die	owners may lose control to managers
easier to borrow and to sign big contracts	decisions can be slower

Definition

Cooperative: under Rwanda’s Law N° 057 of 2024 governing cooperatives in Rwanda, a primary cooperative is made up of persons who have joined together voluntarily to carry out activities together for their socio-economic development, according to the principles governing cooperatives.

Public enterprise: an enterprise owned and controlled by the government, set up to provide goods or services in the public interest.

Example: coffee growers who pool their harvest to run a washing station form a cooperative; a state-owned electricity company is a public enterprise.

Cooperatives

Article 3 of the cooperatives law lists seven principles:

voluntary and open membership;
democratic member control, where each member has one vote and all votes are equal;
member economic participation;
autonomy and independence of each cooperative;
education, training and information of members;
cooperation among cooperatives;
concern for the development of the community where the cooperative operates.

A primary cooperative needs at least 10 members; for persons with disabilities the minimum is 5 (Article 9). The law names types including agriculture, livestock, fishing, production and agro-processing, financial service, traders’, consumers’ and transport cooperatives. Cooperatives are registered by the Rwanda Cooperative Agency (RCA), the national agency in charge of cooperatives: an application passes through the Sector and the District, and RCA then issues a provisional certificate within five working days of receiving it (Articles 67 to 69). RCA also promotes cooperatives, and settles disputes that a cooperative’s own organs cannot (Article 145).

Advantages of a cooperative	Disadvantages
small producers gain bargaining power by buying and selling together	decisions by many members can be slow
democratic: one member, one vote	capital limited to what members can afford
shared equipment, training and market access	leaders may lack business skills; mismanagement harms all members
serves members and the community, not only profit	members who invest more get no more votes, which can discourage investment

Public enterprises

The government owns enterprises where a service is essential, where private investors are unlikely to invest enough, or where the country needs strategic control. For example, Rwanda Energy Group explains that, after the energy and water utility was split in 2014, two corporate entities were incorporated in July 2014 with 100% government shareholding: the Rwanda Energy Group Limited (REG), for energy, and the Water and Sanitation Corporation (WASAC), for water.

Advantages of public enterprises	Disadvantages
provide essential services even where profit is low	may be less efficient without competition
can invest in large projects (power plants, water networks)	losses fall on taxpayers
profits return to the public	decisions may be slowed by administration

All five forms compared

Table A: ownership, liability, capital and control

Form	Ownership	Liability	Capital from	Control
Sole trader	one person	unlimited	owner’s savings, loans	the owner alone
General partnership	2 or more partners	unlimited, for every partner	partners’ contributions, loans	partners, as agreed
Private company (Ltd)	1 to 100 shareholders	limited to each shareholder’s shares	shares, retained profit, loans	board elected by shareholders; votes follow shares
Cooperative	members: at least 10 for a primary cooperative	the cooperative, a legal person, answers for its own debts	members’ shares and fees, surplus, loans, grants	members: one member, one vote
Public enterprise	the government	the enterprise answers for its debts; the state is the owner	government funds, own revenue, loans	board appointed by the government

Table B: profit, legal personality and registration

Form	Profit goes to	Legal personality	Registered with
Sole trader	the owner	none: owner and business are one	RDB, as an individual enterprise
General partnership	partners, in the agreed ratio	none	RDB’s Registrar General
Private company (Ltd)	shareholders as dividends, or kept	yes: continues when owners change	RDB’s Registrar General
Cooperative	used or shared as the members decide	yes	Rwanda Cooperative Agency (RCA)
Public enterprise	the government, or reinvested	yes, when set up as a company (as REG was)	set up by the government

Tip

Exam technique. For “compare” or “distinguish” questions, write in parallel: “A sole trader has unlimited liability, whereas a private company’s shareholders have liability limited to their shares.” Use the five rows ownership, liability, capital, control and profit; they are what examiners look for.

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Worked example 1: paying a dividend

Umuhore Dairy Ltd has 10,000 shares. Its profit after tax is Frw 12,000,000, and the directors pay 60% of it as dividends, keeping the rest to buy a new cooling tank. How much does a shareholder with 1,500 shares receive?

Step 1: total dividend: $60\% \times 12{,}000{,}000 = 7{,}200{,}000$ Frw.

Step 2: dividend per share: $7{,}200{,}000 \div 10{,}000 = 720$ Frw.

Step 3: this shareholder: $1{,}500 \times 720 = 1{,}080{,}000$ Frw.

Check: 1,500 shares are 15% of 10,000, and $15\% \times 7{,}200{,}000 = 1{,}080{,}000$ . ✓ Figures are illustrative.

