Nature and Forms of Business Organizations

CONTENTS
1 2 3 4
● The Role of ● Foundations ● Social ● Business
Business in of the Responsibility Beyond
Social and Principles of of Profit
Econimic Business Entrepreneurs Motivation
Development
LESSON OBJECTIVES
At the end of this module, you should be able to:
1 2 3 4
● Identify the ● Explain the ● Explain the core ● Craft simple
nature and purpose of principles of “Codes of
forms of business fairness, Ethics” or
business organizations accountability and “Codes of
organizations and their role in transparency in the Right
and their socioeconomic socioeconomic Conduct”
characteristics development development of the
country
The Role of
Business in
Social and
Economic
Development
UNIT 1
Prepared by: Kevin Julius P. Lopez, MBA
Nature and
Forms of Business
WHAT IS BUSINESS?
A business is an organization
or economic system where
goods and services are
exchanged forone another or
for money.
Learning Objectives:
At the end of this module, the students are expected to:
1. identify forms of business organizations and their characteristics
2. give examples of the forms of business organizations
Sole
Proprietorship
also known as a sole trader, is owned
by one person and operates for their
benefit. The owner may operate the
business alone or with other people.
A proprietor has unlimited liability for

all obligations incurred by costs or
judgments against the business. All
assets of the business belong to a sole
proprietor, including for example a
computer infrastructure, any inventory
manufacturing equipment, and/or
retail fixtures, as well as any real
property owned by the business.
Advantages of a Disadvantages of a
Sole Proprietorship Sole Proprietorship
• Easiest and least expensive form • Sole proprietors have unlimited liability
of ownership to organize. and are legally responsible for all debts
• Sole proprietors are in complete against the business. Their business and
control, and within the personal assets are at risks.
parameters of the law, may make • May be at a disadvantage in raising
decisions as they see fit. funds and are often limited to using
• Profits from the business flow- funds from personal savings or
through directly to the owner’s consumer loans.
personal tax return. • May have a hard time attracting high-
• The business is easy to dissolve if caliber employees, or those that are
desired. motivated by the opportunity to own a
part of the business.
TYPES OF BUSINESSES IN SOLE PROPRIETORSHIP FORM:
Bookkeeping Home Healthcare Financial Planners
- accommodates the financial -provides accommodation to - helps families plan and
requirements of other senior citizens and services may prepare for retirement by
businesses . consist of cooking meals, setting aside funds for
cleaning homes and assisting college expenses and invest
with hygiene requests. in securities.
Computer Repair Catering

- provide repair services to - presents services for
individuals, maybe home parties, weddings and
based or located in business events.
commercial shops.
Partnership
– is a business owned by two (2) or
more people. In most forms of
partnerships, each partner has
unlimited liability for the debts
incurred by the business. In a
partnership, the partners should have
a legal agreement that sets forth how
decisions will be made, profits will be
shared, disputes will be resolved, how
future partners will be admitted to the
partnership when needed; Yes, it is
hard to think about a “break-up”
when the business is a defined
process, there will be even greater
problems. They also must decide up
front how much time and capital each
will contribute.
Advantages of a Partnership
• Partnership are relatively easy to establish; however, time should
be invested in developing the partnership agreement.
• With more than one owner, the ability to raise funds may be
increased.
• The profits from the business flow directly through to the
partners’ personal tax return.
• Prospective employees may be attracted to the business if given
the incentive to become a partner.
• The business usually will benefit from partners who have
complementary skills.
Disadvantages of a Partnership
• Partners are jointly and individually liable for the actions
of the other partners.
• Profits must be shared with others.
• Since decisions are shared, disagreements can occur.
• Some employee benefits are not deductible from
business income on tax returns.
• The partnership may have a limited life; it may end upon
the withdrawal or death of a partner.
Famous Business Partnerships:
Procter and Gamble
- William Procter and James Gamble were brothers-in-law, related
by marriage. Procter was a candlemaker and Gamble was a
soapmaker, but it was their father-in-law’s idea for them to join
forces and become business partners. They formed the partnership
in 1837 and eventually they went on to become one of the world’s
most successful corporations.
Microsoft
- Bill Gates is credited as being the driving force behind Microsoft which launched in 1975,
he readily admits that the business would never have started without Paul Allen. Although
known as computer pioneers and entrepreneurs, today Paul Allen and Bill Gates are
arguably just as well-known for their philanthropy.
Corporation
• The owners of a corporation have
limited liability and the business
has aseparate legal personality
from its owners.
• Corporations can be either
government-ownedor privately
owned.
• They can organize either for profit
or as not-for-profit organizations.
Advantages of a Disadvantages of a
Corporation Corporation
• Shareholders have limited • The process of incorporation requires
liability for the corporation’s more time and money than other forms
debts or judgments against the of organizations.
corporation. • Corporations are monitored by the
• Generally, shareholders can only government and some local agencies,
be held accountable for their and as a result, may have more
investment in thes tock of the paperwork to comply with regulations.
company. • Incorporating may result in higher
• Corporations can raise additional overall taxes. Dividends paid to share
funds through the sale of stock. holders are not deductible from
• A corporation may deduct the business income; thus, this income can
cost of benefits it provides to be taxed twice.
officers and employees.
Famous Filipino Corporations:
Jollibee Foods Corp. San Miguel Corp. Ayala Corp. The Lopez Group of
-a fast food chain Companies
-Largest food and beverage- operates as the holding
founded by Tony Tan and packaging company incompany of the many -Business conglomerate
Caktiong as an ice the Phil. diversified interest in the owned by the Lopez
cream parlor. Ayala group, is the Oldest Family in Iloilo.
MNc in the country. ( Maynilad, ABSCBN)
SM Group of Comp. Filinvest Dev't. Corp

- biggest retail company in - company in the real estate
the Phil. dev't. and leasing ,
financial and banking
services.
Cooperative
• Often referred to as a “co-op”, a
cooperative is a limited liability
business that can organize for-
profit or non-profit. A cooperative
differs from a corporation in that it
has members, not shareholders,
and they share decision-making
authority.
• 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.Cooperatives may be
incorporated or unincorporated.
Advantages of a Cooperative
• Generally inexpensive to register.
• A cooperative organization is owned and controlled by members.
• Members have an equal vote at general meetings regardless of
their level of investment or involvement. One member, one vote.
• All members must be active in the co-operative.
• This type of organization has a limited liability.
• Profit distribution (surplus earnings) to members is carried on in
proportion to the use of service; surplus may be allocated in
shares or cash.
Disadvantages of a Cooperative
• A cooperative organization entails longer decision-making process.
• It requires members to participate for success.
• It has less incentive, and there’s also a possibility of development of conflict
between members.
• As co-cooperatives are formed to provide a service to members rather than
are turn on investment, it may be difficult to attract potential members
seeking a financial return.
• There is usually limited distribution of profits to members and some co-
cooperatives may prohibit the distribution of any surplus.
• Members providing greater involvement or investment than others will still
only get one vote.
• Extension record keeping is necessary in this form of organization.

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CONTENTS

A proprietor has unlimited liability for

Computer Repair Catering

SM Group of Comp. Filinvest Dev't. Corp

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