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Lesson 4 - Forms of Business

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10 views

Lesson 4 - Forms of Business

Uploaded by

laurence mallari
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Lesson 4:

Forms of Business
Organizations
At the end of this lesson you will be able to:
• differentiate the forms of
business organizations
• identify the advantages and
disadvantages of each form
Single/Sole Proprietorship

• A form of business is owned by one person;


the simplest, and the most common form of
business organization
• It is not separate from the owner. The business
and the owner are inseparable
Advantages of sole/single proprietorship
• Ease and cost formation
• Secrecy
• Distribution and use of profits
• Control of the business
• Government regulation
• Taxation
• Closing the business
Disadvantages of sole/single
proprietorship.
• The possibility that the owner lacks
ability and experience
• Difficulty in attracting and keeping
quality employees
• Difficulty in raising additional funds
• Limited life of the firm
• Unlimited liability of the owner
PARTNERSHIP
• A form of business owned by two or more
persons. The details of the arrangement
between the partners are outlined in a written
document called articles of partnership.
• Profits are divided among partners based on
their agreed sharing.
• The owner is called a partner.
TWO TYPES OF PARTNERSHIP

• General Partnership
• Limited Partnership
PARTNERSHIP AGREEMENT
• Purpose of the business
• Terms of partnership
• Goals of the partner
• Financial contribution
• Distribution of profits and losses
• Withdrawal of contributed assets or capital
• Management power and work responsibility
• Provision of admitting new partner
• Provision for continuing the business of a partner’s
death or illness
• Duration of agreement
Advantages of a partnership
• Ease of formation
• Pooling of knowledge and skills
• More sources of capital
• Ability to attract and retain employees
• Tax advantage
Disadvantages of a partnership
• Unlimited liability
• Limited life
• Potential conflict between partners
• Difficulty in dissolving the business
CORPORATION
• A corporation is a business organized as a separate legal entity (artificial
person) under the corporation law with ownership divided into
transferable shares of stocks
• Emphasize that it is the law (Corporation Code of the Philippines) that
creates a corporation.
• The corporation begins its existence from the date the Articles of
Incorporation is approved by the Securities and Exchange Commission
(SEC).
• The owners are called stockholders or shareholders.
• The word ‘Corporation/Incorporation/Corp./Inc.’ appears in the name of
the entity.
• The voting rights of a shareholder are generally based on the percentage
of ownership.
• The management of the business is delegated by the shareholders to
the Board of Directors
• The proof of ownership is evidenced by a stock certificate.
Advantages of a Corporation
• Limited liability
• Ease of expansion
• Ease of transferring ownership
• Relatively long life
• Greater ability to hire specialized management
Disadvantages of a corporation
• More expensive and complicated to
organize
• Double taxation
• More extensive government
restrictions and reporting requirements
• Employees lack personal identification
and commitment.
COOPERATIVES
• A cooperative is a duly registered association of persons
with a common bond of interest, voluntarily joining
together to achieve their social, economic and cultural
needs.
• The owners are called members who contribute
equitably to the capital of the cooperative.
• The members are expected to patronize their products
and services.
• The word ‘cooperative’ appears in the name of the entity.
• This form of business organization is regulated by the
Cooperative Development Authority (CDA).
Advantages of a cooperative
• Enjoys certain tax exemption privilege
• Promotes the concept of sharing resources
Disadvantages of a Cooperative
• Limited distribution of surplus
• Requires continuous education programs for
members.
• The members have active and direct
participation in the business of the
cooperative.
FORMS of BUSINESS ORGANIZATION
• Sole Proprietorship
• Partnership
• Corporation
• Cooperatives
END OF LESSON
•
Choose SP if the statement is
under Sole Proprietorship, P if
it is under Partnership, COR if
it is Corporation, and COOP if
it is under Cooperatives.
Ease of
formation
Difficulty in raising
additional capital
Enjoys certain tax
exemption privilege
Ability to attract
and retain
employees
Ease of expansion
Can control the
business
Requires continuous
education programs
for members
Difficulty in
dissolving the
business
Secrecy
More expensive
and complicated to
organized
Advantage of
Closing the Business
Limited Distribution
of Surplus
Relatively Long Life
Double Taxation
Pooling of
Knowledge and
Skills
Ease of transferring
ownership
Ease and cost
formation
Greater ability to
hire specialized
management
Promotes the
concept of sharing
resources
Unlimited liability
of the owner

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