Grade

12

BUSINESS ETHICS AND SOCIAL

REPONSIBILITY
QUARTER 3 – MODULE 1

Forms, Purposes and Role of

Business Organizations in
Socio-Economic Development

.
Lesson Forms, Purposes and Role of
1 Business Organizations in
Socio-Economic Development
After going through this module, you are expected to differentiate the forms of
business organizations in terms of their purpose and role in socio-economic
development (ABM_ESR12-IIIa-d-1.1; ABM_ESR12-IIIa-d-1.2; ABM_ESR12-IIIa-d-
1.3).
Business has always been partnered with growth. Consequently, many
people plan of starting their own businesses with the hope of making it big in the
industry. But putting up a business, even a small one, is not as simple as it sounds. It
needs careful planning and study as there are different forms of businesses one may
venture into. Therefore, it is of paramount importance to familiarize oneself with the
characteristics and nature of these kinds of business organizations and how these
contribute to socio-economic development.

Forms of Business Organizations

According to Investopedia, a business is “an organization or enterprising

entity engaged in commercial, industrial, or professional activities.” While most
people associate businesses with profits or those known as profit organizations,
there are also non-profit organizations or those that are put up to advance charitable
or social causes. Moreover, the term "business" is also used in referring to the
“organized efforts and activities of individuals to produce and sell goods and services
for profit.”

Business organizations vary in scale and are divided into the following major
forms:

Form Description
Sole Proprietorship It is owned by one person and in which
there is no legal distinction between the
owner and the business entity. It is
considered as the simplest and most
common form of business ownership and
the easiest type of business to establish
and dismantle due to lack of government
regulation. The sole proprietor receives
all profits and has unlimited responsibility
for all losses and debts.
Partnership In this form, two or more persons pool
labor and capital, and share in profit,
loss, and liability.
Partnerships are of three types:
• General- partners share profits,
managerial responsibilities, and
liability for debts equally;
• Limited- two or more partners go
into business together, but one or
more of the partners are only
liable up to the amount of their
investment; and
• Joint venture- is a general
partnership that remains valid until
the completion of a project or a
certain period elapse. All partners
have an equal right to control the
business and share in profits and
losses.
Corporation A corporation, chartered by the state in
which it is headquartered, is considered
by law to be a unique entity, separate
and apart from those who own it. It can
be taxed, sued or enter into contractual
agreements. Its owners are called
shareholders who, in turn, elect a board
of directors to oversee the major policies
and decisions. The corporation has a life
of its own and does not dissolve when
ownership changes.
Limited Liability Company It is a hybrid business structure which
combines the good features of a
corporation and those of a partnership
(or sole proprietorship). Unlike
partnerships, LLC is created formally as
it involves the filing of articles of
organization to the state but the process
is easier compared to that of a
corporation. In terms of its
characteristics, LLC gives its owners
limited liability for debts and losses and
lets them enjoy profits without double
taxation. However, its life is relatively
 shorter than that of a corporation
because it may face the possibility of
bankruptcy or dissolution once a member
dies.
Cooperative A cooperative is a business organization
owned, controlled and run by and for a
group of people. It is composed of people
(called members) who also use its
products or avail of its services. Unlike
the other forms of business
organizations, a cooperative is service
centered. Its purpose is to help its
members achieve their economic, social,
and/or cultural needs and aspirations.
Cooperatives may be incorporated or
unincorporated.

Role and Purposes of Business Organizations in Socio-Economic Growth

The significant role of business organizations towards national development
cannot be undermined. Below are the common roles that they play in society and
economy.
1. Businesses create jobs for people, strengthening the economic health of each
community where a business is based.
2. Businesses bring technological change and innovation.
3. Different forms of business maintain healthy competition in the market by
offering diverse products or services to consumers.
4. Businesses improve the quality of life of small or big entrepreneurs.
5. Business establishments serve as place for interaction between and among
people.
6. Businesses boost economic revenue which helps in social and economic
development of a country.
7. Business organizations contribute to the Gross Domestic Product (GDP) of a
country.
Activity 1. Understanding the Forms of Business Organizations
Every form of business organization has its own share of advantages and
disadvantages. In the table below, write at least one advantage and one
disadvantage for each form of business organization based from your understanding
of their nature.

Forms of Business Advantage/s Disadvantage/s

Organization
1. Sole Proprietorship
2. Partnership
3. Corporation
4.Limited Liability Company
5. Cooperative

Activity 2. Classifying Business Organizations

List down at least five business establishments, small or big, which are near
your area or you visited sometime in the past. Then, classify each based on the four
forms of business organizations discussed. If possible, identify the owner/s of the
chosen business organizations.

