Forms of Business Org

FORMS OF
BUSINESS
ORGANIZATIONS
Forms of Business Ownership
•Sole proprietorship
•Partnership
•Corporation
Sole Proprietorship
Businesses owned and

operated by one individual
Sole Proprietorship
•Hair salons
•Small Food Shops
•Flower shops
•Vulcanizing Shop
•Sari Sari Stores
•Small Grocery Stores
Advantages of a Sole
Proprietorship
•Ease and cost of formation

•Secrecy
•Distribution and use of profits

•Flexibility and control of the business
•Government regulation
•Taxation
Disadvantages of a Sole
Proprietorship
•Unlimited liability
•Limited sources of funds
•Limited skills
•Lack of continuity
•Lack of Qualified Employees
•Taxation
Partnership
A form of business organization defined by

the Uniform Partnership Act as “an
association of two or more persons who
carry on as co-owners of a business for
profit”
Types of
Partnerships
•General partnership
•Limited partnership
General partnership
A partnership that involves a complete

sharing in both the management and the
liability of the business
Limited
partnership
A business organization that has at least

one general partner, who assumes
unlimited liability, and at least one
limited partner whose liability is limited
to his or her investment in the business.
Articles of Partnership
Legal documents that set forth the basic

agreement between partners.
1.Name, purpose, location

2.Duration of the agreement
3.Authority and responsibility of each partner
4.Character of partners (i.e., general or
limited, active or silent)
5.Amount of contribution from each partner
6.Division of profits or losses
7.Salaries of each partner
8. How much each partner is allowed to withdraw
9. Death of partner
10. Sale of partnership interest
11. Arbitration of disputes
12. Required and prohibited actions
13. Absence and disability
14. Restrictive covenants
15. Buying and selling agreements
Partnerships Advantages & Disadvantages
Disadvantages
Advantages •Unlimited liability
•Business responsibility
•Ease of organization
•Life of the partnership
•Capital & credit •Distribution of profits
•Knowledge & skills •Limited sources of
funds
•Decision making •Taxation of
partnerships
•Regulatory controls
Corporations
Legal entities created by the state whose

assets and liabilities are separate from
its owners..
Corporations
Typically owned by many individuals

and/or organizations who own shares
of the business – stock (shareholders
or stockholders)
Corporations
Stock &
Dividends
Stock – shares of a corporation that may be bought or

sold
Dividends – profits of a corporation that are distributed

in the form of cash payments to stockholders.
Corporations
Creating a
Corporation
A Corporation is created (incorporated)

under the laws of the state in which it
incorporates. The individuals creating the
corporation are called incorporators.
Corporations
Articles of
Incorporation
Legal documents filed with basic

information about the business
with the appropriate state office
(often the secretary of state).
Articles of Incorporation
Common Elements
1. Name & address of corporation

2. Objectives of the corporation
3. Classes of stock (common, preferred, voting,
nonvoting)
4. Number of shares of each class of stock
5. Financial capital required at time of
incorporation
6. Provisions for transferring shares of stock
7. Regulation of internal corporate affairs
8. Address of business office
9. Names and addresses of the initial board of
directors
10. Names and addresses of the incorporators
Corporations
Types of
Corporations
Private corporation
Public corporation
Quasi-public corporation
Non-profit corporation
Corporations
Types of
Corporations
Private corporation – a
corporation owned by just one or a
few people who are closely
involved in managing the business
Corporations
Types of
Corporations
Public Corporation– a
corporation whose stock anyone
may buy, sell, or trade.
Corporations
Types of
Corporations
Initial Public Offering (IPO) – A private

corporation who wishes to go “public” to
raise additional capital and expand. The
IPO is selling a corporation’s stock on
public markets for the first time.
Corporations
Types of
Corporations
Quasi-public corporation –
Corporation owned and operated by,
the state --
.
Corporations
Types of
Corporations
Non-profit corporation – focuses on

providing a service rather than earning a
profit but are not owned by a government
entity (Philippine Red Cross)
Corporations
Elements of a
•Board of directors Corporation
•Preferred stock
•Common stock
Corporations
Board of Directors
Board of Directors – a group of

individuals elected by the stockholders to
oversee the general operation of the
corporation who set the corporation’s
long-range objectives.
Corporations
Board of Directors
Inside Directors – individuals who serve on the board

and are employed by the corporation (usually
executives of the corporation).
Outside Directors – individuals who serve on the board

who are not directly affiliated with the corporation
(usually Executives of other corporations).
Stock Ownership
Corporations
Preferred stock – a special type of stock whose

owners, though not generally having a say in running
the company, have a claim to profits before other
stockholders do.
Common Stock – stock whose owners have voting rights

in the corporation, yet do not receive preferential
treatment regarding dividends.
Corporations
• Advantages: • Disadvantages:
– Limited liability – Double taxation
– Transfer of ownership – Forming a
– Perpetual life corporation
– External sources of – Disclosure of
funds information
– Expansion potential – Employee-owner
separation
5-31
Other Types of Business Ownership
Joint Venture
Joint Venture -- a partnership

established for a specific project or for
a limited time
(Malampaya)
Other Types of Business Ownership
Cooperative (Co-Op)– an organization

composed of individuals or small businesses
that have banded together to reap the benefits
of belonging to a larger organization.
Trends in Business Ownership
•Mergers
•Acquisitions
Other Types of Business
Ownership
Merger – the combination of two companies (usually

corporations) to form a new company
Acquisition – the purchase of one company by another,

usually by buying its stock and/or assuming its debt.

Forms of Business Org

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Forms of Business Org

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FORMS OF

Businesses owned and

•Ease and cost of formation

•Distribution and use of profits

A form of business organization defined by

A partnership that involves a complete

A business organization that has at least

Legal documents that set forth the basic

1.Name, purpose, location

Legal entities created by the state whose

Typically owned by many individuals

Stock – shares of a corporation that may be bought or

Dividends – profits of a corporation that are distributed

A Corporation is created (incorporated)

Legal documents filed with basic

1. Name & address of corporation

Initial Public Offering (IPO) – A private

Non-profit corporation – focuses on

Board of Directors – a group of

Inside Directors – individuals who serve on the board

Outside Directors – individuals who serve on the board

Preferred stock – a special type of stock whose

Common Stock – stock whose owners have voting rights

Joint Venture -- a partnership

Cooperative (Co-Op)– an organization

Merger – the combination of two companies (usually

Acquisition – the purchase of one company by another,

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