Business Ethics and

Social Responsibility
Quarter 3 – Module 1: The
Nature and Forms of Business
Organizations
Business Ethics and Social Responsibility – Grade 12
Alternative Delivery Mode
Quarter 3 – Module 1: The Nature and Forms of Business Organizations
First Edition, 2020

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 Business Ethics and
Social Responsibility
Quarter 1 – Module 1:
The Nature and Forms of
Business Organizations
Introductory Message
This Self-Learning Module (SLM) is prepared so that you, our dear learners,
can continue your studies and learn while at home. Activities, questions, directions,
exercises, and discussions are carefully stated for you to understand each lesson.

Each SLM is composed of different parts. Each part shall guide you step-by-
step as you discover and understand the lesson prepared for you.

Pre-tests are provided to measure your prior knowledge on lessons in each

SLM. This will tell you if you need to proceed on completing this module or if you
need to ask your facilitator or your teacher’s assistance for better understanding of
the lesson. At the end of each module, you need to answer the post-test to self-check
your learning. Answer keys are provided for each activity and test. We trust that you
will be honest in using these.

In addition to the material in the main text, Notes to the Teacher are also
provided to our facilitators and parents for strategies and reminders on how they can
best help you on your home-based learning.

Please use this module with care. Do not put unnecessary marks on any part
of this SLM. Use a separate sheet of paper in answering the exercises and tests. And
read the instructions carefully before performing each task.

If you have any questions in using this SLM or any difficulty in answering the
tasks in this module, do not hesitate to consult your teacher or facilitator.

Thank you.
 What I Need to Know

This lesson was designed and written in the hope to produce young
entrepreneurs. This will help you understand what the nature of business is, as well
as its forms. It is also explained in a way that could easily be understood by Senior
High School students who, at the end of this module are expected to:

1. define business;
2. explain why people engage in business;
3. give the advantages and disadvantages of each form of business
organizations;
4. create their own business and logo; and
5. classify the given characteristics of organizations.

1
 What I Know

Directions: Analyze each sentence below and write whether it is True or False. Write
your answers on a separate sheet of paper.

1. Business is a passive process.

2. Tax preparation is more difficult in a sole proprietorship than in a corporation.
3. A corporation is a separate entity distinct from all the owners.
4. Your liability as a shareholder is only limited to the amount of your investment.
5. A partnership may generate funds through selling shares of stocks.
6. A corporation may be owned by one person.
7. Handling money for a sole proprietorship is easier than partnership.
8. Book stores and sari-sari stores fall under the service businesses category.
9. Manufacturing businesses include baked goods and cosmetics.
10. The sole proprietor can pass the business down to his/her heir.
11. A sole proprietorship needs higher start-up costs.
12. Partnership business lacks formality compared with managing a limited
company or corporation.
13. Profit is the difference between the amount received and the amount spent on
something purchased, produced, or manufactured.
14. Merchandising businesses turn basic inputs into products which are sold
to consumers.
15. In a sole proprietorship, the owner decides alone.

2
 Lesson
The Nature and Forms of
1 Business Organizations

What’s In

Directions: Arrange the following jumbled letters to form the correct words as
described by the given clues. Write your answers on a separate sheet of paper.

1. You engage into this if you want profits.

S U S B I S E N
2. This refers to two or more people who work together or do
business together.
A N R S P E R T
3. It is an organization enjoying the rights and duties as that of an individual.
P O A T R O C O N I R
4. This is what most businesses aim for.
T O F P I R

5. This is another term for the owner of a business.

Notes to the Teacher / Facilitator

Explain clearly to the students the three types of business
organizations that are generally operated for profits - service,
merchandising, and manufacturing. Be sure also that they
understand the three forms of business organization - sole
proprietorship, partnership, and corporation. Emphasize their
differences (three types and three forms).

3
 What’s New

Directions: Answer the following questions on a separate sheet of paper.

You are all aware of online selling, right? What/Who are the most popular
online selling platforms/individuals? Do you think they earn big amount of money
from online transactions?
Answer:
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

Have you experienced being a seller? What item/product/service did you

sell? Can you still recall that experience?

