1.

FORMS OF BUSINESS
ORGANIZATIONS ABM
SENIOR HIGH SCHOOL
 SOLE / SINGLE PROPRIETORSHIP
- A sole proprietorship is the What form of Business Organization
most basic and legal form of does the picture depict?
business
- It has only ONE OWNER
-A proprietor owns and
manages the business and
responsible for all business
transactions.
Ex: Cellphone repair services,
laundry shop and small-scale
businesses selling and bakery.
WHAT ARE THE POSSIBLE ADVANTAGES AND DISADVANTAGES OF
SOLE PROPRIETORSHIP

ADVANTAGES DISADVANTAGES
◼A sole proprietor has ◼Proprietor has limited ability to
complete control and raise capital
decision-making power over
the business ◼and unlimited personal liability for
the obligations of the business
◼Generally has uncomplicated
business transactions and
minimal regulatory
requirements and cost
◼With one only decisions can
be arrived in less time and
implemented faster
 PARTNERSHIP

◼It is an association of two or more What form of Business Organization

does the picture depict?
persons who bind themselves to
contribute money, property or
industry to a common fund
◼Governed by the Civil Code of the
Philippines
◼ Partners AGREEE among
different things (Manage
business, contributions capital,
profit/ losses, form and mode of
settlement)
WHAT ARE THE POSSIBLE ADVANTAGES AND DISADVANTAGES OF
PARTNERSHIP

ADVANTAGES DISADVANTAGES
▪ Easier to organize ◼The life of a partnership is
compared corporation fragile
◼The liability of the partners
▪ can raise more capital for the debts of the business
compared to sole is unlimited.
proprietorships
 TYPES OF PARTNERSHIP

◼General partners -who invest in the partnership,

participate in the day-to-day operations and are
liable for debts and lawsuits of the partnership
◼Limited partners -who invest in the partnership
but who have no participation in day-to-day
operations and who are not usually considered to
have liability.
 PARTNERSHIP

A partnership is a business owned by two or more

persons who contribute resources into the entity.
The partners divide the profits of the business
among themselves. Its chief characteristics are:
(a) association of individuals;
(b) mutual agency;
(c) limited life;
(d) unlimited liability;
 PARTNERSHIP

(e) co-ownership of property.

The association of individuals in a partnership may

be based on as simple an act as a handshake;
however, it is preferable to state the agreement in
writing.
 PARTNERSHIP

(e) co-ownership of property.

The association of individuals in a partnership may

be based on as simple an act as a handshake;
however, it is preferable to state the agreement in
writing.
 PARTNERSHIP

A partnership is a legal entity for certain purposes.

 A partnership is an accounting entity for
financial reporting purposes.
 Net income of a partnership is not taxed as a

separate entity.
 PARTNERSHIP

Mutual agency means that an act of any partner is

binding on all other partners, so long as the act
appears to be appropriate for the partnership.
This is true even when partners act beyond the
scope of their authority. Partnerships have a
limited life. Partnership dissolution occurs
whenever a partner withdraws or a new partner is
admitted.
 PARTNERSHIP

 Each partner has unlimited liability.

 Each partner is personally and individually liable
for all partnership liabilities.
 Creditors’ claims attach first to partnership
assets and then to the personal resources of
any partner, irrespective of that partner’s
capital in the company.
 PARTNERSHIP

There are three forms of partnerships:

 General partnerships

 Limited partnership

 Joint ventures

In general partnerships, all partners have unlimited

liability. In limited partnerships, creditors cannot
go after the personal assets of the limited
partners.
 PARTNERSHIP

Each partnership shares similar features, though

each has different ownership and liability
structures. In any partnership, each partner is
required to commit resources like capital,
property, or tangible experiences such as skilled
work or labor in order to share in the business’s
profits and losses.
 PARTNERSHIP

As we’ll break down for each partnership, at least

one partner is tasked with making decisions the
business’s day-to-day operations. While it is not
required legally, each partnership requires that a
formal partnership agreement is drafted.
This document will lay out each partner’s ownership
stake, liability limitations, as well as their voting
structures and how business decisions for the
company are to be made.
 GENERAL PARTNERSHIP

A business owned by two or more people, with a

maximum of 20 owners, who have agreed to share
all assets, liabilities, profits, and losses of a company.
These partners carry unlimited liability, meaning
their personal assets are on the line and can be sued
for the whole of the partnership’s business debts.
 GENERAL PARTNERSHIP

Taxes, however, do not flow through the

partnership, meaning the partners are responsible
for their own tax liabilities, including any earnings
made from the partnership, on their personal
income taxes.
 GENERAL PARTNERSHIP

ADVANTAGES DISADVANTAGES

◼ More partners, more

capital ◼ Unlimited liability
◼ Added talent ◼ Partners can
◼ Divided responsibility disagree
◼ Greater business ◼ Profit is shared
networks
 GENERAL PARTNERSHIP

To form a general partnership, there are 3 specific

standards that need to be met.
1. The partnership needs to include two or more
owners
2. Each partner must be comfortable with unlimited
liability
3. Proof that the partnership exists via a formal
partnership agreement
 GENERAL PARTNERSHIP

Compared to a corporation or an LLC, the costs of

establishing a general partnership are minimal and
do not require as much paperwork. A general
partnership features many benefits including the
flexibility to form the business as partners see fit.
This flexibility can include the opportunity to closely
oversee its operations.
 GENERAL PARTNERSHIP