Worked example 2: choosing a form

Recommend a form for each, with one reason.

Situation	Form	Reason
Uwase wants to open a small phone-repair stall with her own savings	sole trader	cheap and simple to start; she keeps full control and all profit
30 bean farmers want to store and sell their harvest together	cooperative	pooling gives bargaining power; each farmer has one vote
Four investors want to build a Frw 300 million feed mill	private company limited by shares	limited liability protects their personal property; shares let them raise and divide large capital
Two architects want to work together and share profits	partnership	they share skills and costs; a written agreement sets the profit ratio

Warning

Common mistakes. (1) Writing “one share, one vote” for a cooperative: in a cooperative it is one member, one vote. (2) Calling a public enterprise a “public company”: a public company is privately owned by shareholders who may include the public. (3) Thinking limited liability means the company does not pay its debts: the company pays them from its own assets; only the owners’ personal property is protected.

The 7 Principles of Co-operation, from the Irish Co-operative Learning Academy (about 4 minutes). Compare its seven principles with Article 3 of Rwanda’s cooperatives law in this lesson.

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Practice

Define a company, a share and a dividend.
Distinguish between a company limited by shares and a company limited by guarantee.
State the seven principles of cooperatives in Law N° 057 of 2024.
What is the minimum number of members needed to form a primary cooperative of (a) farmers in general; (b) persons with disabilities?
Give two reasons why the government owns enterprises such as REG and WASAC.
A company with 20,000 shares pays out 40% of a profit of Frw 15,000,000. How much does a shareholder with 2,500 shares receive?
Compare a sole trader and a private company limited by shares under four headings.
A group of 12 women tailors in Huye must choose between a cooperative and a private company. Evaluate both and recommend one.

Show answersHide answers

A company is a business registered under company law as a separate legal person, owned by shareholders and run by directors; a share is one equal unit of ownership; a dividend is the part of profit paid to shareholders.
A company limited by shares is owned by shareholders whose liability is limited to their shares and who may receive dividends; a company limited by guarantee is owned by guarantors who hold no shares and promise a fixed sum if it cannot pay its debts; it is usually non-profit.
Voluntary and open membership; democratic member control (one member, one vote); member economic participation; autonomy and independence; education, training and information; cooperation among cooperatives; concern for community development.
(a) 10; (b) 5.
For example: to provide essential services (power, water) even where profit is low; to invest in large projects private investors may avoid; strategic control of key sectors.
Dividends $40\% \times 15{,}000{,}000 = 6{,}000{,}000$ Frw; per share $6{,}000{,}000 \div 20{,}000 = 300$ Frw; shareholder $2{,}500 \times 300 = 750{,}000$ Frw.
Ownership: one person vs 1 to 100 shareholders. Liability: unlimited vs limited to shares. Capital: owner’s savings vs share capital and loans. Control: owner alone vs directors elected by shareholders. (Also: legal personality and continuity.)
Cooperative: suits members with equal small contributions; one member, one vote; registered with RCA; access to cooperative support and training; but decisions may be slow. Company: limited liability and easier to raise large capital, but votes follow shares, so a richer member could control it. Recommendation: a cooperative, because the women contribute similar amounts, want equal say and qualify (12 is above the minimum); a company suits better if a few members will invest much more.

Sources and credits

Companies: Business registration, Office of the Registrar General, RDB, consulted 2026; Law N° 007 of 2021 governing companies, via RwandaLII.
Cooperatives: Law N° 057 of 2024 governing cooperatives in Rwanda, Articles 2, 3, 4, 9, 67 to 69 and 145, Official Gazette n° 28 Bis of 8 July 2024 (it repealed Law N° 024 of 2021); Rwanda Cooperative Agency. Summarised by Ganzaa.
Public enterprises: About Us: History, Rwanda Energy Group, consulted 2026.
Photo: Kigali business centre, Nikiwatanze, Wiki Loves Africa 2020, Wikimedia Commons, CC BY-SA 4.0.
Photo: Sellers and buyers at the village cooperative, Ntunga, Rwanda, Dewdrops123, Wiki Loves Africa 2017, Wikimedia Commons, CC BY-SA 4.0.
Video: The 7 Principles of Co operation, Irish Co-operative Learning Academy, embedded from YouTube.

Written by Ganzaa: the milk-business case, the comparison tables, the worked examples and the practice items. The businesses and figures are illustrative (2026).

This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.

1Three ways to own a milk business

2Companies

3Cooperatives

4Public enterprises

5All five forms compared

Three ways to own a milk business

Companies

Cooperatives

Public enterprises

All five forms compared