1. Name of Business Organization: ______________________________________

Owner/s of Business Organization: ____________________________________
Form of Business Organization: ______________________________________
2. Name of Business Organization: _______________________________________
Owner/s of Business Organization: _____________________________________
Form of Business Organization: _______________________________________
3. Name of Business Organization: _______________________________________
Owner/s of Business Organization: _____________________________________
Form of Business Organization: _______________________________________
4. Name of Business Organization: _______________________________________
Owner/s of Business Organization: _____________________________________
Form of Business Organization: _______________________________________
5. Name of Business Organization: _______________________________________
Owner/s of Business Organization: _____________________________________
Form of Business Organization: _______________________________________
References
• https://www.accountingverse.com/accounting-basics/types-of-businesses.html
• https://bizfluent.com/info-7745795-roles-business-organizations-economic
development.html
• https://www.slideshare.net/barneyn/what-role-does-business-play-in-society
• https://www.rifkindpatrick.com/Blog/2015/November/The-4-Major-Business-
Organization-Forms.aspx
• https://www.baltimoresourcelink.com/startup/register-license-your-
business/forms-of-business-organization
• https://www.investopedia.com/terms/l/llc.asphttps://www.investopedia.com/ter
ms/b/business.asp
• http://sfp.ucdavis.edu/cooperatives/what_is/
• https://www.ica.coop/en/cooperatives/what-is-a-cooperative
• https://ncdc.unl.edu/what-cooperative

Answer Key (Activities)

Activity 1
Answers may vary.
Activity 2
Answers may vary
Name:__________________________________ Date: _____________
Grade/Section:________________ Score :____________

SUBJECT: Business Ethics and Social Responsibility

QUARTER 3
Worksheet No. 1

Most Essential Learning Competency: Differentiate the forms of business

organizations in terms of their purpose and role in socio-economic
development
K to 12 BEC CG: K to 12 BEC CG: ABM_ESR12-IIIa-d-1.1;
ABM_ESR12-IIIa-d-1.2; ABM_ESR12-IIIa-d-1.3

I. True or False. Directions: Identify whether each statement is TRUE or FALSE.

Then, write the correct answer on the provided space.
______1. Partnership is the most popular form of business ownership.
______2. A sole proprietor owns all the profit of his/her business.
______3. Among the forms of business, partnerships are the easiest to dissolve if
desired.
______4. Putting up a corporation is expensive.
______5.Most small businesses begin as sole proprietorships.

II. Multiple Choices. Directions: Read each item carefully. Then, write the letter of
the correct answer on the provided space.
______1. Which is the easiest form of business to establish?
a. Sole Proprietorship
b. Partnership
c. Corporation
d. Limited Liability Company
______2. The following are true about business organizations EXCEPT:

a. They create employment.

b. They improve people’s standard of living.
c. They impede technological advancement.
d. They offer products or services.
______3. Partnership that gives partners limited liability for debts based on their
percentage of ownership is called ______________.
 a. General partnership
b. Limited Partnership
c. Joint venture
d. Ongoing Partnership
______4. Which type of business partnership holds both owners fully liable for
business debts?
a. general partnership
b. limited partnership
c. joint partnership
d. ongoing partnership
______5. Which is a disadvantage of sole proprietorship?

a. Each partner is fully liable for debts.

b. Dividends are paid to shareholders.
c. Owner is 100% liable for business debts.
d. Business ends upon withdrawal of partner.
III. Performance Task. Directions: On a short bond paper, draw a poster that shows
the role of businesses to social and economic development in your respective
community.
RUBRIC

Criteria 1 2 3 4 5 Score
Relevanc The output Few parts Some parts Most parts All parts of
e to the barely of the of the of the the output
topic shows output output output effectively
discussion show show show a show a
and discussion discussion discussion clear
understand and and and discussion
ing of the understand understand understand and deep
topic. ing of the ing of the ing of the understandi
topic. topic. topic. ng of the
topic.
Creativity Sense of A sense of A sense of A sense of Great
creativity is creativity is creativity is creativity is sense of
barely displayed displayed displayed creativity is
displayed in a few in some in most displayed
in the parts of the parts of the parts of the in all parts
output. output. output. output. of the
output.
Total /10
Answer Key (Worksheet 1)
True or False
1. FALSE
2. TRUE
3. TRUE
4. TRUE
5. TRUE
Multiple Choices
1. a
2. c
3. b
4. a
5. c