(Source: LAW OF TRADERS AND BUSINESS ORGANIZATIONS: A Course Material
ALEMAYEHU FENTAW AND KEFENE GURMU)
Article 210 of the Commercial Code defines a business organization as “any association arising out of a partnership agreement.” A partnership agreement, pursuant to Article 211 of the Code, is “a contract where by two or more persons who intend to join together and to cooperate undertake to bring together contribution for the purpose of carrying out activities of an economic nature and of participating in the profits and losses arising out there or ,if any.”
A cursory look at Articles 210 and 223 reveals two important aspects of business organizations, namely the contractual and institutional ( or, organizational) aspects. According to article 210 a business organization is an association stemming from a contract known as “partnership agreement.” Here it is important to note that the word “association” is a mistranslation of the original French term “le groupment” Article 223 suggests that even if a business organization emanates from a partnership agreement, the mere fact of concluding a valid partnership agreement is not enough to create a business organization at law. There is more to the formation of a business organization de jure than the conclusion of a partnership agreement. In the words of Everett F. Goldberg, “[a] business organization has an institutional aspect with an existence dependent upon, but separate from, the partnership agreement.”
A business organization is a contractual association of two or more persons who undertake to bring in contribution with a view to carrying out an economic activity. It is an essential character of a business organization that it should have a profit motive, this being the feature which distinguishes it from an association.