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1
Specialized Subject
st
1 Quarter – Module 3
Organization and Management

Learning Competency: Analyze the forms and economic roles of business

organizations

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 LESSON Forms of Business Organization
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EXPECTATIONS

As we study and immerse ourselves in “Organization and Management” in the process, it is

necessary to discuss the different phases of economic and differentiate the various forms of business
organizations. The module is subjected to discuss Module 3 – Forms of Business Organization.

After going through the module, you are expected to:

1. analyze the forms and economic roles of business organizations.

Let us start your journey in learning

thru a Pre -test.
PRETEST Good luck!

Fill in the Blank

Directions: Choose the CORRECT word from the table being described by the statement s below and
write your answer in the space provided before the number.

Partnership Single Corporation

Proprietorship

Cooperative General Partnership

Joint Venture

__________________ 1. is a type of partnership which divides responsibility for management and

liability, as well as the shares of profit of loss according to their internal agreement. _________________
_ 2. is an organization established for the purpose of purchasing and marketing the products
of its member.
__________________ 3. is a juridical entity established under the Corporation Code and registered with
the SEC.
__________________ 4. is the simplest form of business and the easiest to register through the Bureau
of Trade Regulation and Consumer Protection (BTRCP).
__________________ 5. consists of two or more persons who bind themselves to contribute
money or industry to a common fund with the intention of dividing profits among themselves.
 LOOKING BACK TO THE
LESSON
Matching-type

Directions: Match the column A to column B. Write your answer in the space provided before the
number

A B

____ 1. Philippine Cooperative Code of 2008 a. Cooperative

____ 2. The purpose of purchasing and marketing b. RA 9520
the products of its members c. Joint Venture
____ 3. Mixture of the features of a sole proprietorship d. Single Proprietorship
and a corporation. e. One Person Corporation
____ 4. Simplest form of business and the f. Transitional Society easiest to
register. ____ 5. Acts like a general partnership but is clearly
limited period of time.

Enjoy reading…..

BRIEF INTRODUCTION

After deciding to start a business (and the business to pursue), one of the important issues is
the form of business entity that will serve as the vehicle in pursuing the business. You may say that
the next important issue is the source of funding, which is correct, but that issue will be discussed
later. Right now, let’s focus on the forms of business.

The choice of the form of business or business organization depends on various factors. In certain
business, like banks, the law requires that the business entity must be a corporation. A small
business, like your friendly sari-sari store, is better off as a sole proprietorship, although it could also
be converted to another form of business if the circumstances require that shift.

A. Partnership

Partnership consists of two or more persons who bind themselves to contribute money or
industry to a common fund, with the intention of dividing the profits among themselves. The most
common example of partnerships are professional partnerships, like in the case of law firms and
accounting firms. Just like a corporation, it is registered with the Securities and Exchange
Commission (SEC).

Advantages of a Partnership

 Partnerships 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.

Types of Partnerships that should be considered:

1. General Partnership
Partners divide responsibility for management and liability, as well as the shares of profit or
loss according to their internal agreement. Equal shares are assumed unless there is a written
agreement that states differently.

2. Limited Partnership and Partnership with limited liability

“Limited” means that most of the partners have limited liability (to the extent of their investment) as
well as limited input regarding management decision, which generally encourages investors for
short term projects, or for investing in capital assets. This form of ownership is not often used for
operating retail or service businesses. Forming a limited partnership is more complex and formal
than that of a general partnership.

3. Joint Venture
Acts like a general partnership but is clearly for a limited period of time or a single project. If
the partners in a joint venture repeat the activity, they will be recognized as an ongoing
partnership and will have to file as such and distribute accumulated partnership assets upon
dissolution of the entity.

B. Sole proprietorship

Also referred to as “single proprietorship,” a sole proprietorship is the simplest form of business
and the easiest to register, through the Bureau of Trade Regulation and Consumer Protection (BTRCP)
of the Department of Trade and Industry (DTI). It is owned by an individual who has full
control/authority of its own and owns all the assets, as well as personally answers all liabilities or
losses. The fact that it is run by the individual means that it is highly flexible and the owner retains
absolute control over it.