In a general partnership, each partner

possesses agency powers, enabling them to
participate directly in the management of the
business. d before being agreed upon,
however.
 GENERAL PARTNERSHIP

AGENCY POWERS - allow partners to

establish binding agreements, deals, and
contracts with other organizations and
individuals that each partner is bound to
adhere by. It’s recommended that
agreements like these be cleared before
being agreed upon, however.
 GENERAL PARTNERSHIP

When a partner passes away, the general

partnership is typically dissolved. The same
occurs when one partner becomes unable to
meet their obligations or leaves the
organization. Specifics can be written into the
partnership agreement that would allow the
general partnership to continue through the
transfer or succession of ownership.
 LIMITED PARTNERSHIP

Establishing a limited partnership

requires two or more individuals
agreeing to start a business where
one or more of the partners are liable
only for the amount they have
invested.
 LIMITED PARTNERSHIP

Clearly, what separates limited

partnerships from other partnerships is
that partners can limit their liability.
Limited partners, also known as silent
partners, have a stake in the company but
do not have the ability to make
management decisions.
 LIMITED PARTNERSHIP

The remaining partners, known still as

general partners, are responsible for day-
to-day operations and any financial
obligations beyond their initial
investment.
 LIMITED PARTNERSHIP

The remaining partners, known still as

general partners, are responsible for day-
to-day operations and any financial
obligations beyond their initial
investment.
 LIMITED PARTNERSHIP

ADVANTAGES DISADVANTAGES
◼ Share in profits and losses ◼ General partner(s) fully liable
without needing to be
◼ Limited partner(s) can
involved in the business
assume general partner
◼ Limited personal financial liability if they become active
risks for limited partners in the business
◼ Taxed via your own income ◼ State taxes and fees
tax returns
◼ Easier to attract new
investors
 CORPORATION
◼A corporation is the most complex What form of Business Organization
form of business organization. does the picture depict?
◼A corporation is a legal entity that
is separate and distinct from its
owners.
◼A corporation has standardized
procedures for its creation,
organization,
◼Corporations are subject to
greater scrutiny, regulations,
control and supervision by the
government
What are the possible advantages and disadvantages of
CORPORATION
ADVANTAGES DISADVANTAGES
 The liability of the owners  Cost of forming and managing
towards the creditors is  Complex process and requires
limited to their investment in registration with the central
the company. regulatory authority and listing
on a stock exchange which
 Additional capital can be required fulfillment of certain
raised easily through stock requirements related to the
markets amount of capital, number of
directors
 Corporations are subject to a
high income tax rate
 CORPORATION
A corporation is a business organization that has a
separate legal personality from its owners.

Ownership in a stock corporation is represented by

shares of stock.

The owners (stockholders) enjoy limited liability but

have limited involvement in the company's operations.
Board of directors - an elected group from the
stockholders, controls the activities of the corporation.
 CORPORATION
 Unlike an actual person, a corporation can
live on in perpetuity, as long it is profitable.

 Shareholders are able to either sell or

transfer their shares enabling the
corporation to live in the event of a cash out
or death.
 CORPORATION
The characteristics that distinguish a corporation from
proprietorships and partnerships are:
 The corporation has separate legal existence from its
owners.
 The stockholders have limited liability.
 Transferable ownership rights (ownership is in shares
of stock).
 Ability to obtain capital (relative ease).
 The corporation can have a continuous life.
 CORPORATION
 The corporation is subject to numerous government
regulations.
 The corporation must pay an income tax on its
earnings, and the stockholders are required to pay
taxes on the dividends they receive: the result is
double taxation of distributed earnings.
 COOPERATIVE
◼ A cooperative is a business organization owned by
a group of individuals and is operated for their
mutual benefit.
◼ The persons making up the group are called
members.
◼ Some examples of cooperatives are water and
electricity (utility) cooperatives, cooperative
banking, credit unions, and housing cooperatives.
 TYPES OF COOPERATIVE
Most simply, cooperatives can be categorized by
their purpose; their members procure from
and/or provide goods and services to the
cooperative.
For example, members of grocery cooperatives
procure grocery items from their cooperatives
while members of worker cooperatives provide
their labor to their cooperative.
 TYPES OF COOPERATIVE
Sometimes, members provide goods and/or
services to the cooperative, as well as procuring
goods and/or services; for example, members of
an arts and crafts cooperative can purchase
supplies from the cooperative and provide their
artwork and labor to market their crafts through
a cooperative store.
 TYPES OF COOPERATIVE
1. AGRICULTURAL COOPERATIVES
- help producers assure markets and
supplies, achieve economies of scale, and
gain market power through jointly
marketing, bargaining, processing, and
purchasing supplies and services.
 TYPES OF COOPERATIVE
2. ARTS AND CRAFTS COOPERATIVES
- help artists and crafts persons maximize
their earning potential and working
conditions.
3. BUSINESS COOPERATIVES
- are formed by businesses to purchase
supplies or obtain services at a lower cost.
 TYPES OF COOPERATIVE
4. CHILD CARE AND PRESCHOOL
COOPERATIVES
- provide high-quality enrichment and
educational programs for children and their
families.
 TYPES OF COOPERATIVE
5. CREDIT UNIONS
– provide at-cost financial services to a wide
cross-section of the population.
6. UTILITY COOPERATIVES
- provide utilities such as communication
services, electricity, and water to their
members.
PERFORMANCE TASK