LEGAL FORMS

OF BUSINESS
OWNERSHIP

ORGANIZATION MANAGEMENT

Instructor: Dr. Marcial Mojica

Reported by: Rosemarie Q. Castillo

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Legal Forms of Business Ownership
1. Sole Proprietorship
• A SOLE PROPRIETORSHIP also referred to as a sole trader or a proprietorship, is an
unincorporated business that has just one owner.
• Advantages:
o Easy to Form
o Effort-Reward Relationship
o Full Control
o Quick Decisions
o Economical and Efficient Operations
o Personal Touch
o Keep the Business Simple, Dynamic and Flexible.
• Disadvantages:
o Small Size
o Limited Life
o Lacks Professional Skills and Talent
o Unlimited Liability
o Growth Prospects
o Limitation of Capital
o Risk of Wrong Decisions

2. PARTNERSHIP
• By the contract of PARTNERSHIP two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the
profits among themselves.
• Two or more persons may also form a partnership for the exercise of a profession.
Article 1767 Civil Code of the Philippines
• Advantages:
o Bridging the Gap in Expertise and Knowledge
o More Cash (and properties)
o More Business Opportunities
o Moral Support
o New Perspective
• Disadvantages:
o Loss of Autonomy
o Emotional Issues
o Future Selling Complications
o Unlimited Liability
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3. CORPORATION
• CORPORATION is an artificial being created by operation of law, having the right of
succession and the powers, attributes, and properties expressly authorized by law or
incidental to its existence. REVISED CORPORATION CODE OF THE PHILIPPINES
• Advantages:
o Limited Liability
o Source of Capital
o Ownership Transfers
• Disadvantages:
o Double Taxation
o Independent Management
o Forming a corporation cost more

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References:
• Skripak, Stephen J., 2016. Fundamentals of Business. Pamplin College of Business and
Virginia Tech Libraries. Retrieved from
https://vtechworks.lib.vt.edu/handle/10919/70961
• [Kevin Troy Chua]. (2020, March 31). Lesson 006 Forms of Business Organization
[Video File]. Retrieved from https://youtu.be/bC_m2hlKA7I
• www.investopedia.com