Answer:

__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

4
 What is It

A business is an active process which is an integral part of human society. It

is an organization where economic resources or inputs, such as materials and
services, are brought together and distributed to deliver or to give consumers goods,
products, or outputs. It involves significant operations such as buying, assembling,
distributing, advertising, selling, and accounting.

Most businesses aim to earn profit. The term profit refers to the difference
between the amount received and the amount spent on something purchased,
produced, or manufactured. The fundamental reason for examining business
activities from a moral point of view is that business organizations should, in
principle, help promote the common good and protect the rights and interests of
individuals.

Three types of business organizations are generally operated for profit -

service, merchandising, and manufacturing businesses.

Service businesses provide services to customers rather than products.

Examples: computer repair, laundry services, tutoring, delivery services,
wellness (such as gym or spa), etc.

Merchandising businesses sell to customers products they buy from other

businesses.
Examples: sari-sari stores, bookstores, department stores, groceries,
supermarkets, etc.

Manufacturing businesses turn basic inputs into products which are sold to
consumers.
Examples: shoe manufacturing, baked goods, candle manufacturing,
cosmetics manufacturing, wine production, etc.

5
Forms of Business Organizations

1. Sole Proprietorship- It is a one-person business. The owner has full control over
the finances and operations and decides alone.

Advantages:
a. Tax preparation is faster. Simply file an individual income tax return including
losses and profits to your business. Your personal and business income is
considered the same and the tax implications for self-employed individuals
would apply.
b. Sole proprietorship has lower start-up costs.
c. Handling money for the business is easier.
d. Sole proprietorships have the least government rules and regulations that
affect them.
e. The sole proprietor can own the business for as long as he/she wants, and
when he/she wants to move out, he/she can cash in and sell the business.
f. Even in common practice, the sole proprietor can pass the business down to
his/her heir.

Disadvantages:
a. The sole proprietor is personally liable for all debts and actions of the
enterprise.
b. There is lack of financial control because of looser structure of sole
proprietorship.
c. There could be difficulty in raising capital.

2. Partnership- It is a business relationship between two or more people. It refers to

an arrangement where individuals share a business venture's profits and
liabilities. The partners give feedback on how to use the capital and other critical
strategic decisions that may provide different perspectives.

Advantages:
a. Partnership business lacks formality as compared with managing a limited
company or corporation.
b. It is easy to start. The partnership may be created either verbally or in writing.
c. You share the burden. You have companion and support.
d. Every partner would add his/her own expertise, skills, experience, and
connections to the business, thus giving it a greater chance of success.
e. There is better decision-making. Two heads are better than one.
f. There is privacy. The business deals may be kept confidential by the partners.
g. The partners own and control the business.
h. The more partners there are, the more funds are available in the company,
which can be used for possible expansion. Its borrowing capacity is also likely
to be higher.
i. There is an easy access to profits in a business partnership. The partners just
have to divide the profits.

6
Disadvantages:
a. The business does not have any independent legal status.
b. The business has no separate legal personality, so the partners are personally
liable for the debts and losses incurred.
c. The partnership business often seems to lack the sense of prestige more
closely associated with a corporation.
d. A partnership will often find it more difficult to raise money than a corporation.
e. There is a potential of differences and conflicts.
f. Decision-making can be slower because there is a need for consultation
among partners.
g. The profit must be shared among the partners.
h. It may require a lot of time and energy thus may affect life-work balance.
i. The profits earned by the partnership will be translated to income on the
individual partners. Thus, they are subject to income tax in the financial year
in which they are made.
j. There are limits on business development like unlimited liability, lack of
funding opportunities, and a lack of commercial status, etc.

3. Corporation. It is an entity created by law that is independent and distinct

from its owners and relies on the corporate laws of the state in which it is
incorporated to continue its existence. Corporations have an advantage in
generating money for the company. It can raise funds by selling shares of
stocks. It files taxes separately from its owners.