Advantages of a Sole Proprietorship

a. Easiest and least expensive form of ownership to organize.

 b. Sole proprietors are in complete control, and within the parameters of the law,
may make decisions as they see fit.
c. Profits from the business flow-through directly to the owner’s personal tax return.

d. The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship

a. Sole proprietors have unlimited liability and are legally responsible for all debts
against the business. Their business and personal assets are at risk.
b. May be at a disadvantage in raising funds and are often limited to using funds
from personal savings or consumer loans.
c. May have a hard time attracting high-calibre employees, or those that are
motivated by the opportunity to own a part of the business.
d. Some employee benefits such as medical insurance premiums are not directly deductible
from business income (only partially as an adjustment to income).

C. Sole Corporation

A mixture of the features of a sole proprietorship and a corporation is found in a new entity
authorized under the Revised Corporation Code — the One Person Corporation. An OPC is registered
in the same manner as other corporations with the SEC, except that it is composed of only one
person, just like a sole proprietorship. [See One Person Corporations under the Revised Corporation
Code]

D. Corporation

A corporation is a juridical entity established under the Corporation Code and registered with the
SEC. It must be created by or composed of at least 5 natural persons up to a maximum of 15,
technically called “incorporators” (the 5-person minimum has been removed under the Revised
Corporation Code). Juridical persons, like other corporations or partnerships, cannot be
incorporators, although they may subsequently purchase shares and become corporate
shareholders/stockholders.
.
Advantages of a Corporation

a. Shareholders have limited liability for the corporation’s debts or judgments against
the corporation.
b. Generally, shareholders can only be held accountable for their investment in stock of the
company. (Note however, that officers can be held personally liable for their actions, such as the
failure to withhold and pay employment taxes. c. Corporations can raise additional funds through the
sale of stock.
d. A Corporation may deduct the cost of benefits it provides to officers and employees.

e. Can elect S Corporation status if certain requirements are met. This election enables company
to be taxed similar to a partnership.

Disadvantages of a Corporation

a. The process of incorporation requires more time and money than other forms of
organization.
 b. Corporations are monitored by federal, state and some local agencies, and as a result may have
more p
c. Paperwork to comply with regulations.
d. Incorporating may result in higher overall taxes. Dividends paid to shareholders are not
deductible from business income; thus this income can be taxed twice.

E. Cooperative

A cooperative is an organization established for the purpose of purchasing and marketing the
products of its members, i.e., shareholders, and/or procuring supplies for resale to the members,
whose profits are distributed to the members (in the form of patronage dividends), not on the basis of
the members' equity

According to REPUBLIC ACT 9520 also known as "Philippine Cooperative Code of 2008".

The primary objective of every cooperative is to help improve the quality of life of its members.
Towards this end, the cooperative shall aim to:

a. Provide goods and services to its members to enable them to attain increased income, savings,
investments, productivity, and purchasing power, and promote among themselves equitable
distribution of net surplus through maximum
utilization of economies of scale, cost-sharing and risk-sharing;
b. Provide optimum social and economic benefits to its members;
c. Teach them efficient ways of doing things in a cooperative manner;
d. Propagate cooperative practices and new ideas in business and management;
e. Allow the lower income and less privileged groups to increase their ownership in
the wealth of the nation; and
f. Cooperate with the government, other cooperatives and people-oriented
organizations to further the attainment of any of the foregoing objectives.

ACTIVITIES

Activity 1: Independent Activity

In 5 to 8 sentences, discuss in a yellow paper how learning this lesson can improve your relationship
with the people around you, your parents, guardians, or family. Ask an elder at home to comment on
your answers.

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Activity 2: Independent Activity

Directions: Give your own descriptions on the various forms of business organizations in 3 to 5
sentences only. Write your answer in the space provided in bullet form.

To discuss Answer
1. Sole
proprietorship

2. Partnership

3. Corporation

4. Cooperative

REMEMBER

 Walk Whitman Rostowadministration from 1966-1969, also known as W.W. Rostow was an economist in the Lyndon B.
Johnson. He also published articles and developed models on economic development. 


The Five Stages of Economic Development model is developed by Walt Withman Rostow. The five
 stagesAge of Mass Consumption. are 1) Traditional Society, 2) Preconditions for Take -off, 3) Take-Off, 4) Drive
to maturity, and 5)


 Partnershipfund, with the intention of dividing the profits among themselves. consist of two or more persons who bind
themselves to contribute money or industry to a common


 Types of partnership are 1) liability, and 3) Joint VentureGeneral Partnership. , 2) Limited Partnership and
Partnership with limited


Sole proprietorship is the simplest form of business and the easiest to register, through the Bureau of Trade Regulation
and Consumer Protection (BTRCP) of the Department of Trade and Industry (DTI). It is owned by an
 
individual personally answers all liabilities or losses. who has full control/authority of its own and owns all the

assets, as well as 

 Corporation is a juridical entity established under the Corporation Code and registered with the SEC.

