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Org. Management Chapter 4ppt.

The document outlines various forms of business ownership, primarily focusing on sole proprietorships, partnerships, and corporations, along with their advantages and disadvantages. It also discusses modifications of corporate ownership, such as cooperatives and mutual companies, as well as minor forms like joint stock companies and joint ventures. The summary includes key features such as liability, ease of expansion, life of the firm, decision-making speed, taxation, and formation ease for each ownership type.

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7 views

Org. Management Chapter 4ppt.

The document outlines various forms of business ownership, primarily focusing on sole proprietorships, partnerships, and corporations, along with their advantages and disadvantages. It also discusses modifications of corporate ownership, such as cooperatives and mutual companies, as well as minor forms like joint stock companies and joint ventures. The summary includes key features such as liability, ease of expansion, life of the firm, decision-making speed, taxation, and formation ease for each ownership type.

Uploaded by

sedic.salman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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FORMS OF BUSINESS OWNERSHIP

The form of business ownership to adapt is a


strategic decision that must be considered at the
inception. The decision may later prove to be
supportive of the owner’s objectives or may be
the obstacle to achieving them.
Forms of Business
Ownership

MAJOR FORMS MINOR FORMS

SOLE
PROPRIETORSH CORPORATION JOINT STOCK
IP COMPANY

PARTNERSHIP JOINT
VENTURE

General Limited BUSINESS


Partnership Partnership TRUST
THREE MAJOR TYPES OF BUSINESS
OWNERSHIP

1. Sole Proprietorship

2. Partnership

3. Corporation
1. Sole Proprietorship – is a type of business
entity owned and operated by a single person.

Advantage of Sole Proprietorship

Sole proprietorship are afforded with advantages


pertaining to the following:

 Ease and Cost of Formation – among the three


ownership forms, the sole proprietorship is the easiest
and least costly to organize.
 Secrecy – one way of effectively competing with
other firms is to know the moves, as well as the
strengths and weaknesses of competitors.
 Distribution and Use of Profits – if because of
his efforts, the business made some profits, the sole
proprietor is the sole beneficiary.
 Control of the Business – the owner is also vested
with the power to solely control solely the business and
sole authority is very important especially under critical
competitive situations.

 Government Regulation – the sole proprietorship


is spared from various government rules, which apply to
partnerships and corporations.

 Taxation – the net income of the sole proprietorship


is treated as the personal income of the sole owner and
is taxed accordingly.

 Closing the Business – sole proprietorship can be


dissolved by the owners at will.
Disadvantage of Sole Proprietorship

The smooth operation of sole proprietorship is


hindered by the following disadvantages:

 Owner’s Lack of Ability and Experience.

 Difficulty in Attracting Good Employees

 Difficulty of Raising Capital

 Limited Life of the Firm

 Unlimited Liability of the Proprietor


2. PARTNERSHIP

A partnership is a legal association of two or more


persons as co-owners of an unincorporated business.

Advantages of Partnerships
Partnerships have the distinction of eliminating some of the
disadvantages of sole proprietorships while retaining some of
their advantages.

 Ease of Formation – like sole proprietorships,


partnerships are easy to form.
 Pooling of Knowledge and Skills – the combined
knowledge and skills of the partners provide the
partnership with a distinct advantage.
 More Fund Available – the combined resources of the
partners provide a bigger source of funds.
 Ability to Attract and Retain Employees – attracting and
retaining employees is a difficulty inherent to sole
proprietorships.
 Tax Advantage – the income of the partnership is not taxed
separately from the partner’s incomes.

Disadvantage of Partnerships
 Unlimited Liability

• Limited Life

• Potential Conflict Between Partners

• Difficulty in Dissolving the Business


Types of Partnerships
 General Partnership
- is an association of two or
more persons, each with unlimited
liability, who are actively involved in the
business.

 Limited Partnership
- is an arrangement in which
the liability of one or more partners is
limited to the amount of assets they
have invested in the business.
3. CORPORATION
- A corporation is an enterprise
chartered by law, with most of the legal
rights of a person, including the right to
conduct a business, to own and sell property,
to borrow money, and to sue or be sued.

Advantages of Corporation

 Limited Liability
 Ease of Expansion
 Ease of Transferring Ownership
 Relatively Long Life
 Greater Ability to Hire Specialized
Management
Disadvantages of Corporation:

 More Expensive and Complicated to Organize

The articles of incorporation contains the following:


 The name of the corporation
 Specific purpose or purposes
 Principal office of the corporation
 Term of existence of the corporation
 Names, nationalities, and residences of incorporators
 Number of directors or trustees
 Names, nationalities, and residences of directors
 Amount of authorized capital stock, and
 Other matters.
 Double Taxation
 More Extensive Government Restrictions and
Reporting Requirements
 Employees Lack Personal Identification with and
Commitment to Corporate Goals
A Summary of the Positive and Negative Features
of the Forms of Business Ownership
Area of Concern Sole Partnership Corporation
Proprietorship
1. Liability of owners Unlimited limited/unlimited Limited

2. Ease of expansion Not easy Not easy Easy

3. Life of firm Dependent on the Dependent on Independent of


owner the partners the owners

4. Decision making Can be made Tends to be Tends to be the


quickly slower slowest

5. Taxation of income Once Once Twice

6. Ease of formation Easiest Easy Not easy


MODIFICATIONS OF THE CORPORATE OF
OWNERSHIP
The corporate form of ownership has been modified to
cater to special needs. Those that have become popular
are cooperatives and mutual companies.

Cooperatives
A cooperative is defined as “an organization composed of
individuals or small businesses that have banded
together to reap the benefits of a larger organizations.”

Cooperatives are of various types. They are classified


according to the special interests of its members. They
are as follows:

 Credit Union – accepts deposits from members and lends


money to its members at a very reasonable interest rate.
 Producers Cooperative – assists one another in the
procurement of raw materials, machinery, equipment,
and other time-saving devices.
 Marketing Cooperative – assists members in the
marketing of their produce.
 Consumers Cooperative – provides members with quality
goods and services at reasonable prices.
 Service Cooperative – makes services readily available
and at a lower price.

Mutual Companies
A mutual company is a financial-service firm (such as an
insurance company or a savings and loan association)
owned by its policyholders or depositors. Mutual
companies may be classified according to products or
services they carry.

a. Mutual Savings Banks – are owned by depositors and


specialize in savings and mortgage loans.
b. Mutual Insurance Company – is a cooperative
corporation organized and owned by its policyholders.
OTHER FORMS OF BUSINESS ORGANIZATION

Minor forms of business organization consist of the following:

 The Joint Stock Company


it is a largely similar in form to the
corporation, although it has certain additional features like
fewer taxes, greater ease of information, mobility, and
freedom from government regulation.

 The Joint Venture


it is best regarded as a particular
partnership established for a specific undertaking. It is
mostly formed for the purpose of producing a movie or a
concert, engaging in oil or mining exploration, constructing a
major project such as a dam or an airport, or perhaps the
underwriting or selling of securities.

 The Business Trust


it is a legal form of organization in which a
trustee is appointed to manage the business and its
operations through a trust relationship.

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