Advantages:
a. The liability of the shareholders of a corporation is limited up to the amount
of their investments.
b. A publicly held corporation may sell shares or issue bonds to raise substantial
amounts.
c. It is easy for a shareholder to sell shares in a corporation.
d. A corporation’s life has no limit, ownership can pass through many
generations.

Disadvantages:
a. The corporation pays taxes on its income depending on its type and the
shareholders pay dividend taxes, so income gets taxed twice.
b. The management team of a corporation can operate the business without any
real oversight from the owners.

7
 What’s More

A. Directions: Below are sentences that characterize the forms of business.

Classify them by writing each sentence to the proper column. Number one
was given as an example. Write your answers from numbers 2-10 on a
separate sheet of paper.

1. It is a business relationship between two or more people.

2. It is operated and owned by one person.
3. It is an independent entity.
4. The individuals agree to share profits and liabilities.
5. It can sell shares of stocks.
6. There is sharing of burden.
7. There could be difficulty in raising capital.
8. The decisions are made by a person alone.
9. It files taxes separately from its owners.
10. The owner controls fully the financial and operational matters.

Sole proprietorship Partnership Corporation

1. It is a business
relationship
between two or
more people.

B. Directions: Supply the appropriate information on the table. Copy the table
and write your answers on a separate sheet of paper.

a. Sole Proprietorship
Advantages Disadvantages
1. 1.
2. 2.
3. 3.

b. Partnership
Advantages Disadvantages
1. 1.
2. 2.
3. 3.

c. Corporation
Advantages Disadvantages
1. 1.
2. 2.

8
 What I Have Learned

Directions: Answer the following questions on a separate sheet of paper.

1. Define business and its forms using your own words.

_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
2. In your own words, differentiate sole proprietorship, corporation,
and partnership.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

3. Why do people engage in business? You may explain your answer by

providing an example.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________

9
 What I Can Do

Directions: Share your insights on the situation below. Write your answers on a
separate sheet of paper.
A rich relative of yours tells you that he/she is willing to lend you one million
pesos without any interest and ask you to start a business. What kind of enterprise
do you prefer? Describe it briefly.
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

Directions: Create your business logo. Use a separate sheet of paper for your
drawing.

Rubrics:

Creativity/aesthetic value 6 points

Excellent -6
Very good -5
Good -4
Fair -3
Somewhat fair -2
Needs improvement - 1
Explicit/implied message of the logo 2 points
Relevance of the logo to the business 2 points
Total 10 points

10
 Assessment

A. Directions: Analyze each sentence below and write whether it is True or False.
Write your answers on a separate sheet of paper.

1. A corporation is a separate entity distinct from all the owners.

2. Tax preparation is more difficult in sole proprietorship.
3. Business is a passive process.
4. A partnership may generate funds through selling shares of stocks.
5. The liability of a shareholder is only limited to the amount of his/her
investment.

B. Directions: Match the terms in Column A to its corresponding definition in

Column B. Write the letters of your answers on a separate sheet of paper.

A B
6. Corporation A. It is a business owned by one person only.
7. Sole proprietorship B. It is the amount received minus the amount
spent.
8. Business C. It is an independent entity distinct from its
owners.
9. Partnership D. It involves important operations like
advertising, marketing, etc.
10. Profit E. It is a business venture by two or more people.

C. Directions: Read each sentence and write the letter of your answer on a
separate sheet of paper.

11. Which is not true of a corporation?

A. The life of a corporation has no limit.
B. The business does not have any independent legal status.
C. The business operates even without any real oversight from
the owners.
D. Corporation files taxes separately from its owners.

12. All of these are advantages of a partnership, except:

A. there is sharing of burden.
B. the partners both own and control the business.
C. there is better decision-making because two heads decide.
D. it has lower start-up cost.

11
13. Which is not a nature of business?
A. It aims to earn profits.
B. There are four forms of business organization.
C. It is an active process.
D. It involves significant operations such as buying, assembling, etc.