Cooperative is an organization established for the purpose of purchasing and marketing the products or its members,
i.e., shareholders, and/or procuring supplies for resale to the members, whose profits are  distributed to the members
(in the form of patronage dividends), not on the basis of the members’ equity.
 CHECK YOUR UNDERSTANDING

Multiple Choice
Directions: Read the questions carefully and encircle the letter of the correct answer. Write your
answer in a yellow paper.

1. Which of the following is a form of business which has unlimited liability. Creditors may proceed
not only against the assets and property of the business, but also after the personal properties of
the owner.
a. Corporation b, Sole Corporation
c. Partnership d. Sole proprietorship

2. Philippine Cooperative Code of 2008 is under of what Republic Act?

a. RA 9521 b. RA 9520
c. RA 9522 d. RA 9250

3. When the preconditions for take-off are met, a society can take off.
a. Drive to Maturity b. Take-off
c. Traditional Society d. None of the above

4. It acts as a general partnership but is clearly for a limited period or a single project.
Which of the following is CORRECT answer?
a. General Partnership b. Limited Partnership
c. Joint Venture d. None of the above

5. In which a type of partnership that divides responsibility for management and liability, as well as the
shares of profit or loss according to their internal agreement.

a. General Partnership b. Limited Partnership c. Joint Venture

d. None of the above

POST -TEST

MULTIPLE CHOICE: Choose the letter of the correct answer. Write your answer in the space
provided.
____1. The followings are the disadvantages of Corporation except ONE.

a. Incorporation requires more time and money that other forms of organization.

b. Monitored by federal, state and some local agencies.

c. May result in higher overall taxes.

d. May deduct the cost of benefits it provides to offices and employees.

____2. Which of the following is advantage of Corporation?

a. Can raise additional funds through the sale of stock.
b. Requires more time and money than other forms of organization.
 c. Processes of paperwork to comply with the regulation.
d. All of the above

____3. Which of the following is CORRECT about Sole Proprietorship?

a. Not easiest and highly expensive form of ownership to organize.

b. The business is easy to dissolve, if desired.

c. Cannot control within the parameters of the law.

d. Profits from the business are divided into the employees.

____4. The following are the advantages of partnership except ONE.

a. The Business usually will benefit from partners who have complementary skills.

b. With more than one owner, the ability to raise funds may be increased.

c. Partners are jointly and individually liable for the actions of the other partners.

d. Prospective employees may be attracted to the business if given the incentive to

become partner.

____5. It means that most of the partners have limited liability, as well as limited input
regarding management decision.

a. Abundant

b. Unlimited

c. Single

d. Limited

____6. Which of the following are disadvantages of Sole Proprietorship?

a. Have limited liability and are legally responsible for all debts against the business.
b. Some employees benefits such as owner’s medical insurance premiums are
not directly deductible from business income
c. Have a hard time attracting high-caliber employees
d. All of the above

____7. It is registered in the same manner as other corporations with the SEC, except that it is composed
of only one person, just like a sole proprietorship.

a. One Person Corporation

b. Partnership

c. Double Person Corporation

d. Cooperative

____8. Republic Act 9520 also known as:

a. Philippine Cooperative Code of 2008
b. Philippine Cooperative Code of 2009
c. Philippine Corporation Code of 2008
d. Philippine Corporation Code of 2009

____9. The following are the objectives and Goals of a Cooperative except ONE.
 a. Provide good and services to its members to enable them to attain increase income,
savings, investments and purchasing power.
b. Allow the higher income and higher privileged group to increase their ownership in the
wealth of the nations.
c. Teach them efficient ways of doing things in a cooperative manner.
d. Provide optimum social and economic benefits to its members.

____10. SEC stands for:

a. Securities and Exchange Corporation

b. Security and Exchange Commission

c. Securities and Exchange Commission

d. Security and Exchange Corporation

REFLECTIVE LEARNING SHEETS

Reflective Question: If you have an existing sari-sari store, what are the possible things you will
consider in terms of business registration based on the topic discussed to respond to the COVID-19
pandemic? Cite at least two and explain. Write your answer in the space provided.

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