14. Which is not a role of a corporation?

A. Corporation provides benefits such as connections with suppliers, etc.
B. Corporation makes massive quantities of goods.
C. Corporation hires huge number of workers.
D. Corporation finds it difficult to raise capital.

15. The following are the advantages of a sole proprietorship, except:

A. there could be difficulty in raising capital.
B. tax preparation is a lot faster.
C. the sole proprietor can pass the business down to his/her heir.
D. handling money for the business is easier.

2
 Additional Activities

Directions: Answer the questions in three to five sentences. Write your answers on a
separate sheet of paper.

1. Do you think businesses benefit people? Yes/No. Why? Give an example.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

2. How do businesses help the society and the economy?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
What I Know What’s In What I Have Learned
1. False 1. BUSINESS Students’ answer may vary.
2. False 2. PARTNERS
3. True 3. CORPORATION
4. True 4. PROFIT
5. False 5. PROPRIETOR
6. False
7. True
8. False
9. True
10.True
11.False
12.True
13. True
14. False
15. True
What’s More
Sole Proprietorship Partnership Corporation
2. Operated and owned by 1 Business relationship 3 It is an independent entity.
one person between two or more people 5 can sell shares of stocks
7. There could be difficulty in 4. Individuals agree to share 9 Files taxes separately from
raising capital. profits and liabilities its owners
8. Decisions are made by a 6 There is sharing of burden
person alone.
10. owner controls fully
the financial and operational
matters
What I Can Do Assessment Additional Activities
Students’ answer may vary. 1. True Students’ answer may vary.
2. False
3. False
4. False
5. True
6. C
7. A
8. D
9. E
10. B
11. B
12. D
13. B
14. D
15. A
Answer Key
References

"S Corporation (S Subchapter) Definition". 2021. Investopedia.

https://www.investopedia.com/terms/s/subchapters.asp.

Bragg, Steven. 2020. Corporation Advantages and Disadvantages —

Accountingtools. Accountingtools. Retrieved from.
https://www.accountingtools.com/articles/corporation-advantages-and-
disadvantages.html.

Crampton, Nicole. n. d. Examples of Manufacturing Business Ideas. Entrepreneur.

https://www.entrepreneur.com/article/335090.

Dantes, Edmond. 2020. Man in Black Long Sleeve Shirt Sitting in Brown Couch
[Image]. Retrieved from https://www.pexels.com/photo/man-woman-desk-
office-4342127/.

DepEd 2016. DepEd Curriculum Guide, s. 2016

DepEd 2020. DepEd Most Essential Learning Competencies (MELC), s. 2020

Fauxels. 2019. Photo of People Near Wooden Table [Image]. Retrieved from
https://www.pexels.com/photo/photo-of-people-near-wooden-table-
3184418/.

Korchak, Johnathan. 2017. Advantages and Disadvantages of a Partnership

Business - Inform Direct". Inform Direct. Retrieved from
https://www.informdirect.co.uk/business-management/partnership-
business-advantages-and-disadvantages/.

Magni, Oleg. 2019. Photo of Two People Shake Hands [Image]. Retrieved from
https://www.pexels.com/photo/photo-of-two-people-shakehands-
2058130/.

n. d. "Sole Proprietorships | Boundless Business". Courses.Lumenlearning.Com.

https://courses.lumenlearning.com/boundless-business/chapter/sole-
proprietorships/#:~:text=More%20than%2075%25%20of%20all,proprietor%
20with%20a%20small%20shop.

Racelis, Aliza. 2017. Business Ethics and Social Responsibility. Manila: Rex Book
Store, Inc.

Roa, Floriano. 2011. Business Ethics and Social Responsibility. Manila: Rex Book
Store, Inc.

Spacey, John. 2017. 18 Examples of A Service Business. Simplicable.

https://simplicable.com/new/service-business.

Start-up Stock Photos. 2015. Woman Sitting in Front of Macbook Inside Room
[Image]. Retrieved from https://www.pexels.com/photo/woman-person-
macbook-laptop-7355/.
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